I have been out of town (in Chinchilla funny enough) for the last few days and have not had the chance to read HC. I think I'm glad for that.
I had a brief look over the ANN's on the flight home yesterday before checking in here last night and I just can'g believe some of the drivel!
Lory, I admit I haven’t read all the last few days posts in the best detail, but I think your the first person to point out the interest rate on the fortress LOC. This is sort of critical if you ask me!
The old debts carried interest rates of 10.46% (loc) and 3.75% (RBLF). The respective outstanding amounts were 120m (90 spent) and 131m. The interest rate on these debts was an aggregate of 7.105% (roughly).
So last week LNC had drawn debt totalling $211m (plus whatever money had been spent from the latest 30mil drawn from the LOC this quarter...but I'll get the that in a moment), and future funding was likely to have to come from either the RBLF if production rates increased sufficiently or from new facilities that would most likely have been attained at rates not dissimilar to the 'notes'!
Today, LNC has paid out the RBLF (130m) and the LOC down to an outstanding balance of 20m. I am going to assume that means the company has paid out 100m, as the WHOLE facility had been drawn but there is no point in paying out debt that hasn’t been spent, when it can still be accessed at a lower interest rate! So I think it's reasonable to assume LNC has spent 10m of the LOC's drawn 30m for this quarter, or put another way, we are only spending 20m per quarter now as opposed to 30!
So in the end LNC has $230m drawn debt, paying interest on 265m at 12.5% (or 13% of 255m, look at it however you like), this leaves 25m of the notes that will be spent on Umiat this winter. When that’s done the company will be carrying $255m debt at 13%. This new debt will cost 5.9% more than the old debt (13-7.105) or $15.6m more a year (taking into account the existing interest repayments!)
Not a win (depending on how you look at it), but you might argue that this is the price of funding flexibility.
LNC now has 70m it can draw at any time and 50m in a new RBLF (with no mention of what assets underpin it I might add Dan!). With an increase in oil production the company will most likely draw from the RBLF at 3.5%. That’s the win.
Total liability of all debt if drawn today would be $405million. That’s less than the oil assets alone.
I'm going to trust BKK on this one.
My last point, and I'm not looking for a gold star here, but I mentioned a month or so back (as did some others) that I thought the new funding was a way to put the existing debt off to one side as a fixed liability (in that assumption I included 30mil for a road to Umiat, turns out I was about 10m off). I think this deal has done that as the capital liability in not payable till 2017! The royalty, coal tenement sale, GCL deal (and possible expansion) Wyoming, SA, QLD could all be online by then. If not the fixed interest liability is $35million annually. That gives us 5 years to sort something out. LNC is only 6 years old. I have hope.
LNC Price at posting:
63.0¢ Sentiment: None Disclosure: Held
