I get the feeling that financing may be the next big...

I get the feeling that financing may be the next big announcement here, and if so, then it will be very interesting indeed to see how they structure it, and how they word it, especially in a very rapidly rising interest rate environment.

Here is an example of a few things you need to look out for, when reading a funding announcement from a company.

As an example of describing funding, you will notice that Pantoro declared new financing today.

The way they explain it will give you an indication of the murky "devils-in- the-details" interest rates that companies are not overly keen on disclosing.

Firstly, they initially state the loan is at 6.8% per annum for the "combined interest margin (CIM)".
Following that, they state the loan is at 7% "net of the "OID (Original Issue Discount)".
Following that, they state the loan balance is at 8% plus the "SOFR (Secured Overnight Financing Rate)".

As you can clearly see, this gives investors no clear idea on what the actual rate is, it's as clear as mud and gobbledygook to most investors.

So then you need to read the small print in the document.

It then says the loan rate is at 8% plus an SOFR Minimum Floor (MF) of 3.5%, which can be more if the SOFR is higher overnight, but not less.

So, we are finally led to something nearer the truth.

The company's loan facility is at a Minimum of 11.5%, but higher if the SOFR goes higher, but the company's first line of the announcement declares an interest rate of 6.8% for a (stated) combined interest rate.

What investors want to know is the actual interest rate for the majority of the loan.

But from the announcement, many shareholders and investors, particularly the young and naive ones, may think the loan's interest rates is 6.8%, but in reality it is actually at a Minimum of 11.5%.

This is the type of "fast one" that some companies try and pull when reporting loan interest rate agreements, so they hopefully impress shareholders and investors, but in fact what they are really doing is disguising the truth. There is quite a difference in interest rate between 6.8% and a minimum of 11.5%.

This is why you need to read the financing documents very closely in order to find the real truth, and then you need to ask questions.

So let's see how OreCorp does when it reports it's financing deal, and how they announce and present the deal. This should be very interesting indeed, when it happens, especially given the fact that they could have locked in funding a year ago at "half the rate" they'll have to pay now. Questions may need to be asked.

Gw