@leverage ... is your tone turning? Rabbitohs supporter here ....

@leverage ... is your tone turning? Rabbitohs supporter here . Can't help you with that southern state game.

@Rob79 ... better read the 8K more closely then IMO. SSN is going through the process to be recapitalized, just a question of how the existing shareholders will fare. MOB has not made it easy for SSN and they clearly want a good portion of their money back and the sooner the better.

If Debt funding is difficult (yes I know MOB lent SSN "$16M" to acquire FB property, but read and understand the 8K in overall context of want SSN owns and owes) and operating cash flow after paying all obligations is minimal (was negative), then that only leaves equity left to contribute and that is exactly what MOB is demanding be done ... get additional equity into the business.

Y'all really do need to read the 8K in its entirely ... I only gave the highlights in the post "Important - what SSN had to tell the SEC but not us". I'll highlight some more to make it clearer

This all comes directly from the 3rd Amendment to the Credit Agreement.
EBITDAX going forward ...

"provided, however, for purposes of the calculation of EBITDAX and interest expense for the Test Period ending June 30, 2016, such amounts shall be annualized by taking the results of the fiscal quarter ending June 30, 2016, and multiplying them by four (4); for the Test Period ending September 30, 2016, such amounts shall be annualized by taking the results of the two (2) fiscal quarters ending September 30, 2016, and multiplying them by two (2); and for the Test Period ending December 31, 2016, such amounts shall be annualized by taking the results of the three (3) fiscal quarters ending December 31, 2016, and multiplying them by four (4) and dividing them by three (3)."

So basically that's good (I think) in that it starts afresh with this Jun Qtr and leaves the ugliness of Dec and Mar Qtrs behind. Plus SSN has better hedging in the June Qtr

"‘Leverage Ratio’ means, with respect to Borrower and its Subsidiaries on a consolidated basis determined in accordance with GAAP, as of any applicable date and for any applicable period of determination thereof, the ratio of (a) Total Funded Debt on such date, to (b) EBITDAX for such period."

Now that then measured up against the following table to figure out the interest rate that applies

	Column 1	Column 2	Column 3	Column 4	Column 5
0	Pricing Level	Leverage Ratio	Eurodollar Loans and Letter of Credit Fee	Base RateLoans	CommitmentFee Rate
1	1	≤ 2.50 to 1.00	3.00%	1.25%	0.50%
2	2	> 2.50 to 1.00 but ≤ 3.00 to 1.00	4.00%	1.75%	0.50%
3	3	> 3.00 to 1.00 but ≤ 3.50 to 1.00	4.50%	2.00%	0.50%
4	4	> 3.50 to 1.00 but ≤ 4.00 to 1.00	5.00%	2.25%	0.50%
5	5	> 4.00 to 1.00 but ≤ 4.50 to 1.00	5.50%	2.50%	0.25%
6	6	> 4.50 to 1.00	6.00%	2.75%	0.25%

This is further prescribed then for June Qtr as follows

"...for the period beginning on the Third Amendment Effective Date through the date a Compliance Certificate is delivered for the fiscal quarter ending June 30, 2016, the Applicable Rate shall be set at Pricing Level 6. Upon Borrower’s delivery of a Compliance Certificate pursuant to Section 7.02(a), the Applicable Rate shall automatically be adjusted as set forth in the schedule above, such automatic adjustment to take effect as of the first Business Day following the date a Compliance Certificate is delivered; provided, however, in the event Borrower fails to timely deliver a Compliance Certificate as required by Section 7.02(a), the Applicable Rate shall be automatically set at Pricing Level 6 in the schedule above.."

So SSN is being hit with 9% on its BB out of the gate. MOB clearly sees the risk. At least they now understand the challenge SSN has in getting Debt/EBITDAX manageable.

The Leverage ratio test is further split into senior (i.e 1st lien) as follows:
(c) Senior Leverage Ratio. Maintain a Senior Leverage Ratio, for any Test Period ending during the following periods, commencing with the Test Period ending March 31, 2016, of not greater than the amount set forth below during the corresponding period below:

	Column 1	Column 2
0	Test Period Ending	Maximum Ratio
1	March 31, 2016 through June 30, 2016	4.25 to 1.00
2	September 30, 2016	4.00 to 1.00
3	December 31, 2016 and thereafter	3.75 to 1.00

and then total Leverage (so including 2nd Lien)
(b) Leverage Ratio. Maintain a Leverage Ratio, for any Test Period ending during the following periods, commencing with the Test Period ending March 31, 2016, of not greater than the amount set forth below during the corresponding period below:

	Column 1	Column 2
0	Test Period Ending	Maximum Ratio
1	March 31, 2016 through September 30, 2016	5.75 to 1.00
2	December 31, 2016	5.00 to 1.00
3	March 31, 2017 through June 30, 2017	4.75 to 1.00
4	September 30, 2017 and thereafter	4.00 to 1.00

Tough sledding ahead

Interest Coverage ratio remains at 2.5x

MOB has also added a Liquidity test
e) Minimum Liquidity. Maintain a minimum Liquidity, as of the end of each calendar month, of not less than (i) for the period commencing with the calendar month ending June 30, 2016 through December 30, 2016, $1,500,000 and (ii) for the calendar month ending December 31, 2016 and each calendar month thereafter, $2,500,000.

And MOB has made it very clear that equity capital has to be delivered

7.23 Capital Transactions.

(a) On or before August 31, 2016, Borrower shall deliver to Administrative Agent a true and correct copy of Borrower’s prospectus or comparable disclosure document for an Equity Transaction.

(b) On or before September 30, 2016, Borrower shall have received aggregate net cash proceeds of not less than $5,000,000 from an Equity Transaction.”



AND THEN THIS

3. Borrowing Base.

(a) As of the Effective Date, the Borrowing Base is hereby increased to $30,500,000, and the Monthly Reduction Amount is hereby reaffirmed at $0.

(b) The Borrowing Base shall automatically reduce to $20,500,000 on June 30, 2016 (the “Borrowing Base Reduction”); provided that the Borrowing Base Reduction shall not count against the number of special determinations permitted under Section 4.03 of the Credit Agreement; and provided further that the Borrowing Base Reduction shall be in addition to the scheduled redeterminations of the Borrowing Base pursuant to Section 4.02 of the Credit Agreement, regardless of whether any scheduled redetermination occurs prior to, concurrently with or after the Borrowing Base Reduction.

(c) For the avoidance of doubt, the parties hereto agree that the increase of the Borrowing Base pursuant to Section 3(a) hereof shall constitute the April 30, 2016 scheduled redetermination of the Borrowing Base pursuant to Section 4.02 of the Credit Agreement.

(d) The Borrowing Base, as increased, and the Monthly Reduction Amount, as reaffirmed, will remain in effect until next adjusted but pursuant to the provisions of Article IV of the Original Credit Agreement.


IMHO, I think you might want to pay closer attention to this stuff....

There is a comprehensive "Schedule 2 - Compliance" that SSN has to supply each period ... its just a shame they don't have to supply it with their Qtrly ASX report.

GFTA!