Default coming on major hedge book. Read last paragraph in particular:
0322GMTPRESS RELEASE:S&P Cuts Centaur Mining Rtg to CC,Watch Neg
Following is a press release from Standard & Poor's:
MELBOURNE (Standard & Poor's CreditWire) Feb. 23, 2001--Standard & Poor's today lowered its long-term corporate credit rating on Centaur Mining & Exploration Ltd. (Centaur) to double-'C' from triple-'C'. The rating remains on CreditWatch with negative implications.
The long-term rating on the company's US$225 million senior secured notes due in 2007 also is lowered to double-'C' from triple-'C', and remains on CreditWatch with negative implications. The ratings downgrade is precipitated by the likelihood that the company will have insufficient funds available on Feb. 28, 2001, to replenish its debt service reserve account relating to its US$225 million senior secured notes.
Following the December 2000 interest payment from the debt service reserve, and the 30-day refund period, bondholders provided an additional 60-day extension to the company to refund the debt service reserve account to its minimum required level of about US$12.4 million.
The failure by Centaur to restore the debt service reserve account to its minimum level within 30 days of paying the December 2000 coupon constituted a technical default, but not a payment default, under the bond covenants. Should Centaur not generate sufficient cash flow or funding to meet its interest obligations in June 2001, a payment default will result, and the rating will be lowered to 'D'.
The company's cash balance at Jan. 31, 2001, was about A$28.5 million, of which A$10 million is committed to meet the bond interest payment due in June 2001 (held in the debt service reserve account), and about A$12 million of the remaining cash is deposited with banks in support of cash-backed performance guarantees and other security. In addition, the company's gold hedging exposure currently exceeds annualized gold production.
Any shortfall of gold production and failure to meet contracted gold deliveries, would crystallize a liability under the hedging contracts. Given the company's limited unencumbered cash resources and likely negative free operating cash flow in the next several months, the source of funding to settle any outstanding hedging contracts is uncertain, Standard & Poor's said--CreditWire |
