Words about RRI refinancing from RRI IR. From Yahoo RRI board.
Term sheet: final word...for now
by: hwilson41 11/26/02 01:45 pm
Msg: 13377 of 13392
I got a call last night about 6:35pm EST from Dennis Barber of RRI’s IR Dept. The misunderstanding about the existence of a term sheet, or the lack thereof, is my fault, probably because I didn’t ask the right questions. The bottom line is this.
There is no term sheet in final form yet. One or more term sheets do exist, as negotiations continue with the three lead banks (BoA, Deutsche, and Barclay’s), but none is definitive yet. Here are some additional remarks by Dennis, some of which we already knew. He said that the talks with the lead banks have been “very constructive”, that RRI has offered to collateralize the banks (now unsecured) in exchange for a multi-year maturity on the new facilities to allow time for them to get access to the fixed income capital markets again, and that they are confident refi will be done, but probably not before Jan ‘03 at the earliest.
My apologies for misleading the board. I assure you it was not done intentionally. But the facts about RRI remain unchanged in my mind.
1. RRI is head and shoulders above its competitors in the merchant energy sector, and is unique among the IPPs because of their retail business (which Moody’s, in their infinite wisdom, chose to ignore in yesterday’s downgrade). The retail business alone will throw off north of $600mm in cash flow next year, and most of us can name several IPPs that would love to have $600mm in cash flow from anywhere and everywhere next year.
2. NG prices are rising and spark spreads are improving. That can only bode well for RRI’s wholesale business going forward.
3. There are 2,461MW of new plants coming on line in ‘03, all in areas (PJM, SE and West) that are and are likely to remain undersupplied (see slide 14 in the 11/25 8K). These will only enhance cash flow and profit in ‘03.
4. RRI will be cash flow neutral to slightly positive in ‘03 due to $600mm or so of CAPEX. After that, it will become a cash cow in ‘04, throwing off $650mm or more from retail as they move into other areas in Texas plus at least $200mm from strengthening wholesale operation from new plants and the rising spark spreads outside ERCOT.
5. The lead banks on the $2.9B bridge loan are the same banks that loaned RRI $1.4B in late October. It borders on the ricidulous to think that banks would lend $1.4B to someone in October and then force them into Ch 11 the following February.
I’ve read the news releases, pored over the 10Qs, 8Ks and other SEC filings, and if there is any bad news on RRI that is real (as opposed to contrived), I can’t find it. Virtually all the negative press is the result either of stupidity or very slanted coverage interested more in sensationalism than in presenting an accurate picture. This stock to me is a rare opportunity, and I’ve been buying accordingly.
THW
P.S. I complimented Dennis on their efforts at keeping their investors informed and particularly the way they return calls. Among the four or five IR Depts in the IPP sector I’ve contacted or tried to contact, RRI’s is far and away the best.
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