possibly technically insolvent, page-14

The role of Fortis in Marion's future success may be interesting.

The excerpt from half year report (below), shows Marion to be quite vulnerable at present. They are in breach of covenant elements, which Fortis have waived subsequent to report. The question in my mind is whether they have been waived till maturity, or until next reporting?

Given that only $5 million remains undrawn, and they are in breach of original covenant, everything depends upon production being up to expectations. Those of you who watched View Resources recent woes (receivership), will understand the pivotal role that bankers can play when they so desire.


Excerpt
"The Group has a US$20 million senior secured revolving credit facility with Fortis Capital Corp of
which US$5.144 million was undrawn as at 31 December 2007. The facility matures and is due in full
on 14 November 2009 with no payment required until maturity. The facility is secured by substantially
all the assets, including oil and gas reserves, of the company’s wholly owned subsidiary, Marion
Energy Inc, a US incorporated company. The facility agreement includes covenants requiring the
maintenance of certain current ratios and an EBITDA to cash interest expense ratio. As at 31
December 2007 Fortis Capital Corporation had not issued a letter of consent to the waiver of these
covenants and was consequently in breach of the covenants. Subsequent to year end the Company
has received a waiver from Fortis Capital Corporation however as the waiver was not in place at 31
December 2007 the bank loan has been classified as a current liability. The interest rate applied to the
facility during the half year period ended 31 December 2007 was 8.82%"

Further down, the report notes that current assets are less than current liabilities by over $6million, but expects that imminent production (my words) will ensure liquidity.