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

RE:RE:Chemtrade's troublesome Credit Facility

[leo101]

hey red, che.un issued $70 mil in new units to primarily pay down some 5.25% debt. the units will cost about 9% to cover  the distribution. (8.2% on the gross proceeds so 9% is an estimate based on what the net proceeds will be.)

so they are replacing 5.25% debt with equity that will cost 9% to service. now take taxes into consideration, the 5.25% debt is tax deductible wheres as the 9% distributions are not. so the question is why?

the answer is simple, the 9% distributions are not carved in stone, they can be cut so kherson is entirely correct when he says that this makes the odds of distribution cut more likely. and of course with additional units outstanding it pushes any possible distribution increase further in the future if at all.

Red_Deer wrote: Kherson__AS USUAL Your Conclusions ARE Sheer Speculation eh !!!!!!!

Nothing stating that the Creditors REQUIRED Pay Down of their Facility

Ever consider that Management simply WANTED to Pay some Down eh ???

And Nothing stating that their Credit Facility is NOW in Question

Which Credit Rating Agency has stated THIS eh ????

Kherson wrote:
The following information was released on Feb.23 2021 on p.2 of the 2020 MD&A. 

Receivables Purchase Facility During the fourth quarter of 2020, 

Chemtrade entered into a factoring facility of up to $100.0 million (the "A/R Facility") with HSBC Bank Canada. The A/R Facility is an uncommitted receivables purchase facility for the purchase of eligible receivables owed to Chemtrade from trade debtors on an undisclosed basis with no recourse. Chemtrade used the proceeds received from the initial sale of trade receivables under the A/R Facility to pay down its revolving credit facility and to redeem the remaining outstanding amount of the Fund 2014 5.25% Debentures, as described above.

Then on March 3, 2021 Chemtrade releases the following information concerning their $70 million Bought Deal Equity Offering

The net proceeds from the Offering are intended to be used to repay outstanding indebtedness under the Fund’s existing credit facility and for general trust purposes. The Fund expects to draw on its credit facility in connection with future organic growth opportunities, particularly in ultra-pure sulphuric acid and water chemical products and the monetization of by-product hydrogen in the electrochemicals segment.

So the big question now is, why did Chemtrade's creditors require them to pay down their Credit Facility twice in 6 months? 
How much longer can Chemtrade continue to pay a Distribution that they can no longer afford, especially when their Credit Facility is now in question?

Kherson