Well its doom and gloom if the economy goes into a deep recession and stays there for a prolonged period. The question for SNDE is really how deep a recession can it survive and for how long?
The banks cut them a little slack with the waiver on not having the "going concern" as part of the 10K ... its all about the BB redetermination as we discussed. Must be looking at highly discounted price deck that will do at least 2 things simply on price 1. Reduce PDP $value 2. Reduce PUDs available (as aread will be declared either uneconomic or not developed within the required 5 years).
The Asset Coverage Ratio is a difficult one to correct. Simplistically it is simply a measure of "easily" a company can cover its debts by selling assets. This is problematic when all of a sudden the "market value" (what buyers - if any - are prepared to pay now) versus the "fair value" or even "book value" of the asset. I expect that SNDE Book value of assets at this point in time is much higher than market value. SNDE says as much about the sensitivity of this covenant in the short term
For reference
and
So while hedging protects the cash flows and adjusted EBIDAX there is not much they can do about the ACR. At 1.5X Total Debt (or even just using LTD of $355M) means they need a PV 9% > $540M based on the price deck used in BB redetermination. Just as heads up the SEC PV10 at Dec 31 was ~$675M
SEA Price at posting:
16.5¢ Sentiment: None Disclosure: Held
