Member Info for GaiasKidney

Afternoon.

High risk bonds are already showing yield improvement over the last few days since Monday. 3month view:

https://ycharts.com/indicators/us_high_yield_b_effective_yield

Sirius' maiden bond will be higher risk (and so coupon) than what's follewed by YC here, but the movements over time will be similar. The direction is what to watch.

I expect they could get it away at a price next week if they so wished. Until they do market fear and loathing of all Sirius will dominate......be that rational or not.............and if it don't go this way there are yet many not that dilutive ways still to skin this cat.

GK.

PS: I wonder if Mr Fennemore reads here and more important, DhisR?..........If he exists at all that is!

16%? Correction got £/$ reversed. Read 25%.

GK.

Hi WW

Finding an acceptable balance between SHs and bond buyers when offering a 'sweetener'?

So let's say present SHs will stomach an eventual 1bn extra shares in a year or so as a minimum time. For bond takers that would be 2 warrants per $ of bonds. Say each bond is for $100k, so 200k warrants attached. Say the warrants have an exercise price of 15p (familiar!) and are not vested for 1y. Then if in a year the price is at a not too taxing 25p bond takers can exercise and sell for an extra 1y gain over the coupon of ~ 16%. Attactive.

SHs will have their future value destroyed by some +10% only, far better than some alternative at pres. If pushed I would take it.

Would JPM?

GK.

Both CBs and warrants have the potential to lead to dilution down the road, but attaching warrants, unlike with a CB, would not mean the structure of the $500m senior secured bond would have to change in any way. That would include the term being longer that JPMs RCF running period. Something I think they insist on so as to retain priority if it comes to a 'sweep up' once Sirius is earning. Something that cannot be enforced with CBs.

Warrants can also be tailored in many ways. Clauses like;

Holders have to retain bonds for x years.
Warrants not transferable.
Warrants not marketable (though i think it would offer more value if they were).
Warrants only vest after x years.
Warrants have reduced exercise prices going forward.
Warrant can be cancelled after a period or certain milestones. Etc.

Lots of options out there, but best to stick with the present plan until the point where it happens or cannot be made to work.

There is time.

GK.

SM

2/7/19 Q2 Update RNS:

"The net proceeds of the New Convertible Bonds have been placed in an escrow account and will be released to the Company upon the issuance of US$500 million senior secured guaranteed bonds (the "Initial Bonds") (or another acceptable US$500 million debt financing) and entry into the proposed US$2.5 billion revolving credit facility with JP Morgan.."

Note: "(or another acceptable US$500 million debt financing)"

This has not apeared anywhere else. JPM would have to accept any modification.

So to your question. It is something being entertained it appears.

GK.

Tnx for getting up SOOO early to pass this on to us CP.

“We believe there is an elevated risk profile evident for equity-holders until completion of the high-yield tranche, given shareholders are, in essence, shouldering the full burden of project financing risk?.?.?.?The market will now inevitably price in an alternative funding scenario, which could include an additional equity call.”

This careful statment is worth some examination.

The bond sale delay disclosure is not mentioned.

It states an obvious given for SHs with 'shouldering the full burden'. Never!

It then comments on what it thinks the market now thinks (not them selves) re 'alternatives'. Of significant note that they are not sayng this is their thinking. But they do however state their thinking with 'until completion of the high-yield tranche'. Not shying away at all there then. They have the can afterall.

Make of it what you will.

GK.

Morning...39 business days and counting!!

Perhaps the alternative if these first 500m bonds are not getting sold into the market prior to the cutoff has always been staring us in the face. 30/4 St2 Launch RNS, 'Initial Bond Engagement Letter':

" J.P. Morgan Securities would endeavour to procure purchasers for the full US$500 million of Initial Bonds currently contemplated as part of the Stage 2 Debt, but would not be under any obligation to acquire any Initial Bonds for which it cannot procure purchasers."

