SRZ on March 23 reported the 11th Credit Agreement.
Please note that this credit agreement with Bank of America as the administrative agent is for 118 million dollar loan only (93.5 million of current borrowings + 24.5 million of letters of credit)
My reading of the SEC filing:
1. The previous credit agreement end date (March 30 2009) when SRZ could be considered "in default" without a new credit agreement in place has been extended to April 31,2009.
2. The Credit limit of 160 million will be permanently reduced as SRZ pays back the loans. (This is positive as SRZ had a limit of 160 million but it could not take advantage of the remaining 42 million in the credit line because it had breached the financial parameters. SRZ however has to pay some holding amount for all the credit that is not utilized, by permanently reducing the credit facility to 118 million it is saving some 1-2% interest that was paid on an annual basis on 42 million.)
3. SRZ has filed for 20.759 million in federal tax refunds which will be used to repay the Lenders.
4. There has been an addition to the original credit agreement with regards to "Disposition of Assets" on March 23,2009
"The aggregate net sale proceeds for the Contemplated Sales Transactions shall not exceed Twelve Million dollars "
>>>> There already exist an agreed disposition agreement for 20 million dollars in Jan 21 ,2009 credit agreement<<<
and this is in addition so total disposition sales would net 32 million (20 million[Greystone] + 12 million [unknown - as per the new credit agreement]) .
5. Jan 21,2009 agreement also had an 8 million Land/Shut Down Communities cash inflow.
So in summary:
1. Extension of credit agreement due date by 30 days.
2. Additional asset disposition price of 12 million (I think this credit agreement was put in place to make another asset sale deal legal and use the proceeds to pay the lenders)
3. The original asset disposition price of 20 million closely matches the approximately 19.25 million that will be received from the Greystone agreement link
So by April 31,2009 you can expect news about:
- Asset sale news worth 12 million.
- Land sale news worth 8 million.
- Tax refund news worth 20.75 million
Total additional "cash inflow" of 40.75 million, if you include Greystone then it would be 60.75 million
Current Market cap of SRZ ( 69 cents ) is 35.11 million. Strong buy !! Strong Buy and Go Long!!
Link to Jan 21 Credit Agreement : Search for "Twenty Million Dollars" & "Eight Million Dollars"
Link to March 23 Credit Agreement: Search for "Twelve Million dollars" & "20,759,271"
Link to my Blog regarding Greystone Sale
Link to my blog regarding Jan 21 Credit agreement (which already mentions the 20 million asset sale and 8 million land deal in Q1 2009)
Please Note: Sometimes the management might not report the deal/sale. Considering the conservative tone of SRZ management that is quite possible. Also in Dec 31,2008 the credit due was 95 million and 24.5 million it has already been reduced to 93.5 million and 24.5 million but has not been projected out to the public.
Comments are Welcome!! Please do leave comments !! Thanks!!
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4 comments:
Your detailed analysis has been very helpful. Thanks.
Have you analyzed (cash flow, balance sheet,..etc.) the mortgage debt Sunrise has ?
I did try to understand the cash flows and balance sheets but could not get a way to understand the way accounting is being done out here in SRZ..
Regarding mortgage debt: recently SRZ has started reporting the correctly the mortgage debt in its books. There are 3 types of assets.
1. Assets that only managed by SRZ and SRZ has no equity stake and hence the debt is not in its books.
2. Assets where SRZ is the monority holder and hence the debt is not in its books
3. Assets where SRZ is the majority holder 50% or more so these associated mortgage debts are being reported by SRZ as debt in its books.
The fact is that SRZ could buy a majority stake in the german venture at a throwaway price but it had a negative impact on its debt/equity as the german ventures debt is now in the SRZ's books..
Another fine print worth mentioning in communities where SRZ is not the majority share holder and SRZ has been commiting additional funds (as the manager or performance guarantor) the money will be returned back to SRZ before the equity partners are paid their share .. ie the money for accounting purposes is a loss but eventually will come back as profit and its like a subordinate debt subordinate to the original lenders but ahead of the equity participants..
So there are quite a few things that come up as we dig deeper..
=WHATSUP Prahalad
Thanks so much for taking the time to do a great analysis.Sounds like if we take a six months to a year view we will be rewarded for that.
Keep up the great job.
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