Author Topic: FELP - Foresight Energy  (Read 285195 times)

heth247

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Re: FELP - Foresight Energy
« Reply #660 on: February 24, 2017, 05:52:46 PM »
What's the rational for redeeming a portion of the 2021 notes, don't they have to take them all out to deal with the 2017 PIK notes? 

Disclaimer...could be a stupid question...mainly here to troll picasso.

It seems to me that the $54MM part will be funded by equity offer, but they also mentioned that it is conditioned by "the pricing of an offering of senior secured debt securities of the Issuers prior to the Redemption Date".  What is this new senior secured debt for and how much will it be? Will it be used to take out the 2017 PIK notes?



heth247

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Re: FELP - Foresight Energy
« Reply #661 on: February 24, 2017, 08:00:36 PM »
Question: Why 54.5 million and not the entire 35% clawback? Can they do multiple equity offerings to keep chipping away until they hit 35%?

Who in the heck participates in this equity offering and at what price?

Maybe they think the current stock price of $6.5 is still a bit too low for taking out the entire 35%?  As a common unit holder, I really want them to issue as less ass possible shares at this price.

valcont

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Re: FELP - Foresight Energy
« Reply #662 on: February 25, 2017, 07:28:00 AM »
It seems to me that the $54MM part will be funded by equity offer, but they also mentioned that it is conditioned by "the pricing of an offering of senior secured debt securities of the Issuers prior to the Redemption Date".  What is this new senior secured debt for and how much will it be? Will it be used to take out the 2017 PIK notes?

It may refer to the pricing of the equity offering. If they are planning to take out the 2017 PIK , don't they have to give a 30 day notice to the reserve group according to this section?

Financing Letter Agreement
On the Closing Date, FELP, Reserves, certain investors in Reserves (together with Reserves, the “Reserves Investor Group”) and Murray Energy entered into a letter agreement (“Financing Letter Agreement”) that grants certain rights and imposes certain obligations on the Reserves Investor Group, Murray Energy and the Partnership with respect to the redemption of all of the Exchangeable PIK Notes.
Pursuant to the Financing Letter Agreement, if the Partnership proposes to consummate an Exchangeable PIK Note Retirement, the Partnership must deliver to the Reserves Investor Group notice of the proposed Exchangeable PIK Note Retirement, along with the expected material terms thereof, no less than 30 days prior to the consummation of such Exchangeable PIK Note Retirement. No later than 15 business days prior to the consummation of such Exchangeable PIK Note Retirement, the Partnership must deliver a second notice to the Reserves Investor Group that must include all the material terms of the Exchangeable PIK Note Retirement and copies of any agreements to be entered into with respect thereto, which may be delivered in draft form. Within 10 business days of receipt of the second notice described in the preceding sentence, each member of the Reserves Investor Group shall have the right to make an election with respect to the Exchangeable PIK Note Retirement (an “Election”) which shall entitle such person or entity to: (i) continue to hold all of the Exchangeable PIK Notes then held by such person or entity and receive payment in full in connection with the Exchangeable PIK Note Retirement on the same terms as the holders of Exchangeable PIK Notes who are not members of the Reserves Investor Group; (ii) exchange the Exchangeable PIK Notes then held by such person or entity (subject to an aggregate cap on all Exchangeable PIK Notes held by the Reserves Investor Group of $180.0 million in principal plus an amount of additional principal issued in consideration of accrued and unpaid interest (the “Reserves Investor Group Amount”)) for the securities or other instruments to be issued in the Exchangeable PIK Note Retirement in an aggregate principal amount equal to the Exchangeable PIK Notes held by such person or entity (subject to the Reserves Investor Group Amount); or (iii) any combination of (i) and (ii) immediately above. To the extent any member of the Reserves Investor Group elects to exchange any portion of the Exchangeable PIK Notes held by such person or entity under the terms described in the preceding sentence, the Partnership and Murray Energy must promptly enter into, and subsequently perform, such agreements or arrangements, and to cause each of their financing providers to enter to such agreement or arrangements as may be necessary or advisable to effectuate such exchange.

heth247

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Re: FELP - Foresight Energy
« Reply #663 on: February 25, 2017, 09:37:27 AM »
It seems to me that the $54MM part will be funded by equity offer, but they also mentioned that it is conditioned by "the pricing of an offering of senior secured debt securities of the Issuers prior to the Redemption Date".  What is this new senior secured debt for and how much will it be? Will it be used to take out the 2017 PIK notes?

