Aboutoil

According to the CLL slide presentation after paying of the existing debt CLL has $400 million cash on hand and $200 million unused credit.

1st question to ask is whether 10.5 % on the $175 million used to pay off the existing debt is better than the previous arrangement.

2nd to ask, The $400 million cash on hand is probably being invested to offset interest costs as the money only needs to spent in stages as construction of POD2 progresses. ( and this might take up to 2-6 mths). Lets assume they go for GIC's one of the safest invesments around .ING DIRECT offers 3.85% for a 1 year term. So for accounting purposes the 10.5% is an expense and the 3.85% would be an income,,,SO for all intensive purposes the effective interest rate is 6.65% which ain't bad.

MOST IMPORTANTLY: If you read the actual press release as nobody seems to be doing, it says the following!

http://www.connacheroil.com/document...

600 million at 10.5% SUBTRACT ( ESTMATED)$37 million for transaction costs=

$563 million SUBRACT $175 million to pay off existing debt = 60 million to pay for 1 year debt servicing =( ESTIMATED) $328 million to fully fund POD2...

There you have it even with no money earned on investing the cash on hand then everything is paid until POD 2 is completed..By the time 1st year of prepaid interest is over,POD 1 will be at full production..

EVERYTHING is well planned,, they've got secured financing during troubled times and by pre-budgetting the financing charges until full production they've ensured that the interest costs will not be a factor in EPS at least for 1 year and POD1 in full production.