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1) It is NOT 80% US admissions for the RCF covenant. This only means the Liquidity covenant (of $100m) would not apply

2) There IS NOT more than this for the liquidity covenant. It is a simple condition (for three consecutive months) in black and white regardless of other revenues

3) The 85% admissions used by CINE for their base case scenario will have all the other revenues included but we don't know at what level these are assumed (apart from the overseas Box Office) as they haven't told us. We also don't know how much headroom this gives them in paying down the RCF to avoid the net leverage covenant test and so it might only be 79% that is needed but obviously if other revenues, like concessions, are higher than they have assumed in their scenario then they won't need as much by way of US admissions, maybe 76%, but who knows???

The important thing is that revenues are improving and the more they have, and will do over the rest of June, then the better position they will be in to pay down the RCF but we have no way of being sure whether they can or have until they tell us. Personally I'm not too worried as even if they can't pay down the RCF enough to avoid the net leverage test then I would be very surprised if they don't get a waiver.

Hi RS2002,

I agree with most of what you say but I don't think you are quite correct with regard to requiring either A or B to bypass the covenant test as these actually refer to two different tests. Using your notation:

A - If they achieve 3 consecutive months of admissions over 80% of 2019 then they don't need to meet the minimum liquidity covenant of $100m

B - If they pay down 65% of the RCF then they don't need to satisfy the 5x Net Leverage covenant

I agree though that we don't know what BO needs to be to enable them to pay down 65% of the RCF, only that under their base case scenario (85% admissions) they think they had enough. 80% may also be enough as I said, or even 70%, we just don't know.

If they can't pay down the debt then the net leverage test comes into play and for which they will need a waiver (as this 5x test is not achievable).

*they may be in a position to pay back the 65% of RCF necessary to avoid the covenant test

Tegop - I don't think we should get too hung up on the base case of 85% of BO (or rather admissions) versus 2019. It is important but it is not a make or break figure, it was simply what CINE expected in their weighted base case scenario i.e. their best guess not what they absolutely needed. In their own words they felt if they met this then they forecast "that the Group will maintain sufficient liquidity and headroom against key covenant metrics through its continued recovery". The key word here is 'headroom' so 85% is OK but so might 80% or 70% - we don't know.

It is unlikely that 85% will be hit in 2022 (unless there is a really extraordinary H2 i.e. averaging around $1bn per month) so the question is whether CINE is now making money and even if it's not as much as they hoped is it still enough to satisfy the covenants.

I think we can say with some certainty that CINE are now (May and June) running cash flow positive but whether they are for H1 2022 as a whole is I think too close to call. In H2 2021 the cash flow excluding exceptional items was negative $89m but as AllKap has pointed out the domestic BO for the first 6 months of this year looks like it will be a bit better than H2 2021. Whether it is enough to swing the cash flow positive for this period is hard to tell. It depends on lots of other things (relative levels of concessions, non-domestic BO, operational costs, capex, interest, execeptional items etc.).

Bottom line is I think Beta is spot on in his analysis and conclusion - i.e. they may be in a position to pay back back the 65% of RCF necessary to avoid the waiver test and still satisfy the liquidity covenant, they may not. It's very hard to judge but as it's that close one would hope they don't have a problem getting the waiver instead anyway.

Good idea Krauty but can’t see it happening. Besides even if some metrics became standardised I’m sure the miners (as all companies do) will find other ways to spin the numbers. Fair play, that’s what you’d expect, it’s just ARB stretch it a bit far in my view.

To me ‘mine’ does mean ‘operate’ but fair point as depends on interpretation though just illustrates how such statements can mislead.

What annoys me particularly about the way ARB present it is that other companies that report similar numbers at least include the cost of the machines in their mining numbers. ARB don’t even do that, they just include power basically which is why they can quote such a ridiculously looking low number when compared to others.

Btw - even if ARB’s admin costs were zero they would still be making a loss at today’s BTC level (and would imagine the same is true for most other miners).

@Pokerchips - Apologies, I thought you were implying ARB is still making profits as you ended with the quote from the accounts “As such the directors have considered the sensitivity around BTC market price and have anticipated and modelled a significant fall in Bitcoin price still allowing the Group to mine at a profitable level."

The all in cost for ARB was around $40k in Q1 (including interest payments) and will be even higher now given their recent drop in mining numbers. They, and all other miners, are running at significant losses at the moment.

As I said though, and I agree with you, they are in a better place than most to ride this out.

" as the maths doesn t work at prices back below 10k"

The maths doesn't work at prices below $20k. ALL miners are making losses at the moment. Profit is different to cash but many will be losing cash too.

