RE: JM Interview7 Oct 2022 11:58
Seems people have a lot less to say today than the rest of the week so far.
I was thinking what alternative scenarios could have played out.
LIBOR rate has shot up in thr last couple of weeks. Headline inflation in Brazil 12% plus, industrial costs running at multiples of that. Every type of construction supply more expensive from concrete to diesel. In that environment it is easy to see how a contingency plan set last year, before the energy crisis, before Putingate, and before Liz Kwarteng cut the UK economy off from reality, could be overwhelmed by macro factors. Easy to see how a 15% contingency, that many thought was way too much, turned out to be too little. Not necessarily for the company, but for the bankers.
The banks insisted on this raise now, despite the price, to minimise their risk.
Plenty of things could have gone far worse. If the project and company were less well run they may not have been able to raise the cash, failed to meet the debt draw down criteria, and the project stopped as it ran out of equity funds. The fact that there are large willing backers, even at a discount, preserves value which would otherwise have been annihilated.
Hard to see what choice the execs had, despite the bike and anger here at an unexpected dilution. The fact it was unexpected was down to investor naivete about the effect of all the above macro factors on business.
The company rightly points to what has been done and secured so far, $375m of on budget contracts. The fact we look like getting over the line still, on a project still worth multiples of the current mkt cap, is far better than any of the potential alternate scenarios.
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