Green Energy Enterprises Inc. (GYOG)

[mike93433]

BANKER: I am hoping you can give us your view on Anvils points.
TIA

Posted by: Anvil Date: Friday, July 02, 2010 12:40:56 PM
In reply to: None Post # of 158531

Pipul and Tufan:

1. Pipul - Banks see enormous risk in a roll-ups. Everything from back room consolidations, leadership/management, synergies etc. The banks look for repayment from cash flow first, asset liquidation second. In consolidations, it is easy to get internally focused addressing all the issues and lose sight of the business and cash flow deteriorates. Thus the primary source of repayment weakens and may be insufficient to repay the debt.

One of the key ingredients banks will look to is management. Have they ever successfully run a large business and have they ever made a series of acquisitions and were they successful. In looking at Dean's resume, I don't see either, so the risk is extremely high. I also don't see much in the way of bench strength at CFO. Can't comment on the new COO as no one knows who he is.

In terms of assets, one buys operating businesses usually on a cash flow multiple. That is usually substantially higher than the asset value and book value. Therefore, asset liquidation is generally not sufficient to repay a loan.

2. Tufan: I am assuming the funding bank was not satisfied with the SBLC based on the pr. Which is interesting. Because in this structure, the funding bank is soley relying on the trust bank that issued it the SBLC. The funding bank obviously did not think that if demand was made on the trust bank's SBLC, that the trust bank could make good on the payment.

Again, in this structure, the funding bank is not looking at QASP for repayment, it is underwriting to the credit worthiness of the trust bank. Thus it wanted full cash collateralization.

When people approached me about doing a deal like this, if they didn't take no for an answer, I would tell them I would do it for 100% cash collateralization. Just another way of saying "get lost".

Finally, I again go back to the original question, if the trust bank thinks it is such a good deal, and has the financial capacity to issue a $100MM SBLC, why not do it themselves.

Believe me or not, no bank is going to do based on the Newby structure.

Out of posts for the day. GLTA