As suggested in my post the other day if you can’t generate sufficient free cash to pay down debt and maintain enough liquidity you end up running into minimum liquidity conavents under your credit agreements.
It could easily be a case of the company realising that they aren’t producing enough free cash flow to enable them to escape this catch 22 situation. It’s a bit like when a rocket is launched into space, there is an escape velocity that it must achieve to escape the pull of the earths gravity, any less and it comes crashing to the ground.
With $23.6million in net debt at 31 Dec 2017 the worry will be that they’ll need to raise well over this figure or they will just end up tittering on the edge of low liquity with no credit line in place.
Investors forget that when these credit lines are established they are provided based on timelines for repayment that also factor in orderly liquidity positions based on expected cash flows.
Once the expected cash flows change so does the orderly liquidity equation.
They are just my thoughts. It’s possible the raising is for something other than maintaining orederly liquidity but I doubt it. Esh
DRM Price at posting:
32.0¢ Sentiment: None Disclosure: Not Held
