Lattice wrote: Wallop, I wish to respond to your post to inz and highlight some flaws in your accounting. The first glaring one is you are not considering the interest coveage ratio covenant. You have to look at what will happen to the EBITDA in
US terms. Concordia has only $550M its debt (Say $200 to Cinven, Amco 50M, Interest payment $250M plus other costs such as the recent arbitration costs)... so that leaves them over exposed because 80% of the debt in USD just got more expensive. It does not translate to a $150M savings as you have stated. Additionally, they will be bringing at least 20% less cash flow from AMCo in US terms with the lower GBP. Most of their expenses are paid in Euros (Source, Saldahla at the Q4 conference call). And finally, my last point, there is no 5% tax savings from a tax cut to Concordia, Concordia bought AMCo as a tax inversion and they do not pay corporate taxes in the UK so any reduction in UK's corporate tax rate is a moot point. There is no wiggle room here if the CER falls to 1.20-1.30. Guidance is based on 1.53. They stated a miss on Q1 (actual numbers, not adjusted) because of FX.
Some posters on this board have said the costs of hedging would have outweighted the f(x) risk. I strongly disagree. They could have bought buts on the GBP and sold calls with the same premium and it would have cost them nothing and taken away the doomsday scenario where their cash drops in USD terms. MT didn't wager 600 million of his own equity on the 50/50 vote of Brexit, but yet he rolled the dice with shareholder equity.
For the record, Brexit was never a part of the short thesis and you can look back at my posts prior to Brexit to confirm this. It was just an adjunct to the clown show going on and it is actually the least of the company's worries.
Apologize for the typos, as I don't proofread ... and its been a long a$$ week and going for early drinks. To all my haters and my sole pal on this board, have a good weekend.
wallop13 wrote: Let's break this down.......
Say CXR looses 15% of EBITDA from the 40% generated in the UK (36 million USD a year). Now we factor in the 5% tax savings from the tax cut, that brings in an extra 12 million USD. So we are left with an overall EBITDA loss of 24 million USD (4% decrease) a year. Now we factor in that the 500 million GBP debt is now worth 150 million less USD. It now becomes clear the effect of the pound will be negligible, and quite possibly positive if the currency recovers in the next two years and the GBP debt has been repaid.
These figures are from memory, so you can double check.
YourMindIz wrote: Is this the effect of the pound to dollar forecast from paridy to 1.15 to 1.20 . Or is it something else here we don't yet know about. And please don't post responses that a lower GBP is good for CXR. IT IS NOT. I know that cxr only has 20% of its debt in pounds and the other 80% is in USD. If the pound goes down and the speculation for another interest rate rise is now alive and well after the payroll figures today it will keep the USD up. So the management is out to lunch when they say this will not have any effect. PIssed off here at this P_O_S and lack of positive PR communication. We need a Friday afternoon buyout rumour. CALLING FOR ROLLER.....