He may well have Sharks but "credit scoring" is done by lenders. A popular and widely used predictor is the Z-score and its variants. Total Assets is the denominator in 4 out of 5 of the sub calculations. Figure out that sensitivity to what I'm looking at. Also US Lending studies show the #1 financial ratio used by lenders AND included in loan agreements is the Debt/Equity ratio. Once again, if you look to the balance sheet you will see what the shareholders equity is. Now that will increase (because total assets will increase commensurately by the amount of the "bargain acquisition" - all by the stroke of the accounting pen and not by capital raising - if my line of reasoning is correct.
Present shareholders equity as of last Balance Sheet (31/12/2016) is $13.5M. Now add to that the IOG acquisition of ~$2M and say $15.5M. Now for round numbers sake say the "Bargain Acquisition" revalues IOG to $6.5M .... that brings Total Assets t0 $20M. If they got a $10M debt facility then D/E =0.5 which is comfortable. Their Z score still remains negative by my calcs.
However the "C" of Cash is scores higher than the "C" of Collateral for commercial lenders of any repute. How much cash will the asset generate to meet the repayment obligations of the loan. Far easier to make a slide presentation than to deposit the net cash. Besides hasn't this dance be done before? Mizuho was going to get them a $40M debt facility for Pathfinder & EFS properties because "...exploration success at Niobrara and Eagle Ford is de-risking properties allowing access to debt capital for large-scale ongoing development...."
Other than raising a many more millions of equity capital , selling properties and saying debt is bad (and we paid ours off...) and over leveraging has sent 200+ companies bankrupt what else has changed?
AKK Price at posting:
0.4¢ Sentiment: None Disclosure: Not Held