Not 'under any obligation'. Would be a bit embarrasing and auk though considering the agreement also states that:

"J.P. Morgan Securities (acting directly or through its affiliates) to act as initial purchaser of the Initial Bonds on a best efforts basis.."

Just walk away will they?

I'm beginning to suspect there may just have been some very expensive jumping mistakes made here by some.

See what transpires.

GK.

Yesterday...........Seems like months back already....said (and stick by all the more):

"I would put other proportions on the risks: build 20%, market 15%, finanace high at 65%."

and ho **** ing ho, the market for once obviously agrees!!

So Myo (glad you haven't sloped of for a week + like last time..;-))...). With:

"but as always the finance has been the drag.....I don't think there are many who post here who weren't aware of the risks"

But since you are so forward with info and explaination on other fasinating aspects of this project, I think there are quite a few who would like you to be 'sorting' those irksome risks for them as well.

Obvious it's test for our favoured Merchant B CEO, so a bit unlikly any of us will have a better clue or a more likely steer. Best to just say: 'err...it's difficult...init'!

ATB.

GK.

PS: oh and just in case you int got the message.....it's all your fault :-)

JR

Err..1/ September.

2/ http://www.stockchallenge.co.uk/ hit 'FTSE ranking.

GK.

A placing cannot work to release the funds in the $2.5bn RCF. The contract with JPM is for it to be a plain bond first of $500+m only. No other alternative.

A placing cannot raise more than 1/5th of the Capex needed to complete this build either without the sp being driven to wipe out.

Talk of placing shows how people do not uderstand the situation. It's bond or bust.

GK.

The trials of Job go on.

This Initial Bond is very much an international effort and mostly USA centred it seems. Prospectus p276:

"Initial Bond Engagement Letter....
The Initial Bonds and the indenture governing the Initial Bonds are expected to be governed by New York law. The Initial Bonds must have certain terms in order to satisfy the conditions precedent to the RCF commitment under the Commitment Letter, including a minimum maturity of 7.5 years, minimum gross proceeds of US$500 million and a maximum yield of 15 per cent."

That is where present market turmoil is, mostly induced by tariff stick waving. That the pain is now viciously blowing back would in logic motivate the sides to do a deal now. We'll see.

For Sirius I think they will now be pressing JPM to extend out beyond the 'usuals' in the bond market to include those who in large scale took the May placing and with those placing takers Sirius should, with reminder, point to risks expressed elsewhere in the Prospectus to their 15p investment. Re p301/2, right near the end!:

"In circumstances where.. the Stage 2 Debt Event has not occurred by the end of September 2019, the amount held in escrow in respect of the Escrow New Convertible Bonds will not be available to the Company at that date and the Company will have no available cash to deploy into the Project beyond that date and, as a result, it will be required to cease all discretionary spending and simultaneously consider all options available to it. Unless the Company was able to secure alternative funding (if any such alternative funding were available to the Company, which it may not be) or a merger or acquisition transaction involving the Company by the end of September 2019, the Company would cease to operate as a going concern and the Board would be required to place the Company into administration or liquidation, which could result in Shareholders losing part of or all of their investment in the Company. There can be no assurance, however, that the Company would be successful in securing any such alternative funding or completing any merger or acquisition transaction on commercially acceptable terms, or at all, and the Company is not confident either could be achieved."

It looks to be very much be in their interest to have this bond succeed. It looks like ALL there invested value depends on it. Buy them then? would make some sense IMO.
======
Hard day for speculators this. Some have this AM set in stone losses, some who did so well previously. Other are diving in, after a day trade turn or committing?

No action from me, I decided a while back this is now do or die....and should - hoho - move soon to more of a value proposition and from this present highly speculative situation.

Hold I say. GLA.

GK.

Be prepared for pain . They will be sorting this quickly little doubt.

GK.

This bond is on sale in the US and Aus too. They will take any spare, they have the foresight.

The Square Mile has already lost the opp - a nine figure opp - to have worked with the co on providing St 1 & 2. It was being handed to them on a plate. They fluffed it. It's a rum day for London City when it becomes so obvious that 'umble PIs have a far better steer on what's ahead here than they do.

