Chemtrade Logistics Income 6 50 Convertible Unsecured Subordinated Debentures T.CHE.DB.E

RE:Impact of CN Stike - from TD Waterhouse today

[Kherson]

hawk35 wrote: Chemtrade Logistics Income Fund
(CHE.UN-T) C$11.24
CN Rail Strike Could Materially Impact Chemtrade
Paul Bilenki, CFA
 
Event
About 3,200 CN Rail workers are now on strike after their union and the company
failed to reach a deal before last night's midnight deadline.
 
Impact: POTENTIALLY NEGATIVE
Chemtrade's operations rely heavily on rail service, including service from CN
Rail, for the transportation of various chemicals into and out of its facilities.
 
A prolonged strike could impact the company in several ways including: (1) being
unable to ship product to customers and, by extension, potentially having to curtail
or temporarily shutdown operations at certain facilities until normal rail service
resumes; (2) being unable to transport necessary supply inputs into facilities or
having to find alternative sources of supply at higher cost; and (3) potentially
needing to fulfill obligations to customers by sourcing product from alternative
facilities or from third-parties at higher cost.
 
We believe that Chemtrade's Electrochemical (EC) segment is most at risk
from a prolonged strike. The North Vancouver chlor-alkali facility is exclusively
serviced by CN and we do not believe there are any viable alternative means of
transportation from the facility. We would also expect the company's large sodium
chlorate facility in Brandon, Manitoba to be impacted as we would expect that
other rail carriers would only have the capacity to move more limited amounts
of product, if at all. We estimate that each week of lost production in the EC
segment would equate to ~$3.0mm of foregone EBITDA.
 
We would anticipate a less pronounced impact on the SPPC and WSSC
segments, but an impact nevertheless, as both segments also rely on CN for
rail service, while several of Chemtrade's suppliers and customers will also be
affected by the strike.
 
We understand that a rail strike would not qualify for business interruption
insurance, but Chemtrade could potentially declare force majeure if needed to
avoid incurring additional cost penalties in addition to its forgone earnings.
 
Rail strikes have historically been short-lived, with either quick resolution among
the negotiating parties or the government stepping in and implementing back-towork
legislation to prevent a significant impact on the economy.

Hawk35, you conveniently forgot to mention that Back to Work legislation has to be passed by Parliament and the House is not scheduled to reconvene until December 5th! What is also obvious is that the Liberals will require the support of the NDP if any legislated B to W bills are tabled and we all know that the NDP simply will not!
Good luck to the longs!
Too funny!
Kherson