It may refer to the pricing of the equity offering. If they are planning to take out the 2017 PIK , don't they have to give a 30 day notice to the reserve group according to this section?

Financing Letter Agreement
On the Closing Date, FELP, Reserves, certain investors in Reserves (together with Reserves, the “Reserves Investor Group”) and Murray Energy entered into a letter agreement (“Financing Letter Agreement”) that grants certain rights and imposes certain obligations on the Reserves Investor Group, Murray Energy and the Partnership with respect to the redemption of all of the Exchangeable PIK Notes.
Pursuant to the Financing Letter Agreement, if the Partnership proposes to consummate an Exchangeable PIK Note Retirement, the Partnership must deliver to the Reserves Investor Group notice of the proposed Exchangeable PIK Note Retirement, along with the expected material terms thereof, no less than 30 days prior to the consummation of such Exchangeable PIK Note Retirement. No later than 15 business days prior to the consummation of such Exchangeable PIK Note Retirement, the Partnership must deliver a second notice to the Reserves Investor Group that must include all the material terms of the Exchangeable PIK Note Retirement and copies of any agreements to be entered into with respect thereto, which may be delivered in draft form. Within 10 business days of receipt of the second notice described in the preceding sentence, each member of the Reserves Investor Group shall have the right to make an election with respect to the Exchangeable PIK Note Retirement (an “Election”) which shall entitle such person or entity to: (i) continue to hold all of the Exchangeable PIK Notes then held by such person or entity and receive payment in full in connection with the Exchangeable PIK Note Retirement on the same terms as the holders of Exchangeable PIK Notes who are not members of the Reserves Investor Group; (ii) exchange the Exchangeable PIK Notes then held by such person or entity (subject to an aggregate cap on all Exchangeable PIK Notes held by the Reserves Investor Group of $180.0 million in principal plus an amount of additional principal issued in consideration of accrued and unpaid interest (the “Reserves Investor Group Amount”)) for the securities or other instruments to be issued in the Exchangeable PIK Note Retirement in an aggregate principal amount equal to the Exchangeable PIK Notes held by such person or entity (subject to the Reserves Investor Group Amount); or (iii) any combination of (i) and (ii) immediately above. To the extent any member of the Reserves Investor Group elects to exchange any portion of the Exchangeable PIK Notes held by such person or entity under the terms described in the preceding sentence, the Partnership and Murray Energy must promptly enter into, and subsequently perform, such agreements or arrangements, and to cause each of their financing providers to enter to such agreement or arrangements as may be necessary or advisable to effectuate such exchange.


True, but  can they just issue the senior debt for now and take out 2017 PIK later?  Maybe they saw an opportunity in the debt market and want to take advantage of it. That might be also why they have to issue $54MM more equity for now at ~$6.50. Just some speculations. I am not an expert of these things.

valcont

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Re: FELP - Foresight Energy
« Reply #664 on: February 25, 2017, 10:11:10 AM »

True, but  can they just issue the senior debt for now and take out 2017 PIK later?  Maybe they saw an opportunity in the debt market and want to take advantage of it. That might be also why they have to issue $54MM more equity for now at ~$6.50. Just some speculations. I am not an expert of these things.

They can't. There are indentures in place to not assume more debt unless its a payment/refinance of an existing one.

gadfly

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Re: FELP - Foresight Energy
« Reply #665 on: February 25, 2017, 10:15:48 AM »

True, but  can they just issue the senior debt for now and take out 2017 PIK later?  Maybe they saw an opportunity in the debt market and want to take advantage of it. That might be also why they have to issue $54MM more equity for now at ~$6.50. Just some speculations. I am not an expert of these things.

If you assume the repriced YTM on the 2021 notes should be something like 6%, it looks like they are only saving about 5 million dollars doing this. That seems strange to do if Murray isn't participating in the equity offering. Why offer more common units to save 5 million dollars and screw Murray if it's done at current prices?

So hopefully this meanings something bigger is happening...

They can commence the "Murray Purchase" without refinancing the 2021 notes right?
« Last Edit: February 25, 2017, 10:19:32 AM by gadfly »

Picasso

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Re: FELP - Foresight Energy
« Reply #666 on: February 25, 2017, 11:02:59 AM »
It's tricky to figure out what exactly is being refinanced here. 

Here's what I do know....

