Member Info for Digittt

Hard to read anything into the loss as it's an accounting loss I think, so could be including any non-cash write-downs relating to historic things. EBITDA a better measure of cash generation (before tax) and at $8.2m, that doesn't seem terrible on first pass.

Dan, assume you're from my hometown... don't give it a bad name. The project will be built for sure. Questions will be when and who owns it then and can afford to take the risk. I'm holding onto my paper losses and expect nothing back...but will hold. Worst case I have a life lesson to tell my kids and I'll have to work 6 more months before I retire.

Yup, hope that was without googling. Reading it with my kid and that's around the part where he explains how mankind got to Earth. Had forgotten that part of the story and was laughing my head off with my kid. It's good to laugh... especially after the truckload of money lost on Sirius to date.

Reading one of my favourite books last night and I stumbled across the following passage...can't believe it if this hasn't been picked it up before:

Sirius is paved with gold
So I've heard it said
By nuts who then go on to say
See Tau before you're dead"

Question is: What book? (and no cheating...although no chance of stopping that!)

The company spun massive porkies about the stage they had got to with the originally planned project finance. Unless I have someone from the specific department telling me that the guarantee was about to be issued, I wouldn't believe anything related to that. Even then, it woudl be overlooking the significant equity / junior debt raise that would have been needed to close the funding.

Zero chance of that unless SXX was a blonde who was friendly with Boris. Absolute pipe-dream if you think Government money is coming in any time soon...a guarantee is the same thing as cash in from a work / credit assessment perspective. The government work as diligently as any senior lender would to cover off the risks. Prior experience tells me they are very cautious on completion risk and they are not going to do anything unless there's a strategic in play or the contractors start stumping up guarantees on completion themselves...suspect SXX will still be seen as the integrator, so will default back to needing a strategic.

Been a while since I posted, and will save a whole lot by simply saying OUCH! We all had our reasons for being excited and positive and willing to take a risk...and we've all been hurt. No sense at picking at wounds. I haven't been through the billions of comments over the last few days....just some select posters...apologies if there are repeats. Some commentary though which may be useful, is my opinion based on large, similar project experience...but by no means is fact and is by no means necessarily informative:
1. Agree with Vinn the Binn's sentiments, we all believe this project will be built...that remains true.
2. Disagree on trade creditors pulling terms. They may try, but they are all after the big picture, and I would believe all of them will see maximum result for them if the project is built.
3. Expect the big vendors to help out...they will no doubt slow down, but they will try and do what's necessary to not derail the project. And they'll charge interest and financing costs for their good deeds.
4. Expect the mgmt team will be talking to lawyers, financial advisers and their board weekly if not daily to have "confirmation" they believe they are still a going concern. If the auditors become painful, this is what throws this under the bus / will raise desperation stakes. This won't be a fun time for mgmt at all...have been through it.
5. Costs will increase by a chunk...financing costs...extra running costs for a delay...standing down and starting up costs for some vendors. Can't quite calibrate this in my mind yet, but instinct is $500m or so hit...but that's a total instinct guess. Could easily be more...or less.
6. We are all going to realise very little out of this...whenever equity comes in, it's going to hurt like hell. Why? Because it's about what's best for them and faceless PI's are very easy to screw without conscience. But, depending on how they bring in the strategic partner, we might realise something.
7. Strategic partner would help unlock the debt....but that's also going to require a lot more cash / contingency to cover the risks...suspect we'll head back to a standard project finance structured debt solution...depending on how much cash the strategic partner has. Expect them to arrive saying nothing for existing shareholders as they are having to put all their cash into saving the business and project...but that is hopefully the start of negotiations.
8. Someone else said it, but to be clear - bond market conditions are not great, but they're not shut-down at the moment. Had another client pause a process to wait for things to settle, but other poorly rated bonds have got away. The real story is the risk of construction is scaring people without having a bit pot of cash or strategic partner to guarantee.

Wait and see for me at this point...I've written off the cash mentally (OUCH again)...but am looking on the bright side - my kids are stoked they're not going to be going to university

My 2 cents...the reason you suffer the pain of the slow govt backed PF is because it ultimately gives you longer dated debt that over life will be cheap. In my mind no other version of financing is going to be cheaper unless it's a royalty or supply stream with a counter-party who has a very very very low cost of capital. Perhaps some pension fund would consider that, but that would be a pretty big bet for them. My instinct is it's going to be expensive and I would suggest give the counterparty an equity kicker, but we will find out...if we manage to get an expensive deal that doesn't give away too much equity and doesn't have too long or too short a term, that's probably worth it in my mind.

I expect management to use this as an excuse to do an equity raise of sorts now to keep things progressing for another 2 or 3 quarters before cash flows from the alternative funding or at least to keep auditors happy...but we shall see. I can't imaging funding flowing in the next 2 months, but happy to be wrong. In any event, anything that keeps the project going forward and allows us to retire more and more risk, then that should be good..

On a humorous side-note (at least to me), a brief read of the board this morning regards CF seems to suggest that we are back saying "He is the Messiah, he is the messiah", and he's no longer "a very naughty boy".

Correct, and just to double-clarify...there is also no single MD in investment banking, there are many...it's just a title, roughly equivalent to a partner at an accounting/ consulting or law firm. ie it's senior but there there can be thousands of other partners.

As an aside - Investment banking titles have always made me chuckle...as far as I remember from top down it's Managing Director, Director, Vice President, Associate and Analyst. About the only logical link is Director to MD.

