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Vantage Drilling Company Message Board

  • silurian3 silurian3 Jul 5, 2013 8:04 PM Flag

    There are no buy outs

    I constantly read on this MB about hypothetical buyouts that will produce an instantaneous profit for the shareholders. There will be no buy outs due to the debt of VTG versus the cost to build new drill ships. The way to make money on VTG is simply to buy now at $2 and wait 1 to 2 more years for all the rigs to get to work in order to reduce debt and then you can sell out for $4. A very nice ROI. Nothing complicated here.

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    • HH,

      Ya but your borrowing costs are still 2-3pts higher then your competitors. No one is going to take the debt on and comprimise their cost of capital which would cause credit issues. There will be no buyout until at least $300-400mm in debt is paid down to where the NAV of the balance sheet is more in line with replacement costs of the assets. Anyone who is thinking buyout right here especially with the lawsuit with SU is plain kidding themselves.

      Bragg has to repair the balance sheet while managing some growth without leverage since this model is not being rewarded by wallstreet. The drillers should be performing well with borrowing costs low and day rates sky high but wallstreet doesnt want growth via leverage in a regime where rates will be rising. I hope Bragg isnt going to continue to use his paybook from the 90's which isnt working. Ask ESV shareholders if their happy the last 3years despite growing EPS?

      Look for Bragg to help right the balance sheet with a sizable equity deal using stock at our expense late next year to buy into the mexican jv. This will improve balance sheet metrics and debt coverage in order to maintain some growth in 2015 ahead of th Palladium delivery.

      • 1 Reply to zd60610
      • Who is talking buyout? Not Bragg, or he would not have gotten into the JV to build drillships.

        Emphasis will be on:
        1) Getting the Titanium up to 98% utilization
        2) Getting the Tungsten in the water, and building up utilization
        3) Paying down debt, and improving balance sheet
        4) Starting work on a second JV drillship, or another 100% VTG Rig
        5) Mexican JV will wait 3-4 years or until the balance sheet has been repaired.

        The question is how fast can vantage pay down debt. Is $200-$300 Million a year doable?

    • Hint:

      Lowered borrowing costs about 460 BPS saving ≈ $90 million/year in interest

      $850 million of“pre-payable” debt

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