The 2021 debt doesn't allow for cash coupons or any maturities before 2021 when addressing the 2017 refinance.  They could refinance all $300+ million of the 2021 debt but it's pretty steep ($115 with accrued interest).  They did add previously missed coupon payments in new 2021 debt, so total leverage has gone up a bit as well as higher accruals from the bump in coupon payments.

If I were running Foresight I guess what I could attempt to do (or in this case what Goldman might be recommending), is use some combination of equity and cash on the balance sheet to reduce total leverage.  With $50 million of equity issuance and $100 million on the balance sheet you could do a few things... 1) pay down the PIK by $100 million and work on refinancing the remaining $200 million + accrued, 2) pay down $50 million of the 2021 at $110 by clawing it back in.  Anyone who owns that 2021 will now have to worry about losing an 11% note.  So maybe it would make them amenable to some waiver on the cash coupon/maturity.  Instead of getting called in this year or next year, maybe they'll take some $6 consent fee.  I'd probably take another $6 if it meant holding onto that 2L at 11% with some nice call premium in 2018 and 2019.  And total leverage has been taken down by $150 million or so which improves the credit of it anyway, 3) now you can issue $200 million or so in new secured 2022 secured notes with some cash coupon (actually a market for that right now) and total dilution would be somewhere around $50 million which only adds 9 million units.  That's a decent outcome for Murray.

Otherwise without that consent you're looking at new convertible PIK debt with 2022 debt or something where only Murray and Cline participate (who else would buy that kind of paper?).  You don't need Goldman to market that security, I'll tell you right now that no one would buy it.  Plus they mention in the 8-K some new senior secured bond as part of the 2021 clawback.  Or they just issue a bunch of equity for $200 million, but why do it now and not closer to maturity if they'll generate another $100 million by October?  Equity issuance at $6 sucks for Murray.  And some new convertible PIK note might keep a lid on price appreciation which prevents Murray from selling anything down into Foresight for a long time.  Cline will take 60% of it and then Cline will get $2.90 of accrued distributions on it.  Hypothetically that would be another 20 million units going to Cline, or another $58 million of cash that would need to be generated for those units on top of the already exiting common units before Murray could convert his subs.  Would seem like an unusual decision for Murray to let that happen.  Plus they wouldn't even need to do any of this 2021 clawback if they were going to suck it up and issue that much equity.

We won't know for a month and it's probably not worth the time to speculate until we get more details...

By the way, this is probably my last post on FELP on this board.  It's been a blast but I'd like to post on other ideas :)

Patmo

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Re: FELP - Foresight Energy
« Reply #667 on: February 25, 2017, 01:26:06 PM »

By the way, this is probably my last post on FELP on this board.  It's been a blast but I'd like to post on other ideas :)

At first I was like... https://www.youtube.com/watch?v=q3ZcX1JNju4

But then I was like... https://www.youtube.com/watch?v=-A4prtgQEEQ

Can't wait to see what you have up your sleeve, your ideas are super flavorful and it's a treat to even just follow the stories as they develop

heth247

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Re: FELP - Foresight Energy
« Reply #668 on: February 25, 2017, 03:42:28 PM »

By the way, this is probably my last post on FELP on this board.  It's been a blast but I'd like to post on other ideas :)

At first I was like... https://www.youtube.com/watch?v=q3ZcX1JNju4

But then I was like... https://www.youtube.com/watch?v=-A4prtgQEEQ

Can't wait to see what you have up your sleeve, your ideas are super flavorful and it's a treat to even just follow the stories as they develop

Picasso, Hope it is just "probably", not "definitely", your last post here. We will miss you, but look forward to your new ideas. thanks.

awindenberger

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Re: FELP - Foresight Energy
« Reply #669 on: February 25, 2017, 04:45:04 PM »

By the way, this is probably my last post on FELP on this board.  It's been a blast but I'd like to post on other ideas :)

At first I was like... https://www.youtube.com/watch?v=q3ZcX1JNju4

But then I was like... https://www.youtube.com/watch?v=-A4prtgQEEQ

Can't wait to see what you have up your sleeve, your ideas are super flavorful and it's a treat to even just follow the stories as they develop

Picasso, Hope it is just "probably", not "definitely", your last post here. We will miss you, but look forward to your new ideas. thanks.

I'm definitely looking forward to these new ideas Picasso, but it seems to me that the FELP story is nowhere near finished.