GK.

FT are the lacky of the London finance establisment. They have had it in for the upstart Sirius uncouth roo worriers from the get-go.

Nothing new..............and has it stopped Sirius...................NO.

GK.

I live in hope Dean :-)

I'll hire the pub, you get the beer!!

GK.

M20. Hi.

"..the issue of selling further tranches of $500m high-yield bonds.......... they present a greater issue than this initial raising of debt."

That could be the case at the time, but only if the build was getting into some trouble re overspend/delay. That then increasing a perception of increased future default/insolvency risk.

If instead the build and costs stick reasonably to plan then the opposite re further bond pricing should apply. Even with some significant departure from the plan, if all further bonds can go between 13.5 and the 15% cap and near all the provision within the RCF gets used - up to $3.5bn (plus there is this first $500m + the $400m CB + May equity raise) and the build gets completed to cash generation, then in time SHs will be out of the woods and rewarded.

Bar accidents I don't expect a great departure from the plan re schedule/costs now though and I would put other proportions on the risks: build 20%, market 15%, finanace high at 65%.......and the majority of that to go this week and as this then should move through the 'St2 Event'.

Will the market agree? We'll see.

ATB.

GK.

doh$$$$?

Sirius needs to re 'feel the love'......it will come.......and then so will the $$$....Along a 20mt/y conveyor!?

GK.

SNN/Lost

2030 eh?

$1833m is I guess the figure to work the modeling against if you think the 13mt/y 'Phase 1a' case is what is now targeted to be built.

This is what SRK are coming up with for 'Unlevered Free Project Cashflow' for 13mt @ 2030. If this is the case by then then debt will be being easily managed and much of that figure could be distributed. Mcap around $30bn would be reasonable.

Table 17-9 p235 july SRK CPR.

GK.

Tnx Lost. A well reasoned analysis.

Can explain alot as to why suppossed discounts to NPV are so high..........but reality says they are more in line with what could be expected with a project (and it's financing) like this at this stage.

Many of these inputs will change as we move along. Coupons should reduce on further drawdowns then bond sales, build risk should reduce and of course the remaining time to earnings reduces.

Look at their unlevered future NPVs at production, add in the debt servicing, then note the few remaining risks and 'fair' looks very different to 'fair' today.

IMV it's a buy, a speculative buy moving to a value buy, but as said earlier: not a 'get rich quick' buy.

GK.

Morning. So who are these shorters?

Now here's an answer that may surprise and maybe horrify.............Errr........wait for it.......Sirius.

I've thought for a while on how do you get someone to buy 200m shares at a price that is presently some 40% above what could be paid in the market. perhaps the answer is that the seller makes a promise to compensate buyer for that premium if they need to. but that could put a bit of a dent in the sellers accounts. Avoid that? Short your own stock. The outrage!!

Prospectus re accounts:

"Net finance income/(costs), primarily attributable to fair
valuation movements in the embedded derivative associated with the
Existing Convertible Bonds and the embedded derivative associated with
the contemplated subscription for 200,076,829 Ordinary Shares in the
Company in return for US$50 million under the Royalty Financing
Agreement between the Company and Han**** British Holdings Ltd
(Han****) (the Equity Purchase Price),.." P12/13

and p213/4

"3.4 Net Finance Income / (Costs)
Net finance income/(costs) consists of finance costs, net of finance income. This item currently principally reflects fair valuation movements..... on the embedded derivative associated with the Equity Purchase Price (which results in an expense when the Ordinary Share price increases and in income when it decreases)."

'Embedded derivitive' eh? What's dat den?

With La R finnally stumping up in a week or so logically this position closes. Perhaps from that there will be an associated sudden drop in lent stock, quite possibly from a firm who may have some 'association' with (owned by?) the co's Lead Arranger? If such a situation pertained perhaps getting rid sooner maybe advisable noting an 'event' soon. But I wouldn't go advising me. ;-)

GK.