To address speculation regarding note holders being able to take...

To address speculation regarding note holders being able to take any action, even if Sev.n or any other interested buyer were to get a majority ownership position in the senior notes. The note holders do not have any right to demand repayment of the notes unless there is a change of control. So this speculation has no basis.

Furthermore, as the CFO stated on the quarterly call, the company held cash of $200m at 30 April with about $100m of remaining capex left for the year as the majority (55%) had been spent by 30 April. At the same time as the cash outflow /of $100m capex per quarter ceases, production costs will redu
ce and volumes/revenues will increase. So CRN will be at least Free cash flow neutral second half onwards with no improvement in coal price. I share the high conviction view of many analysts that coking coal prices will start moving higher in the back end of the year, together with $200m increase in earning 27 onwards which the market will start to factor in as we move in to 26.

The second the ABL is sorted this will return to trade at levels closer to a few months ago. CFO (ex Genesis CFO) was very clear on the call that there were multiple options available to them including prepayments and alternative ABL facilities. He officially started 1 April, it is a shame he hasn’t had more time to get ahead of this but that has created an opportunity to buy in at these levels. I would expect to see an update early this week given 31 May deadline.

If anyone is buying up the notes at a discount to face value, this may be a precursor to a takeover offer. Illustratively, if you buy the notes out for $300m and CRN still has $200m cash at present, you are effectively buying it at a bit over $100m net debt (a bit more for ABL slight draw) wih most of the growth capex done and Stanwell rebate about to roll off. Using consensus PCI forecasts for 27 of ~$220 CRN will generate +$500m EBITDA. Normally long life assets should trade at least 5x EBITDA. But placing them even at 2x and taking off net debt then converting to AUD this implies equity value of ~A$1.4 billion or $0.80 per CDI minimum.