My take would be, yes. PNC has presumably done their due diligence and determined that the risks are appropriate, which means that PNC believes there is a pretty good chance that HTI is not going to be going under. I also find the terms of the agreement interesting. At the close of last qtr HTI had 76.2M of outstanding 3.25% convertible bonds. The terms of the credit facility state that it becomes due in October 2012 unless HTI reduces the amount of the 3.25% convertible bonds to 50M or less and has at least 50M in cash, in which case the credit facility becomes due in October 2014. Assuming that HTI intends to keep the credit facility beyond 2012, I am intrigued by what they intend to do regarding the reduction of the outstanding 3.25% bonds. On the one hand, they could be looking at another swap or maybe, just maybe, they actually think they are going to be generating enough cash to allow them to retire 26.2M of the 3.25% bonds by this time next year.
I think, possibly, the $50 million "liquidity" figure includes both cash and available credit, so I think they could meet this standard even with today's balance sheet, if I read it correctly. It would be nice to see them book some more gains on more repurchases of the notes with this cash, since the notes will be put on them anyway. The market price of the notes seems like a gift horse for the company, so some of those gains should be inevitable with this agreement in place.
Unifi, u seem to really have a grasp on this, so, how does this tie in with the previous refi they offered. Seems to me they are expanding their liquidity or am I reading this wrong? I am assuming they had a good quarter which they have not yet reported with good cash flow (obviously amount unknown).
I believe you are correct, that the purpose of this credit facility is to improve HTI's financial flexibility. In the Q&A portion of the 1st qtr conference call, someone from HTI (probably the CFO) gave the following answer to a question about how much cash HTI needed to operate. "From a cash balance you know we’d like to think closer to $75 million as a cash balance. You can certainly run from below $50 and operate the business (Rich), but we’d like to stay closer to $75. We’re really going to stay away from talking about anything related to debt or financing until after the offer is over."
HTI has been running below the 75M, so the credit facility fits in that respect. Also, in the last conference call the CFO responded to a question on the amount of outstanding debt that was puttable in Jan. 2013 by stating - And so we expect that we'll likely finance a portion of that, but we also at this point are looking to more focus on our performance and improve the financial and we are not aggressively pursuing additional financing in the near term. This statement would seem to also indicate that the credit facility is likely just a move to increase financial flexibility and not related to an attempt to finance some of the outstanding 3.25% bonds. Reading deeply between the lines of that statement also gives me hope that HTI believes it is going to make a profit in 2012 and use it to buy back at least some of its outstanding debt.