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A cash raise will make the company more attractive to predators, and given 170p plus for long ago, there's massive headroom for a decent return. As a long term holder whose taken a bit already I've trimmed back slightly at near 50p in order to afford some rights or whatever. Wouldn't have thought it's worth raising much at the current SP. It'll be double in 6 months time!
Just running some quick numbers
Current market cap is £160m
Debt at Dec-20 was £90m
So EV is £250m
EBITDA atm is £5m or so but was £80m pre-Covid. In one year of normal trading we can almost whip out the debt
If the banks want current debt to be 1-2x EBITDA then we RI for c.£80m. Then in a year we’d have generated a tonne of cash and have nothing to do with it. Also then the banks have missed the chance of earnings lots of interest and fees which after all is why they are in business
Let’s also not forget the banks have been getting their cash. Over the covid year CF has paid back £29m of bank debt (Dec-19 debt was £119m). So other than the covenants atm look silly (LTM EBITDA is obviously artificially low) resetting at that level (1-2x EVITDA) would just mean the company is a flood with cash in 12m as EBITDA returns to normal
So if there was an RI what amount do you need to raise? Well £80m is too much and the banks have lost a big earning piece of business and for what? A few weeks of extra bottle?
“The banks have provided further waivers in respect of anticipated covenant breaches through until 31 March 2021, taking account of the Company's cash flow projections, subject to certain conditions. We are engaged on a plan to refinance the Company, and will provide a further update in due course.”
“subject to certain conditions” and “we are engaged on a plan to refinance the company”. I will be surprised if there isn’t a RI here.
Putting the banking covenants aside, there are other good reasons why the new CEO might want to raise money through equity. This company potentially has a very bright future, but the new gaffer needs time and some money to implement his new strategy.
Unlike a lot of other companies, they haven’t yet been down the equity route and they can pitch it to shareholders as something along the lines of 50% dilution now for a 5 or 10 bag in a couple of years time.
Dan, as i've said, i'm not anti CF, & as some people on here have stated, Yes i would buy it at a lower price. Everyone wants to buy at the lows. Good on those who got in low 30s & sold for 50p. Well done i say. But i also say: why did you sell at 50? i know why & so do they. There is far too much uncertainty here & that meteoric rise had manipulation written all over it. Unfortunately for some they will undoubtedly see this fall quite a bit early next week. I would say to them to just hold & be patient. I do think CF will come good in the end but the recovery will require a restructuring & refinancing package. How they do it remains to be seen. New CEO in place soon i believe!
I think your points are very fair. No point pretending this is all roses it’s not
I just think it would be daft to call an RI atm though as the company has shown it is able to pay down debts. Over the covid year it handed the banks £29m! And paid its interest
Yeah the EBITDA is obviously low atm but stores are closed. This will be difficult but the banks could write themselves years of goodwill now with a proper debt deal
The specials paid before covid are clear signs of cash generation but also mismanagement. A new ceo can scrap that policy and focus to bring down debt. The annoying thing is atm the new ceo is not at the table with these chats!
Let me say something positive as i'm always castigated for taking a realists view. If CF get the financing sorted out. However they do it: Placing/RI etc, this share has huge potential. A new CEO could transform this into a really good business. I agree with some of the comments here regarding the current management. **** poor IMO. Have really mishandled the whole financing/pandemic issues. Unconvincing in their webcast on results day. I would hope the banks/backers could do something here about a management restructure!
Sheena, the share has been pumped up in preparation for a cash call. It is so obvious. A share doesn't rise that much in couple of days unless behind the scenes manipulation going on. I have no issue with CF as a potentially good investment but the equity issue is going to hold this down. If you are holdng this share personally i would probably say hold but each to their own. The SP is only cheap if the company is going to survive. I personally have had ample opportunity to buy this @30p but i know it will go lower & until the equity is sorted it is uninvestable in my eyes.
@paddyboy1
Thanks for that, always good to read incredibly useful information on here, helps us all make good decisions!!
This will tank Monday morning! Just watch!