No, its more likely that they will pay the bank some fees and be subject to some new loan restrictions. They will probably be required to use excess cash flow to pay down the credit line until they are back in compliance with the reduced credit line. That's what happens most of the time.
One item that stands out from the call is that their wastewater capacity is doubling with new disposal wells coming online. Is any other company moving wastewater from a central terminal to disposal wells by pipeline and barging wastewater to that terminal? GRH is definitely a pioneer and is going to be the low cost disposal supplier.
Jim Collins and his followers may not be having such a great day. Panick Report is having a good day. Trade alert went out on ESCRP with it trading at 3.45 this morning
ESCR is 90% hedged. With the preferred dividend deferred and negligible capital expenditures they will have some excess cash flow every quarter to pay down the credit line.
What usually happens when an energy company exceeds their borrowing base because it gets reduced? Does this result in bankruptcy as some have suggested? No. The bank will typically charge some fees and place restrictive covenants on the company. They will be required to use excess cash flow to pay down the credit line until they are back in compliance with the reduced borrowing base.
Wake up Tom! Are you this misinformed on other issues you own? It's conceivable MILL could pay the preferred dividend, but they have to overcome tough loan covenants (10 mil capital raise) as well as tight cash.
Mill does not have 30 million in the bank. They will get tax rebates in June, but some of that cash may already be earmarked to pay down the remaining Keybank credit line. All the lender terms are filed. The rate was raised on the small remaining Keybank loan with the last covenant violation waiver, but is still reasonable. The cash rate was already raised on the Apollo loan and an additional 2% payment in kind (non-cash) interest was added to the large Apollo lender. Apollo is not a new lender. The rate being charged by Apollo would make Vito the loan shark blush. They didn't take off all their hedges - just a portion of them.
Rational heads already swapped out of MILL-PC / MILL-PD into SDRXP, GDPAN or MHR-PD which were all trading at about the same discount to par range as MILL-PC / MILL-PD. It is conceivable that Geisler could still pay the dividend after bringing in financial advisers, but the odds are not so great.
When a distressed company hires financial advisers it's often done to prepare for a bankruptcy filing. Some will interpret things that way here and MILL is going to have a really bad day. I think MILL is the rare company that's actually hiring financial advisers for other transactions. They were careful to call it a "Capital Repositioning" as opposed to a "Capital Restructuring". Just gave Panick Report subscribers a trading target price on the preferred issues, but won't post that here. Common is of less interest to me.
What's really amazing is that SDRXP is a par 100 convertible issue trading at 40. MILL-PD was trading at close to 10 today which is also 40 cents on the dollar. SD has 1 billion in liquidity and just paid the SDRXN dividend in shares of SD common stock. SDRXP will also get paid in common. Odds of a deferral there are slim to none. Dividend is not even a cash expense. There was no need to gamble with MILL-PD.
Common and preferred issues will trade lower, but MILL may have more of a future with a more realistic capital structure. Paying off Keybank and getting most preferred holders to swap for common would put them in a much better position.
I've been telling Panick Report subscribers and others that MILL liquidity is tighter than it was last quarter. Have told folks that GDPAN, MHR-PD (up big today ahead of my upcoming article) and SDRXP are also deeply discounted issues and nearly certain to keep paying the dividend. Have told folks that MILL-PD was a gamble that could go either way. Maybe Geisler still has a couple of tricks left. I feel sorry for Jim Collins who just came out with an article promoting the MILL dividend trade. Anyone following him for their preferred stock picks would do well to switch to the Panick Report which sent out a trade alert on ENRJ-P at 8.50.
What's ahead for MILL? If I was Geisler, I would defer the preferred dividend and try to get holders to swap voluntarily for shares of common. If they can get most of the preferred to convert to common and with Keybank mostly paid off they could move forward in a more realistic fashion. They might actually have much better liquidity in a few months with Keybank now likely below the lowered borrowing based and another big Alaska rebate coming in June. Going to be ugly tomorrow for the preferred longs. On the bright side, I think MILL is still far from done. Will still be some more trading opportunities ahead.
