Well we know now how they are going to fund Algar.
I am happy with everything except the rate. It is difficult to make a clear assessment with out more information, but at first glance it appears they may have traded a term loan at 8.5% for a note at an effective rate of 10.5%.
In addition, the term loan was for 7 years - the term of the new notes will only extend the funding by an additional 1 year as they are repayable in Dec. 2015.
According to the announcement on Connacher's web page, net proceeds will be only C$563 million. According to my calculations, that means the brokers will rake in about C$13 million for putting the deal together.
Perhaps it would have been more prudent to wait until next year when Pod 1 was fully ramped up and new drilling results had firmed up more reserves - a more reasonable interest rate would likely been possible at that time
The following is taken from the 2006 Annual Report.........
The oil sands term loan has a seven year term. Its principal is amortized by one percent per year commencing in 2008. Additional repayments will be due if certain cash flow performance thresholds are attained. Principal payments on the oil sands term loan are not expected to be significant in the first six years. The oil sands term loan is a floating-rate facility, bearing interest either at a US Dollar Base Rate plus a margin or a US Eurodollar rate plus a margin. In October 2006, the company entered into an interest rate swap with a financial institution whereby the floating rate on US$90 million of the oil sands term loan was fixed at an all-in rate of 8.516 percent over the term of the loan. All interest on the oil sands term loan is being capitalized until Pod One becomes operational
