MBAC Fertilizers (TSX: MBC, Stock Forum) continued its journey to keep its head above water and claw back a steady decline in SP since the top of the year when the company announced today that it had signed final agreements with its senior lenders to extend the maturity of its loans and established a deferral on interest and principal repayments for up to two years.
According to the news release, the company initially obtained the loans to build its Itafós operations in Brazil and begin production of Single Super Phosphate ("SSP").
Under terms published in the company's August 26, 2014 news release, the company will be allowed to defer the repayment of principal and interest amounts until September 15, 2016 outlined in the final senior debt extension which included an extension of the current maturity dates of the existing working capital facilities by up to four years.
Interest rates will remain the same and the company has enough funds required to be maintained in the debt service reserve accounts.
Company President and CEO, Cristiano Melcher, commented on the life-saving deal, “Signing final agreements in connection with our debt extension with our senior lenders is important on a number of levels.”
He added, “We believe it demonstrates a strong level of support within the financial community for Brazil's agriculture fundamentals as well as for our prospects for becoming a significant fertilizer producer. In addition, it enables management to focus more attention and effort on strategic initiatives that will help accelerate our production ramp up, optimize operations and identify strategic partners.”
The company will continue to examine and implement initiatives to deal with its near-term liquidity issues and has received indications from its senior lenders for approximate additional working capital facilities totaling US$6.7 million. Gross proceeds from these funds will be used for the purchase of supplies, spare parts and phosphate rock from 3rd party suppliers.
Melcher illustrated, “The initiative to purchase third-party concentrate provides a number of short-term benefits.”
Then he concluded, “In a period of intense ramp up, third-party concentrate allows us to optimize our industrial facilities, lower the consumption of certain consumables and take advantage of the advanced stage of the ramp-up of certain of our plants. We expect to be able to produce more granulated SSP immediately, improving our cash flow generation.”
MBAC Fertilizers was in the news recently when the Toronto-based company provided a production and corporate update at the beginning of October.
Shares soared 61.54% on the news to $0.105 per share.
Currently there are 181.6m outstanding shares with a market cap of $19.1 million.