What surprises me is how people can come to a view that this is a positive thing when this announcement is lacking in information which is required to form a view about what this really means for MSB in time, things like:
What is the term of this debt?
How is it secured, if at all?
What happens in the case of default?
Are there commercialisation milestones that need to be met for the facility to be maintained?
Is this straight up vanilla debt, or is it really some sort of mezzanine arrangement where the debt converts to equity?
If so, what are those conversion terms?
Can the covenants on this force MSB to do an emergency capital raising at any time?
Less than one page announcement for a financing development that is very significant for the business, and which significantly raises the risks for the business?
Seriously?
If I owned a business and I needed money to fund it, the first question I would ask myself is what happens if I don't have the money to repay the debt when it falls due, and I have no assets which I am able to liquidate to stave off insolvency?
Have you asked yourself what happens if they aren't generating sufficient free cash flows in the future to service that debt (which will have a principal value of $107.6m after 4 years, given the interest is being capitalised).
They've gone all-in here.
And in doing so, they've put all the shareholder equity value on the line.
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