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Strategies & Market Trends : Value Investing

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To: Jurgis Bekepuris who wrote (55525)	6/24/2015 2:00:10 PM
From: E_K_S	Read Replies (2) of 78695

Thought this should be a net positive for SFY. The new credit facility is $650mln. It replaces their old facility of $236mln. The term is 5 years. That leaves $414mln . Total debt after new facility is $1.525Bln. Senior debt does take a second position to the new credit facility. Their senior debt is treated as if it is one (but different maturities); total $845mln = $250mln 2017, $225 mln 2020 & $400mln 2022. I see this new credit facility as a net positive since (1) they got 3x as much as before & (2) five year term. I expect SFY to use up to $250mln to pay off the 2017 Note (face value $250mln) (and they can buy some of that at a discount if they do a partial call next year). This was not stated but my thinking. Once they pay off the 2017 Note, they could redo their credit facility to then payoff their 2020 note. I am very pleased to see the refinance done sooner than later. I am not buying any more of the 2017 debt. Nor will I touch the the 2020 or 2022 debt (just too far out). Common could be toast if they default on the 2017 debt. Worst case they default on 2017 debt ( as well as 2020 & 2022 notes), issue a new common in place of debt (old common becomes worthless). With new credit facility of $636mln and converted senior debt to common, those shares should be valued at $12.50/share (assume a $ for $ conversion of old debt for new common). Cost basis of those shares would be $6.25/share if you bought the distressed debt at $0.50/100. Therefore, the risk/reward for the Senior debt got better w/ this deal and not that good for the common. The common shares are moving higher ($2.46/share +1.58%) while the Senior Debt is much lower (2017 bonds off about 10%). I like the deal. What's you take? EKS

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