Running Hard To Stand Still10 Jul 2024 13:22
It appears the general opinion is that what Rusty says or writes cannot be trusted. Plenty of evidence to support that view:
On 19 March 2024 Rusty wrote: By focusing our capital allocation on a fixed dividend level that is competitive with the industry and the market at large, we are prioritizing the acceleration of our balance sheet de-leveraging, with over $200 million in debt repayments during 2024, creating financial flexibility and a strong foundation to maximize long-term value creation for our shareholder base.
On 3 June 2024 DEC raised $610M of bonds @7.28% - fully expected amortisation March 2033. The proceeds were partially used to redeem cheaper Bonds maturing earlier and reduce the outstanding RCF. It's called kicking the can down the road.
The latest $100M acquisition will be funded by a ragbag "combination of the issuance of approximately 2.4 million new U.S. dollar-denominated ordinary shares direct to the Seller and a senior secured bank facility supported by the acquired assets, along with existing and expanded liquidity from the Company's recently increased borrowing capacity."
We are not informed of the issue price of the new equity ($10 anyone?) or the size, coupon and duration of the new "Senior Secured Banking Facility". Rusty informs us these are "High Quality Assets" - Rusty has never bought high quality: it's always somebody else's unwanted cigar butts that he thinks he can get a last puff out of. Maybe he can, but it's not a given and he has no control over the price that last puff fetches.
Please don't lose any sleep: like all the previous acquisitions, disposals and financial manouvers, as Rusty never fails to tell us, it's accretive. In my estimation the risk quotient has risen again: but these is still a dividend to be cut if things deteriorate.
I classify DEC as a capital/debt hungry business that is running very hard just to stand still. The treadmill only has to speed up marginally and we are all dumped in a heap on the floor.
AceOfClubs
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