Their debt is $1.3bn (~US$850m).
And the reason it is that is because they acquired the following earnings stream:
[You know this because, it was pointed out to you, so your are just being churlish by drawing negative attention to the debt, as if it is some kind of problem].
So they've geared the balance sheet [*] to US$0.85bn in order to acquire EBITDA of around US$2.2bn pa. Would you not?
It's something about which shareholders of other companies can only dream, yet you try to masquerade the debt as being somehow problematic.
Clearly, talking about WHC's balance sheet, without including discussion of how the balance sheet has been deployed, is either analytically incompetent or reflects some kind of pathological bias. (In your case, both, I suspect.)
[*] And when I say "geared", that is barely the case, because given the company is forecast to generate around US$2.6bn in EBITDA this year, that equates to Net Debt -to-EBITDA of a mere 0.33 times and EBITDA-Interest coverage ratio of more than 35 times.
"And the only reason they managed to reduce their debt was because of windfall prices. Hell, if iron ore quadrupled in price, I'm sure FMG would reduce their debt to zero as well. Really clutching at straws congratulating management on that one."
Who cares what happened that allowed the balance sheet to get into such a pristine shape that it facilitated a non-dilutive acquisition of company transforming assets?
The fact is it did, and as a result now 80% of WHC's earnings are derived from the world's pre-eminent coking coal assets, without any recourse to shareholders for a cent.
As for your criticism of WHC management, you reckon the fairies living at the bottom of the garden represented WHC in the negotiations with BHP?
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WHC Price at posting:
$7.61 Sentiment: None Disclosure: Held
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