Sometimes actions speak louder than words. If Geisler pays this one he will definitely be up for a preferred stockholder award. We'll see. I'm sitting this one out with MILL-PD. Collins is a braver guy than me given how tight liquidity is at MILL right now. I'd also have to give credit to Gary Evans for refusing to defer the GRH-PC dividend last year when that company was running on fumes, scrambling to sell assets. selling common stock and borrowing money from him personally. Speaking of Gary Evans, look for my MHR-PD (great move today) article out tomorrow.
Don't get too comfortable Verado. If Geisler does come up with a way to pay the dividend, I will hit the buy button faster than you can hit the cover button. MILL-PD is still far from being an investment, but it can still be fun to trade.
I think Geisler and friends need to put up $10 million themselves. If they liked it at $5 they should love it at $1 with warrants. I'm not saying that they will do it, but that's what needs to happen IMO to pay the preferred. Not betting on this one either way. It's too hard to call. I got popcorn ready to watch the show though.
SDRXP convertible is at 40 cents on the dollar. GDPAN convertible is at 22 cents on the dollar. Those are easy bets. ENRJ-P is not bad (for risk takers) at 52 cents on the dollar. MHR-PD (look for my upcoming article) is at 60 cents on the dollar. If there weren't so many easy opportunities elsewhere, then maybe I'd be willing to bet on Geisler. I am rooting for him though.
I recommended ENRJ-P to Panick Report subscribers as a speculative trade at 8.50. My Seeking Alpha article came out with it trading near $10.50. Still looks pretty good at 13.50 which is only a couple of points more than MILL-PC.
You are correct that they need to do a PIPE. Cash is only 2.5 mil. Forget the Alaska rebates as they are being forced to use those to payoff KeyBank. Forget Keybank as I doubt anything can be borrowed back as its paid off. Company can't sell more debt per covenants. Selling preferred at 40 cents on the dollar is irresponsible. A midstream deal is not happening in the short term. Joint ventures are also longer term. Geisler may find a way to pay the dividend (I'm rooting for him), but he is facing some big challenges.
Why even bother with the MILL issues? GDPAN (par 50 convertible trading at 10.50) is cheaper and they have 150 mil of liquidity and little chance of deferral. SDRXP (par 100 trading at 40) is cheaper than MILL-PC and SD has 1.1 billion in liquidity. Little chance of a SDRP deferral since the divvy will be paid in shares of SD (see my Seeking Alpha article). I would say there is a 99% chance that SDRXP pays the next dividend and a 95% chance that GDPAN pays it. MILL-PC / MILL-PD are a coin toss at best. Why bother?
Since you claim I will give you a dozen picks today and a different dozen picks the next one, here are the actual facts. The Panick 10 are my high yield picks as opposed to speculative stuff that I sometimes flag as shorter term trades. The MILL issues are fun to trade and not good for much more than that lately unfortunately.
Average time in Panick 10 is 123 days, based on 71 picks since I launched the Panick Report in late 2012. 49 gains over 5%, 10 losses over 5%. IRR for all Panick 10 picks as a group is 35%. Current top pick in the Panick 10 is SDRXP. There is a difference between short term trades and picks. I still like PTAXF (even with some recent setbacks), EWPMF and TAOIF as equity picks. Have liked those 3 for quite awhile. Incidentally, those 3 oil companies are all debt free.
Liquidity looks extremely tight at MILL I'd say the next dividend is a coin flip - not a lock. GDPAN (par 50 trading at 10.50) and SDRXP (par 100 trading at 40) are both cheaper than MILL-PC. It's a lock that they will pay the next dividend. SD has 1 billion in liquidity and will pay the SDRXP dividend in SD stock (see my last article on that) so it's not even a cash cost. GDP raised 150 million after paying the Q1 dividend. They have 175 million in liquidity. MILL may have to pull a "Gary Hunter" and sell common to pay the preferred dividend.
A couple of months ago GRH did a private placement of common stock while continuing to pay the preferred dividend. Things are looking up for GRH lately. Maybe Geisler will take a page from the Gary Hunter playbook. If Geisler does pay the dividend, covering that will be the least of the problems for the shorts. MILL-PD could trade a few points higher and there is another 3 months of the shorts paying astronomical borrow fees hoping for a deferral.
Disc: no position in the MILL issues, but I'm rooting for Geisler to pay the dividend.