RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:RE:Time for stockholder dilution again?The somewhat convoluted and twisted workings of their balance sheet and debt instruments I won't even pretend to understand. I recall some overlap from the Mr. Lube credit being used to extend debt to one of their other recent royalty agreements but can't be bothered figuring out which.
My main point is that this isn't a buy a royalty and pay down the debt fast with the tight amount of spare money available type of company. Even with all the dilution involved in and around the time of most deals they've done the long term bank loans keep going up and up, pretty significantly.
If they tried to do a deal which is the usual barely accretive type straight with debt I'd guess it would never get paid down, or if it somehow did other long term bank loans would rise.
Bear with me as I'm just making the following simplistic illustration in my head as I type and I'm pretty tired so it may go wonky:
A loan for 50 million taken out for royalty XYZ that gains us 5 million in royalties per year, is pretty standard for DIV.
They pay 6% on that loan best case scenario so 3 million a year paying down nothing but interest which leaves shareholders at best $2 million to be distributed.
So shareholders are entitled to 2 million per year on a 50 million dollar layout, or just a 4% return on their money with none of the debt being paid down. Move the debt payment up by a million to 4 million to knock a million off the principle of the loan per year and shareholders make 2% return on that 50 million, albeit the debt is going to be sloooowwwly paid down.
****What in this scenario am I missing that doesn't basically make this a gawd awful business model that in the end will just have a huge debt load while many of the underlying royalties slowly deteriorate?*****
Also keep in mind I would guess the fixed royalty rate increases that are becoming the norm with new deals are there for a reason. We now have absolutely no idea how Stratus, Barburrito etc are doing as their sssg plus or negative essentially remain hidden.