Madam, I realise I have made a faux pas in my post above re ebit v op CF. Some little, but very loud, distractions here .
So to put it right, here are some simple numbers to determine what amount of PPE might need to be sold, to hit that $38.5 debt reduction.
Trading EBITDA MP is $25m, so maybe Trading EBIT = $0
Some restructuring and one-offs - allow for margin of safety
Op CF = 18 mo interest (allow for some fees) = ($10m) say
Cap ex based on recent past = ($21m) say
total debt reduction required = (38.5m)
susbtotal (69.5)
So sales of PPE required over next 18 mo ~ $69.5m.
Proceeds from sales for FY 2015 was $20m (18 mo at that rate would be $30m) - so we are looking at more than doubling the rate of PPE sales to hit the target.
Playing Devils advocate:
If they don't get near that target, with what looks to me like shock therapy happening, in a worst case scenario maybe we are looking at something like Nitro I mentioned above, and 20c in the dollar or so for plant and equipment under liquidation. That would pretty much wipe out the net assets. We are nowhere near that stage ATM.
For the creditors, they may not care very much as they would probably get their money. Then again I suspect they have left themselves some room here.
However for shareholders, it would obviously be very nice if the operating business was carefully protected as a workable going concern, as the very significant value of the Plant and Equipment might depend on this, even if the goodwill value is negligible. Sometimes pulling bits out can have unforeseen consequences. It may be that their Trading EBITDA guesstimates are shattered by unforeseen problems. Obviously survival means shareholders might benefit from the next Boom (lol) times as well.
A note re the covenant:
Their description sounds a bit funny, as they appear to be describing an ICR rather than a DSCR to me, as I always included P+I in DSR rather than I costs - I hope they are not making a critical error in their release - that would be a massive unworkable error with such high P added - lol. Anyway we are probably looking at interest being $7m or so in year 1, so roughly we need trading EBITDA to stay above $17.5m, which sounds eminently doable based on the guesstimates. However if they are getting close to breaching that covenant, then they need to sell another $15 to 20 m of stuff, which will hurt badly on top of what they are already selling.
Keen to see how they go. Good luck with your investment.
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(20min delay)