The less said about the bit in the accounts on the cost to mine each BTC being below £6k the better - just to say that is at best misleading.

Having said that it is not Armageddon (yet). Many businesses go through periods of losses and whether they come out the other side depends on many things (how long that period is and how deep the losses are, cash reserves, debt obligations, monthly cost base and opportunities for savings, support of lenders, ability to raise more funds, longer term outlook etc. etc.

Simply put the longer this goes on, the more miners will suffer and eventually it is inevitable they start to fall (IF it continues long enough) but those better positioned regarding the above factors have a much better chance of surviving especially as when others fall the difficulty reduces for those remaining. I feel ARB is better positioned than many (relatively low costs, not unmanageable levels of debt, most (if not all) machines arriving having funding in place - but it will be feeling the pinch too and I still have some concerns (why did they need to sell so many BTC last month for example)?

There's a lot of ill-informed nonsense on the board today, mainly from tourist trolls, but please no more of the £6k to mine a BTC spiel.

"indeed soon it will require a 500% SP increase just to make it back to £1.00."

Really? It needs to fall to below 17p for that to be true. That's roughly half the current sp so don't think it's that likely 'soon' - though not impossible.

Agree HC, if it’s just a few months then most, if not all, miners should survive but I keep hearing it will come good by the next halving. If we have to wait that long then there will be casualties.

I just don’t know which is true which is why I’m holding rather than becoming even more exposed. It may be a very good entry for newcomers though. I would de-risk a bit but like many that would mean selling at a chunky loss - and besides on balance I’m still confident in ARB. For now.

“Nothing has happened, crypto fluctuates“

Yes crypto fluctuates but the difference is that I cannot believe any miner is making a profit at the moment and many are likely to be haemorrhaging cash.

These are businesses not currencies, they can only sustain losses for so long. Some won’t survive if BTC stays this low or goes lower for a sustained period.

ARB is well placed I feel but it is not immune.

“As i keep saying the MMs are not going to let this go until after the court case“

If there is enough buying pressure they don’t have a choice. That could easily happen due to either of the things that @shazabo mentioned and more.

But if you believe the MM’s decide sp regardless of buying or selling pressure then fine - but if I believed that I wouldn’t bother investing at all.

I don’t think we do actually HC. I agree with everything you say it’s just that our starting point is different.

If I wasn’t already invested more than ideally I want to be in ARB (and have spare cash available to invest) I would be looking over all the miners and trying to pick out the one I think is best placed to come out of this mess smelling of roses (or a new entrant that could take advantage).

As it is I think ARB IS one of the better placed ones so am happy to let my existing investment ride. I will start looking more at other miners, and consider more in ARB, as I’m getting some more cash soon but for now I’m holding back.

“I wouldn’t imagine anyone parts with cash or sells stock based on what’s written here.”

So why do you get so worked up if people post negative things?

Personally I feel what’s posted here doesn’t influence a share price but can influence individual investors which is why I get annoyed when people post misleading information (positive or negative).

If that’s your definition of FUD then I agree with you AB - we just have different definitions of FUD.

Fair enough Limp. If you think this represents an opportunity to buy at a cheaper price something you feel is becoming more undervalued then go for it. I do, and have done, the same and more so with ARB than with any other stock.

But I’m not doing that at the moment with ARB as I feel the current drop is fully justified and to put more in just because it’s cheaper feels too much like chasing losses to me - which as someone with a history of gambling I know only too much about sadly.

For me I cannot consider investing more in ARB, or any other miner, at the moment simply because they are all making losses currently and many could collapse over the next year if BTC doesn’t recover or, even worse, falls more.

So personally I’m just holding for now rather than investing more on what I think is becoming more of a toss of a coin gamble.

But I would NEVER suggest what others do. It’s their choice and would only caution that whatever they do they do it with their eyes open and based on facts rather than the hype of the rampers or the bile of the trolls.

FUD IS healthy. Just as whatever the opposite of FUD is. So long as you have both. Having a predominance of one over the other is what I think is unhealthy.

“unless you believe crypto and blockchain technology disappearing for good“

That’s not the issue. It’s how many months miners can survive with BTC at these sort of levels. If you know the answer to that it would save a lot of those 300 or so posts so would be happy to hear it.

It’s a very difficult question to answer though as it’s not just about how quickly the money runs out but others things too like how much support they can get from lenders and/orshareholders. Falls in difficulty will also help those that can hang on.

For me the biggest worry for ARB Is the BTC backed Galaxy loan and how this is being dealt with. Other miners will be feeling other pressures.

Of course BTC could recover in a month and it will prove a fuss about nothing.

But to trivialise the current situation is (insert expletive and description here).