Andrew Peller Ltd T.ADW.A

Long Term Debt - falling CDOR interest rates

[Jonathan9]

"On June 13, 2023, the Company amended and restated its credit facility, which is now comprised of an assetbacked revolving facility maturing on June 13, 2027.

The overall facility size was reduced from $350,000 to $275,000, and the borrowing limit is based on certain percentages of the fair value of accounts receivable, inventory and real property.

The facility is an interest-only facility with principal repayment due upon maturity and is to be used to fund day-to-day operations, distributions, capital expenditures and acquisitions. The amended credit facility is subject to a minimum fixed charge coverage ratio covenant when excess availability as a percentage of the facility limit is below a certain level.

On June 30, 2023, the Company entered into an interest rate swap agreement on $65,000. Until June 13, 2027, the interest rate on this portion of the facility is fixed at 4.46%, plus the applicable margin. The interest rate on the balance of the facility has a variable interest rate of CDOR, plus the applicable margin. As at September 30, 2023, the applicable margin was 2.50%."

CDOR peaked at close to 6% in fall 2023 and has been falling since, now below 5%.  If rates continue to fall this will reduce interest expense and improve earnings. I expect the Port Moody sale will be used to extinguish a large chunk of this debt. This is the biggest overhang and continued lowering of rates can be a catalyst.

Note: For most of the last 10-15 years, CDOR was 0.5 to 2%. Are we heading back there?

[Jonathan9]

CDOR replaced by CORRA  - 4.53%

[Jonathan9]

CORRA Rate today - 4.29%. Expected to continue to drop.

[TheCount11]

Seems like investors excited about new management otherwise stock would be closer to $2 vs $4  There hasn't been any revenue growth over last 5 years.   Cap Ex has been deferred. BC grape crops need a minimum of 3 years. The is the management bull case?  

[Stonksonlyup90]

There is a lot of cash sitting in Money Market funds. As rates drop, these value stocks are primed to be bid up. The stock needs a catalyst... perhaps if they could get the job done on that Port Moody land sale that could be said catalyst!

[TheCount11]

I don't see a risk adverse investor who has cash like investments jumping into a winery whose west coast crops burnt, froze and are being replanted but you never know. Maybe the catalyst is new management?  Peller was checked out and family raided coffers.  Do they have a plan to grow revenues 5% yer year and be profitable?