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  • imadeadcat imadeadcat Jan 17, 2008 1:49 PM Flag

    Moody's lowered debt rating to Ba2

    1. The debt is not supposed to go down to $2 billion until 12/08. The $200 million tax refund issn't due until q2 of 2008. The Miami land sale( if it happens )is for another $106 million after tax and it is a q3 2008 event. Who ever thought the debt would be down to $2 billion by now?
    2. Debt covenant breach seems really unlikely with libor falling and the $200 million tax refund due. Interest rate on $1 billion of floating rate debt is lower than it has been in over a year. Libor looks like it may go lower. With libor down ~1% that saves MNI $2.5 million a quarter creating more covenant cushion.
    3. Regarding EBITDA holding up (it was down about 2% for 2007 thru q3 of 2007)... S&P projects EBITDA for 2008 at $517 million. I feel that number is low but it could be used to calculate covenant risk. Using 2007 year end debt of $2.5 billion and year end debt of $2 billion gives average debt of $2.25 billion times debt cost of 6.5 percent (from the last 10 q) yields interest cost this year of $2.25x.065= $146 million in interest. 2.75 times $146 millon equals $402 million ... way under the $517 ebitda projected by S&P and well under the covenant... and none of that reflects libor going down 1% in last few months.
    4. Regarding the creditor comments. The bond holders have no say. The beauty of MNI's financing is that they have time.
    5. MNI did not pay all cash for KRI. They used 35 million share at ~$54 each. That $1.890 billion is now valued at $385 million.

    Don't let me talk you off the ledge. Sell if you want and drive the price down. I am still accumulating.

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