Sherritt International Corp T.S

We got an upgrade (DBRS Debt rating Feb 1)

[rkhosla]

wonerful thorough note - worth reading

https://www.marketscreener.com/amp/quote/stock/SHERRITT-INTERNATIONAL-CO-1411562/news/DBRS-Morningstar-Upgrades-the-Rating-on-Sherritt-International-Corporation-s-Second-Lien-Notes-to-B-42863218/

[VerificateASAP]

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[FrozenInOntario]

Thanks for this RK. So the 26 gets a new Recovery Rating.  From RR6 with an anticipated recovery of 0-10% to RR5 with an anticipated recovery of 10-30%.   Sherritt should be a BB but is rated B because of the Cuba factor.  Mind you, this is still non investment grade and Sherritt is still junk from the rating agency. So refinancing is off the table for some time, i will

[VerificateASAP]

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[Contrarian333]

"So refinancing is off the table for some time" I don't think refinancing is an objective.  I think the objective is to reduce debt to zero but to do so (as much as possible) without activiating the cash sweep and having to redeem bonds at 107..

[VerificateASAP]

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[FrozenInOntario]

 Yeah, you are right on the debt reduction.   Lets see on thursday what it the excess cash at the end of the year as well as their cash position.  Should give a pretty good idea if they will do another debt buy back. GLTA

[NorthVan77]

Redeem bonds at 107? Is there something I'm not aware of I thought the FCF tenants of the agreement required them to redeem bonds at par. Potential solution could be to take a loan from an entity such as a battery producer and use it to pay the bonds and redeem them in physical metal.  

[Contrarian333]

Section 3.07 Optional Redemption. (a) At any time prior to the Stated Maturity of the Notes, the Company may redeem the Notes, in whole or in part, upon not less than 30 nor more than 60 days’ prior notice mailed to each Holder or otherwise in accordance with the Applicable Procedures at a redemption price equal to (i) the principal amount of the Notes being redeemed, plus (ii) a premium equal to

[rkhosla]

would you mind sending us as well the rules around the "cash sweep" mandatory redemptions?  i've never been able to find these.

[FrozenInOntario]

Their april 2022 investor presentation had a slide on this. https://s2.q4cdn.com/343762060/files/doc_presentations/2022/Sherritt-Investor-Presentation-April-2022.pdf

[FrozenInOntario]

page 20

[rkhosla]

Thanks.  I guess I would love to have a peek at the "indenture agreement" itself.  Not sure how to find this.  

[FrozenInOntario]

Hey Contrarian, The cash sweep is covered under Section 3.08 Mandatory Redemption from Excess Cash Flow. Under this section, there is no premium awarded if I am not mistaken (b) Any Notes redeemed in accordance with this Section 3.08 will be redeemed on a pro rata basis at a redemption price of 100% of the principal amount thereof plus accrued and unpaid interest, if any, to (but excluding) the

[VerificateASAP]

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[Contrarian333]

Yes FrozeninOntario - I read it the same as you have.  I was going by memory.

[Contrarian333]

So to be clear, my view like others on this Board is that they will try to manage their affairs such that they don't activate the cash flow sweep (paying par for bonds) and they won't make an optional early redemption (paying par + 7 points) but will continue to tender for the bonds at a discount to par until such time as they aren't getting takeup - then they might pursue another

[autofocus111]

Is there a limit to how often they can run tender offers? When would you expect them to announce the next one?

[Ernieandbert]

No limit to buying back bonds in the open market from time to time or through a tender process (tender just more efficient).  They have the tender set up so can quickly, easily and cheaply tap that as a source to acquire bonds in the open market.  

[VerificateASAP]

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[VerificateASAP]

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[FrozenInOntario]

Their presentation indicates that they need $150M in outstanding 2L notes so the cash sweep take effect.  I cannot find this in the indenture. They have 230 mm of 26 O/S.   Cash sweep will probably get triggered on 2 half report - 30 april trigger date.   So would expect a buy back to be annonced in February, after they settle the Sus.  And then,  a sweep. 

[rkhosla]

[rkhosla]

This is exactly my take on it as well. They cannot avoid the sweep by preemptively buying back the bonds, (unless of course they manage to reture them all in one fowl swoop).  It's based on excess cash flow which would be calculated before they buy bonds back as far as i can tell.  .