CRN (ASX) We finished the day in green

Originally posted by gilroy: ↑

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.

Expand

Notes are currently trading at 72% of face value

Originally posted by gilroy: ↑

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.

Expand

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.

The only defaults it can be in is if Cash is less than $100m and if the ABL this gets re-structured all is good.
The only other one I am aware of is if a noteholder wants their face value back which can onlt be on Oct 1, 2026 (2 years after issuance)

No.	Vol.	Price($)
19	1699752	14.5¢

No.

Vol.

Price($)

1699752

14.5¢

Price($)	Vol.	No.
15.0¢	287337	2

Price($)

Vol.

No.

15.0¢

287337

No.	Vol.	Price($)
10	1012405	0.145
22	1977923	0.140
9	435981	0.135
9	167172	0.130
7	260540	0.125

No.

Vol.

Price($)

1012405

0.145

1977923

0.140

435981

0.135

167172

0.130

260540

0.125

Price($)	Vol.	No.
0.150	287337	2
0.155	553166	6
0.160	636962	8
0.165	546817	10
0.170	757725	14

Price($)

Vol.

No.

0.150

287337

0.155

553166

0.160

636962

0.165

546817

0.170

757725

(20min delay)
Last 14.5¢		Change -0.020(12.1%)		Mkt cap ! $243.0M

Open	High	Low	Value	Volume
17.0¢	17.0¢	14.5¢	$2.473M	16.32M

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