DOES SEITEL HAVE THE RESOURCES TO WEATHER THE STORM?
From Seitel's line of credit agreement freeedgar.com
<<< 6.16.2. Leverage Ratio. The Borrower will not permit the Leverage Ratio, determined as of the end of each of its fiscal quarters, to be greater than 2.5 to 1.0.>>>
and
<<<"Leverage Ratio" means, as of any date of calculation, the ratio of (i) Consolidated Indebtedness outstanding on such date to (ii) Consolidated EBITDA for the Borrower's then most-recently ended four fiscal quarters.>>>
and
<<<"Consolidated EBITDA" means Consolidated Net Income plus, to the extent deducted from revenues in determining
Consolidated Net Income, (i) Consolidated Interest Expense, (ii) expense for taxes paid or accrued, (iii) depreciation and depletion, (iv) amortization and (v) extraordinary losses incurred other than in the ordinary course of business, minus, to the extent included in Consolidated Net Income, extraordinary gains realized other than in the ordinary course of business, all calculated for the Borrower and its Restricted Subsidiaries on a consolidated basis.>>>
Yahoo shows EBITDA for the trailing 12 months as $113 million. At a 2.5 to 1 ratio, that would allow long term debt to reach as high as $282 million.
biz.yahoo.com
At the end of Q3, Seitel had $166,333,000 in senior notes outstanding. A principal payment at the end of December of $18,333,000 should reduce that amount to $148 million. Seitel issued another $107 million in debt this quarter biz.yahoo.com which brings the total to $255 million. In addition, Seitel took out a new loan in Q3 for $10 million bringing long term debt to $265 million.
At best, Seitel would be able to borrow $17 million on the $75 million line of credit without breaching the debt to EBITDA covenant in the agreement. At worse, the unusual non-cash entries this year do not count toward EBITDA, and no borrowings are available on the line of credit. The fact Seitel issued new debt, at a higher interest level, in order to zero out the line of credit, plus the fact the company needed to obtain a new facility for $10 million last quarter, suggests the LOC is no longer available.
All available information suggests Seitel does not have the liquidity to to fund the cash burn seen in Q3 for even one more quarter. The market conditions which persisted throughout Q4 point to even worse cash sales than those seen in Q3. Unless Seitel has a source of cash not currently disclosed, the company is already out of money. With the current glut of natural gas on the market and low demand, there is no reason to believe prices will rise to a level which justifies new projects anytime in the next 6 months.
Seitel is dog meat. |
