RE:RE:Risk Canacol will be offside on debt covenantyou should start with reading the March 31, 2015 MD&A page 13. You will see where my numbers in my analysis come from and should also relise that I used the new leverage ratio of 2.75 to 1. I'e included the text below to make it easier for you......
Looks like us shareholders are in a tough situation, the debt providers are going to be calling the shots pretty quickly.
Credit Facilities and Debt Senior Secured Term Loan On April 3, 2013, the Corporation entered into a credit agreement for a $140 million senior secured term loan with a syndicate of banks. The Senior Secured Term Loan was for a five-year term, with interest payable quarterly and principal repayable in 15 equal quarterly instalments starting in October 2014, following an initial 18 month grace period. The Senior Secured Term Loan carried interest at LIBOR plus 4.50% and was secured by all of the material assets of the Corporation.
On April 24, 2014, the Corporation completed an upsizing of its existing Senior Secured Term Loan, from $140 million to $220 million, with no changes to the terms of the Senior Secured Term Loan or the repayment schedule. The revised term loan carries interest at LIBOR plus 4.50-5.00%, depending on agreed leverage ratios, and is secured by all of the material assets of the Corporation. The carrying value of the Senior Secured Term Loan included $6.1 million of transaction costs netted against the principal amount as at March 31, 2015. The Senior Secured Term Loan was replaced in April 2015 with a new term loan as further described below. Consequently, the discussion of financial and non-financial covenants below is only relevant as of March 31, 2015 and no longer applicable as of the date of this MD&A. A discussion of covenants related to the new term loan, which was closed and funded in April 2015, is presented below for the benefit of the reader.
The Senior Secured Term Loan include various non-financial covenants relating to future acquisitions, indebtedness, operations, investments, capital expenditures and other standard operating business convents.
The Senior Secured Term Loan also include various financial covenants, including a maximum consolidated leverage ratio ("Consolidated Leverage Ratio"), a minimum consolidated interest coverage ratio ("Consolidated Interest Coverage Ratio"), a minimum debt service coverage ratio ("Debt Service Coverage Ratio"), a minimum consolidated current assets to consolidated current liabilities ratio ("Consolidated Current Assets to Consolidated Current Liabilities Ratio") and other standard financial covenants. The Consolidated Leverage Ratio is calculated on a quarterly basis as consolidated total debt ("Consolidated Total Debt") divided by consolidated EBITDAX ("Consolidated EBITDAX"). The maximum allowable Consolidated Leverage Ratio is 2.75:1.00. Consolidated Total Debt includes the principal amount of all indebtedness, which currently includes bank debt, office lease commitments, and net hedging liabilities, if any, and specifically excludes amounts with respect to the Corporation's convertible debentures or warrants; additionally, restricted cash maintained in the debt service reserve account related to the Senior Secured Term Loan is deductible against Consolidated Total Debt. Consolidated EBITDAX is calculated on a rolling 12-month basis and is defined as consolidated net income adjusted for interest, income taxes, depreciation, depletion, amortization, exploration expenses, share of joint venture profit/loss and other similar non-recurring or non-cash charges. Consolidated EBITDAX is further adjusted for the contribution to adjusted funds from operations, before taxes, of the results of the Ecuador IPC as disclosed in the calculation of Adjusted Funds from Operations in the Corporation's management's discussion and analysis. The purpose of including this last amount is to capture the funds from operations of the Corporation's joint venture in Ecuador into the calculation as it is accounted for on an equity consolidation basis in the Corporation’s consolidated financial statements. Consolidated Total Debt and Consolidated EBITDAX are calculated as follows: