Katanga Mining Ltd Ord KATFF

RE:Debt-to-equity swap option?!

[patels96]

I personally don't think a debt to equity will be an option. If you think about what is GLEN actually gaining from this, they already own ~86% of KAT meaning KAT is fully consolidated into GLEN (so a rights offering/issue doesn't make much sense) and have an off-take agreement with KAT. There are various option available to KAT that can reduce indebtedness, simply put it this way the facilities (A,B,C) were all due in 2021, meaning the the financial stress of the ballon debt payment 2021 were immense. This can however, be structured such that the debt facilities are layered with the highest interest debt facility due first. What I mean by layered is that the first debt facility with the highest interest rate is due say 2026, with the second debt facility due 2028 and the last debt facility due in 2030 (this is just a hypothetical example). Something like this would make sense as GLEN would receive its highest debt facility with the highest interest rate first, and KAT can work with more pre-determined cash flows and reduce its ballon debt payments as they come due. Remember indebtedness means when the debt actually becomes due, not how much debt KAT has. In addition, GLEN can various covenants in the debt structure such that KAT has to maintain certain financial ratios within a given range, or hold off on paying potential dividends. Given that KAT is still ramping up, and major projects are still due (Cobalt Project due Q2 2019, Acid Plant due Q4 2019, and Ion Plant due Q4 2019) GLEN should have had KAT capitalized its interest payments (which they just started doing as of the last financial). Furthermore, GLEN can give KAT some sort of grace period after which debt payments will start. Ultimately, I think KAT will have its debt restructured in such that way that the financial burden on KAT is reduced with the understanding that copper/cobalt deficit is right around the corner.