SRZ: 11th Credit Agreement- New asset sale of 12 million projected.

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!!

Energy Solutions (ES) The Nuclear Option

Energy Solutions is a specialized technology based nuclear services company providing its customers a full range of integrated services and solutions including nuclear operations, characterization, decomissioning, decontamination, site closure, transportation, nuclear material management, processing, recycling and disposal of nuclear waste, research and engineering services across the nuclear fuel cycle.
The company is a 1.7 Billion dollar revenue company with current market capitalization of 697 million. Company has 5500 employees worldwide including 1100 scientists and engineers and has 175 patents to its credit.
The company is the largest transporter of radioactive material in united states. ES has also been operating the world's largest low level radioactive waste (LLRW) disposal site.
52 week high is 27.42 USD and 52 week low is 3.35USD. Recent purchases has been done at around USD 6 by insiders. There has been a recent ruling in favour of the company where ES Clive radioactive disposal site is not a regional disposal facility and not under the jurisdiction of "Northwest compact" (Agreement between a group of states to share common LLRW disposal facility.
Company website: http://www.energysolutions.com/ & http://envirocareutah.com/
Considering the facilities under its management and recent ruling the stock is posed to tread back to USD 20+ level and definitely a recession proof industry. Worth investing at CMP 7.97 USD levels.

SRZ : Material Definitive agreement for Greystone

SRZ has files an 8k Report for the material definitive agreement it has entered for Greystone properties.




Let me start with a statement made by SRZ in their Year ending Annual 2008 report (link)
"As previously announced, the Company has determined that it will not fund any new seed capital projects of its Greystone subsidiary. Sunrise has also informed the management of Greystone that it is exploring strategic options for the subsidiary, and is currently working with financial advisors to assist in this matter. The carrying value of Greystone at December 31, 2008 is $(9.3) million, which includes $43.6 million of goodwill and intangible assets, $2.6 million of working capital and $62.4 million of deferred revenue. Since the carrying value of Greystone is negative, there is no impairment as a result of the Company's decision to sell this business."

So basically on its books the greystone subsidiary has a negative networth of -ve 9.3 million. Now lets look at the current 8k filing data.
===========================================
SRZ has 2 subsidiaries "Sunrise Development Inc" (SDI) and "Sunrise Senior Living Investment Inc"(SSLII)
SRZ and its 2 subsidiaries have agreed to sell their stake in Greystone to "Greystone Partners II LP" (buyers) with following transactions.

Sunrise Development Inc(SDI):
1. 1.5 million USD in Cash to be paid to SDI.
2. 2.0 million USD in 30 days notes (ie. after 30 days SDI will receive 2.0 million)
3. 6.0 million USD in 7 year notes with interest rates: (First 5 years 10% & next 2 years 12%)
4. 2.5 million USD which will be paid whenever any cash withdraw is done by Buyers ..Maximum limit is March 2029 which is a hardstop for the 2.5 million payment.
Total payment rough estimate is 12 million with 3.5 million within 30 days.

Sunrise Senior Living Investment Inc (SSLII):
1. 0.5 million USD in cash to SSLII
2. 3.7 million USD within 45 days to SSLII
3. 3.05 million USD to be paid into Seed capital by the buyers on behalf of SRZ-SSLII
(SSLII will receive 35% share of the Seed capital in the future)
Total payment rough estimate is 7.25 million to SSLII over the lifetime of the contract with 4.2 million within 45 days

Conclusion: Greystone had a networth in SRZ books of negative 9 million but this sale will result in 7.7 million +ve cash flows within 45 days into SRZ and its subsidiaries. and total value of the Greystone will be more than 19.25+ million USD in the lifetime of the agreement. As I had mentioned in the previous post.. the house has been cleared and all this money is going to go directly into the bottomline (profits). Now we know why Richard (CFO) is getting the 1 million compensation package!!

SRZ: Annual Results for 2008: review

SRZ came out with annual results for year 2008. I have re phrased it for clarity.

It was a very negative readout and the summary is basically:

Q4 2008 Revenues: 435.6 million
Year end 2008 Revenues: 1.7 billion.
Net Loss Q4 2008 : 305.6 million
Net Loss Year end 2008: 439.2 million

My Observations: Q4 2008 losses are 305.6 million and Full year 2008 losses are 439.2 million. Q4 2008 losses are 69.6% of year 2008 losses which is very large and strange.

Solving the reason for such high Q4 losses is key to understanding majority of the losses for the year 2008 and also will help us understand what actually is being reported by the company management.

Here is "my" understanding of the Q4 result:

Company has reported in Q4 2008 large paper losses for "impairement of goodwill and intangible assets" related to Marriot Senior Living and Karrington Health (122 million in Q4), "impairement of owned communities and land parcels" (30 million in Q4) in total there are 184 million of onetime related costs which has resulted in Q4 losses being 305.6 million.

Also company has shown expense growth rate higher than the revenue growth rate for consolidated communities resulting in 9 million of additional operating losses. This could be because, the german venture is now a consolidated community due to 95% ownership by SRZ.

Company has cleaned the house with these reported losses. Infact SEC has raised questions with regards to why the impairement of MSL and Karrington health is being done after so many years and not before. SEC has requested SRZ to restate their old earnings. SRZ has reported that the impairement of assets/goodwill was realized after the downturn started.

Another way to shift through the fog of financial engineering is to look at Taxes paid out. Cause SRZ can report numbers to the public but to the govt there is no fooling around and if you are making money you have to pay your taxes period.

Look at Q4 2008 Taxes paid: 11.147 million.

Look at Q4 2007 Taxes paid: -22.598 million (refund)

Conclusion: Results are bad but the management spin is more negative than the actual result...Why?

- Maybe to scare off the various lenders to sign the dotted line?....

- To have losses to write off against profits in the near future. Your guess is as good as mine.

Here is the link to the actual 10K filing