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14/02/24

13:42

Post #: 72402481
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Originally posted by dynofish ↑

About finance, I feel I can comment as a former lender...I imagine that the initial withdrawal of the approved financing syndicate's approval at the eleventh hour cited a rarely used clause in preliminary documentation called a "material adverse change clause". If the financial circumstances are severely impacted by market conditions and the loan might quickly become delinquent, then they can just invoke that clause and pull the approval.

Now the existing $300m loan from Ford would most likely have been secured against the assets of the subsidiary company that owns Kathleen Valley and a guarantee from the listed parent company. Any new loan would certainly require security, and Ford in my opinion would not wish to continue to participate in a new deal requiring sharing its security over Kathleen Valley with many other lenders. That would be why a completely new facility was developed with all new lenders and an amount that pays out Ford and provides the extra funding.

I hear on this forum that other offtake partner LG may be prepared to participate in a finance deal. I'm not sure how that could work while keeping the Ford deal in place because I doubt Ford will easily share its security. But it might work because both Ford and LG have common interests. So maybe a new deal is struck where Ford and LG each take up a 50% participation in a $460m aggregate facility. That way Ford exposure goes down to $230m(from $300m) and shares the security over Kathleen Valley with LG who also lends $230m. One or more of the government sponsored export finance "banks" might also participate with the simpler terms likely to apply without the big syndicated bank facility previously contemplated. This would be a good outcome.

Among other possible outcomes, I had thought that Hancock might subscribe to a substantial convertible note arrangement similar in structure to the Syrah deals with Australian Super. Such a deal could allow debt to be repaid, or converted to equity (probably at the option of LTR). Those deals that upon conversion would take the lender Hancock above 20%, would need to be approved by shareholders and conversion would then be exempt from the mandatory takeover bid requirement. In that case, Hancock may be able to go to say 30% holding if the debt was converted, and not trigger a takeover. Such a deal would be large enough to clear Ford and provide the extra debt needed on top.

These are just my thoughts and only represent possibilities, but I think it is better than the stuff I see published by journalists.

Regards
DF

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LG could go 2nd behind FORD on the asset is another option, both parties would need to agree.

If it all goes sour FORD recovers their money 1st and whats left over LG will get.

Big risk for LG if they did it that way.
2 seperate debts FORD with 1st rights.

LTR Price at posting: $1.05 Sentiment: Buy Disclosure: Held
2 Upvote

0 Great analysis

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