I remember talking with the directors some time ago. The plan they had at trying to keep AEJ alive was to utilise the land they have and build a New generation Biomass generator. they understood that Coal Fired generators had a bleak future and they were looking into new opportunities.
It appears that this plan has more life than what it had originally appeared to have.
The liquidators and the lenders just didn't want to listen to the directors, they forced the situation to a point which was almost unrecoverable by shuttering the power station. My genuine belief is that the lenders have cost themselves more now than had they listened and supported the directors.
Having said that, we still don't know the details of the "Consortium" and what it will mean for existing AEJ shareholders! Having said that it doesn't take a lot of intellect to know that existing shareholders will be massively diluted but the more important aspect is at what value?
Before AEJ went into liquidation the valuation was basically Mgt EBITDA ~ $26m at 8.5 x = $221m less $195m in debt = $26m or $33/share. I know AEJ didn't trade at that level only because of the risk from lenders (which provide to be real by being placed into receivership!) . That is why the directors were pushing the lenders so hard for a long term debt agreement. Once that was in place the share price would have moved up closer to the $33/share and the board would have been in a position to raise equity to reduce debt.
If the new proposal and the Consortium deliver a massive dilution but the AEJ share price stays in the range between $15 to $30 per share its a great outcome with potential further growth into the future.
I would really love to understand how much of a right off the Lenders will take, the level of debt that will be carried by the new Venture and whether the existing Lenders will be part of the debt structure?
I suspect that we will not know for around three months while the Sale and Purchase Agreement needs to be finalised!
AEJ Price at posting:
$8.00 Sentiment: Hold Disclosure: Held
