Form 10-Q November 2008
We may not be able to obtain funding or obtain funding on acceptable terms because of the deterioration of the credit and capital markets. This may hinder or prevent us from meeting our future capital needs.
Global financial markets and economic conditions have been, and continue to be, disrupted and volatile. The debt and equity capital markets have been exceedingly distressed. These issues, along with significant write-offs in the financial services sector, the re-pricing of credit risk and the current weak economic conditions have made, and will likely continue to make, it difficult to obtain funding.
In particular, the cost of raising money in the debt and equity capital markets has increased substantially while the availability of funds from those markets generally has diminished significantly. Also, as a result of concerns about the stability of financial markets generally and the solvency of counterparties specifically, the cost of obtaining money from the credit markets generally has increased as many lenders and institutional investors have increased interest rates, enacted tighter lending standards, refused to refinance existing debt at maturity at all or on terms similar to our current debt and reduced and, in some cases, ceased to provide funding to borrowers.
In addition, Lehman Bank recently defaulted on a borrowing request under our senior secured credit facility which effectively reduced our total commitments under this facility by $9.5 million. As a result, we can provide no assurance that other lending counterparties will be willing or able to meet their existing funding obligations under our senior secured credit facility.
Due to these factors, we cannot be certain that funding will be available if needed and to the extent required, on acceptable terms. If funding is not available when needed, or is available only on unfavorable terms, we may be unable to grow our existing business, complete acquisitions or otherwise take advantage of business opportunities or respond to competitive pressures any of which could have a material adverse effect on our revenues and results of operations.
Our substantial amount of indebtedness could adversely affect our financial position.
We currently have a substantial amount of indebtedness. As of September 30, 2008 we had approximately $640 million of total indebtedness outstanding , approximately $34.7 million of letters of credit outstanding and approximately $425.3 million of additional borrowing capacity under our senior secured credit facility. In October 2008, one of the lenders under our senior secured credit facility, Lehman Bank, defaulted on a borrowing request. As a result, the total commitments under the facility have been effectively reduced by $9.5 million. Our senior secured credit facility allows us to request increases in the commitments under the facility of up to $150 million. We may also incur additional indebtedness in the future.
Wow, that is enlightening, you cut and paste their risk statement out of their 10Q or K, and it’s the same statement that is in the 10Q's of most companies that use debt financing, the standard CYA statement.
That is so scary I better sell all of my shares, oh I forgot I'm not a complete idiot so maybe I will just hold on to them like planned before I saw your scary little post.
Give me a break.
Our substantial indebtedness may:
• make it difficult for us to satisfy our financial obligations, including making scheduled principal and interest payments on our indebtedness;
• limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;
• limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;
• require us to use a substantial portion of our cash flow from operations to make debt service payments;
• limit our flexibility to plan for, or react to, changes in our business and industry;
• place us at a competitive disadvantage compared to our less leveraged competitors; and
• increase our vulnerability to the impact of adverse economic and industry conditions.
We require a significant amount of cash to service our indebtedness. Our ability to generate cash depends on many factors beyond our control.
Our ability to make payments on and to refinance our indebtedness and to fund planned capital expenditures depends on our ability to generate cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and other factors that are beyond our control. We cannot assure you that we will generate sufficient cash flow from operations or that future borrowings will be available to us under our credit agreement or otherwise in an amount sufficient to enable us to pay our indebtedness or to fund our other liquidity needs. We may need to refinance all or a portion of our indebtedness at or before maturity. We cannot assure you that we will be able to refinance any of our indebtedness on commercially reasonable terms or at all.