Delphi Energy Corp. DPGYF

RE:20% Dilution at $1.27, New Debt at 10% rate & Raymond James

[stockfy]

stockfy wrote:   20% dilution at $1.27 per share. Also DEE replaces the existing bank debt of $30 million whose interest rate currently is from 3% to 5% with $30 million in senior notes whose interest rate is 10%. This is a very expensive debt and proforma the deal all DEE's debt will have 10% interest rate.

A prudent value investor can't be happy with such deals but such deals are expected due to DEE's overly weak balance sheet and high leverage. DEE doesn't have negotiating power when leverage is above 3 times while having the most expensive Montney wells in the Montney space at $8 million each.

Not to forget that now you know why Raymond James has been pumping DEE by setting irrationally high price targets. DEE and Raymond James have been making business together and they continue to make business together once again:

A syndicate of agents, led by Raymond James Ltd. and co-led by AltaCorp Capital Inc., has sold the securities on a private placement basis.

The Company has agreed to sell, on a private placement basis, 27,559,055 common shares at an issue price of $1.27 per common share, a discount of 3.8% to the closing price of Delphi common shares on the TSX on May 19, 2017, for aggregate gross proceeds of approximately $35 million (the "Equity Offering").

 

Furthermore, the Company has agreed to issue an additional $30 million principal amount of the currently outstanding 10% senior secured Collateralized Exchange ListedTM ("CELTM") Notes (the "Notes Offering"). The re-opening of the CELTM Notes was priced at 100% of par (plus accrued and unpaid interest) to yield 10% (the "Additional Notes") and will not be issued with any warrants. The Additional Notes are being offered as further notes to Delphi's existing $60 million aggregate principal amount of 10% senior secured CELTM Notes due 2021, issued on June 15, 2016 (the "Existing Notes"). 
 

Including the working capital deficit at  the end of the year, leverage reaches almost 4 times:

" Average production in 2017 is now expected to be in the range of 8,600 to 8,900 boe/d with adjusted funds from operations of $35 to $38 million.  Total capital spending in the year is expected to be in the range of $105 to $110 million, slightly lower than planned, resulting in bank debt and working capital deficiency at the end of the year of $37 to $42 million. "