According to the filing, Oaktree now owns 15.8MM shares- 12mm issued plus 3.8mm owned already. That is 80% of the outstanding shares. That puts an EV of $200 million on this price at today's 4.38 price. How can the company say that is a better outcome than anticipated. I do not think the total 20MM shares count has the shares issued for the convert exchange.
Correction filed by Oaktree---- There are 18MM shares outstanding. That includes 700,000 options, the exchange for the bonds, new shares issued to Oaktree. Oaktree owns roundly 69.5% of the company. The bondholders own 6.3% and the public owns 24%. The market value of the company including options is $72MM @$4/shr. The debt is $125MM but they list $25MM of discounts to that number. I assume that is fair value accounting but it is not footnoted in 10Q. The discount is being amortized so I assume it will go away. The accounting is a non-cash increase to debt and a positive cash flow item. PIK interest could grow that by about $13MM/year. with debt amort and PIK, the debt can grow by $17MM/year. EV is thus $172MM (plus $25MM of debt discount?). If EBITDA is $20MM then the multiple is 8.6-9.8. If the CEO keeps making progress, they could refi that debt at some point and that savings would accrue to equity holders. The key continues to be increasing EBITDA. The coverage on debt is 1.53 so no bank would touch this anytime soon. Maybe Oaktree would take a discount of $25MM and a refi at 8% would produce coverage ratio of 2.5! They have to show sustained $20MM of EBITDA however. George what is your take on refi and debt discount?
Given the company history and commodity type businesses and offshore assets, I do not think they could refi $100MM. They could do $50MM but coverage would not be 2.5 because PIK debt is still outstanding and a default on that would cause cross defaults. Think only time will cure this but huge interest rate is big detriment to equity.