Martin says:
Mr xxxxx,
The recapitalization announced on January 31, 2017 is intended to address significant financial challenges facing the Company and to strengthen and enhance the Company’s long-term prospects. Upon implementation of the recapitalization: well, why, why, why do the costs and the cost of expenditures continue to be so high? Why?
It refinances over US$200 million of debt. In particular, it refinances the US$175 million of senior secured notes that mature March 1, 2017. This looming maturity date was, of course, of great concern to the Company and to shareholders, and represented a major overhang on the share price. Good job, yet dilution was massive, and at your cash burn rate and continued debt costs your new cash also won't last long. For what, half a year or so. The 'plus' side that Trump is upending everything and 'scaring' everyone, which is gold price positive, and indeed Gold may in fact be ready to go, come end of 2017 into 2018.
Through the conversion of the preferred shares, the transaction eliminates over $70 million of debt-like instruments. Nice chunk, yet debt continues to be hefty. If dilution occurred to the extent it did and most or significantly more debt was paid off, the refi deal would seem much stronger. What has happened is a four year extension, with continued high debt, and continued need to keep borrowing. Unless, as operations are reliant, Price Of Gold jumps and maintains much higher. Seems Banro chose the kick the can down the road approach, yet diluted the eF out of Commons. Commons were bush whacked here.
The infusion of new working capital will assist management to optimize gold production and cash flow at Banro’s Twangiza and Namoya mines. Been hearing this same tune for quite a while now. So, for how long? Borrowing will continue, and soon, at Banro's cash burn rate.
Banro’s three major financial partners are highly sophisticated global resource investors. We believe that their decision to become Banro’s three largest common shareholders reflects the long-term prospects of the Company and the potential of its gold assets. Management believes in that potential as well. This one is near funny, but is not funny... Your belief suggests you n mngt don't know and are guessing, and that your highly sophisticated global resource partners are slowly (or quickly) acquiring your company, and playing you. You can believe in the company, as I do, yet question is who will in fact own the company?
This recapitalization of the Company strengthens the long-term viability of the business without impacting continued operations. It positions Banro to improve the balance sheet and working capital, continue optimizing operations and advance the development projects, all of which are expected to contribute substantially to the long-term value of the Company. Gosh, we've heard this one before. When that previous big financing deal happened and mngt under CFO Jennings relayed they were financially strong and 'clear' for two years forward, and then just months later they were like, "oops, we're outta cash folks, gotta get back to that beg n borrow mode.
Once the recapitalization has been completed, the Company will be in a position to begin a serious promotional campaign. Uh huh. We've all heard this before.
They may in fact mean it this time.
If I as a fund wanted to load-up on this company wouldn't I want to get in at or about at the price the financiers just did? Seems lower BAA price to come.
regards,
Martin Jones