Methinks the IPA commitment will be needed before any of the $3bn will be available for draw. As will the additional ~$600m for contingency. Lenders at this point will only commit if it's fully funded plan and will do it all together. The fact that the IPA funds will draw last is indicative that there will be some conditions precedent to their draw that they only envisage being able to meet later down the path (ie the risk retirement). Normally you try get everyone to fund together, so they're all equally pregnant such that if you end up in a mess, you all have equal skin in the game and make decisions as such. Sounds like they are having to avoid that path on the financing to move it forward. That kind of disparity could easily cause delays and sitting on hands, so I like the fact that they are outlining what appears to be the agreed route out of it.

However, don't see the funding closing anytime soon...suspect they haven't got to documentation yet which experience tells me can take anywhere from 4 to 9 months or so. The $600m needs to be raised and injected ASAP to give the project runway to reach the debt while having some negotiating strength. Can't remember where the company was with it's going concern disclosure before, but I'm sure the auditors are having a field day. Also a little grumpy with what I would suggest is the intentional misleading of the DD process mid-way through last year. Could have sworn they indicated then that the lenders advisers were done / reports complete...and we're 6 months later and they're not.

Anyway...in it for the long run...happy to be here, but was a little happier with my head stuck in the sand yesterday!

OR - did you steal that off my screen? I started writing the exact same response and then got side-tracked by the school run and work. Wholeheartedly agree with your sentiments.

Also do think the $400 to $600 will be higher as my memory of the source was that it didn't suggest it covered all the risks (delay? funding cost exposure? etc). If we have a good strategic partner solution, possibly not by much, if we go it alone, then by a larger amount.

Backstop for funding drawdowns will be when the cash runs out, but a lot of work typically happens from commitment letters to drawdown...lenders won't get any prizes for pushing everything to the limit. Development finance institutions and ECA's are typically the slow moving beasts - commercial lenders can crack the whip internally.

One thing to consider is if there is an SP, how are they involved in the deal and how their involvement will impact on the lending process to date...ie re-trades, new inter-creditor negotiations etc etc.

I suspect another royalty is unlikely. These will be senior lenders - they won't let SXX go off and sell operating cash flow from above the lenders to solve a funding issue below the level of the lenders. It doesn't work like that typically.

Also, from experience I know how difficult these can make the inter-creditor agreements...throwing another royalty in there brings in another party...that may sound trivial, but it's not. The Gina royalty I'm sure is already painful enough.

Yep, we'll see. Don't really know what to think currently - the strategic partner angle is playing on my mind, but that also may be something you link to ST2 close.

My instinct (along with others here) is that a placing is imminent. Company will take the pain now as the extra cash will give it a longer runway to close out ST2...even though it's there as a contingency.

But again with the leaks...

Many thanks, and yep, that's where I was going...not the smartest of tweets. Seems like bad tweets are all the rage...

Jobbinscl - just clarifying, you say that because you mean month-end is Sunday, or is month-end a different term in O&G? Asking as I genuinely don't know if there's an alternate reference, and I thought I had seen someone implying something similar before. And no, clearly O&G isn't my typical space.

We could always email the FT saying we have an ongoing concern about their reporting...

@...maybe that's too harsh, but I used to like the FT. FT in their defence are fine to raise this in my mind, but it's clearly a non-event to anyone who knows the project.

I think the comments to the article spell it out..."Wait a sec, you are telling me if they can't raise the money for the project, the project might not happen? Some slick investigative journalism there."

Going concern is a 12 to 15 month look forward typically...the company has said it needs ST2 funding to proceed past Q2-19. No surprises the auditors are obliged to mention the risk, but don't qualify the numbers that are prepared on a going concern basis. The point about stage 1 was because it got them funded more than 12 months, hence no need to mention it..

I got hammered when I joined the board for daring to suggest there was risk of construction overrun and that we can expect some dilution (think I may have even specifically mentioned the tunnel, although that's coincidence). Yes, I'm a little irked, but that's just because I made the mistake of looking at my paper profits. Take the emotion out of it and it's as expected. This is a start-up and lenders will make the project push risk onto those that can bear it. They will not take risk. A start-up with a finite amount of equity that it's burning through can't. Hence, the contract renegotiations transferring risk / and the strategic partner pressure and, and... There's more to come when you consider the level of contingent funding they will require doesn't include items yet that they will need to (from my read), but it doesn't change the fact this is a good project. CF has done what any entrepreneur I know in start-ups does...drives things enthusiastically forward, building momentum any way he can. It takes a strong character and constitution to do that, and it also takes a salesman. If you've been swept up in the sales talk, that's a lesson for life unfortunately....but you will get your money back and a return at some stage. There are many startups where you don't.

Thanks Myo and PAAA...i will definitely try listen to the pres when I get a chance.

Going back to the lack of completion guarantee - lenders in this will typically want big corp with a big balance sheet (Rio etc) to be on the hook to repay all their debt throughout the construction until completion is reached (defined in many different ways but best to think of it as production at a certain rate at a certain cost per unit etc etc). ie if we don't reach completion by a certain date, big corp has to fully repay the debt (in theory). Once completion is reached, then the project debt turns fully non-recourse and the completion guarantee falls away and worst case for the lenders all they have is the asset / project company.

In the absence of a shareholder who is a big corp who is able to provide that guarantee they will look to push risk back onto contractors/sub-contractors - we are seeing that. They will also goose up the contingency...to provide a stupid level of certainty...I have seen that kill projects. In order to find a medium between the two, they will often look for a strategic partner and get them involved. It sounds like that's where we're at.

The cost of getting them involved is unclear, clearly...ADM would be the natural fit I would think although I have no idea what their balance sheet is like and I worry they'd have us over a barrel.