Raw - VEII...................................................
1) "I see that as nothing but good news... You're telling me they secured $61 million at 7% interest, non-dilutive? I feared a lot of dilution and/or obnoxious interest rates."
Everything I stated in my previous post to you is a fact as of yesterday. I suppose this is good news to an eternal optimist ;-). To someone like me, who is in the commercial finance/venture capital business, their $61 million L.O.C. is meaningless because they have nothing until they secure their last round of funding. They can't do anything with those funds until they break ground because its a construction loan, secured by other assets. If you have sufficient collateral, you can secure loans like this without a problem. Its the last round of financing that is the most challenging, believe me.
What they are offering for the $25 million worth of funding is between 33%-50% annualized interest over a two to three year period. On the surface, that may sound like a great deal for an private investor, but unless you are willing to write the check for them under those terms, you need to take a hard look at the facts of the case before making that determination.
First, the private investor must accept a second position against the collateral behind the bank. Therefore, in the event of a loan default, the bank receives all the proceeds of an asset liquidation until they are made whole before the party in the second position receives anything. How much is a white elephant, space aged ferris wheel worth upon liquidation? I can assure you, it nowhere near $86 million.
Second, they don't have a track record to prove they can support generating returns sufficient enough to assure a private investor they are capable of meeting their obligations.
Third, for $25 million worth of private placement capital, an investor can obtain a far superior deal over what VEII is offering from numerous other ventures. Don't kid yourself about any lack of dilution until they have that final $25 million in the bank. The VC's all know that VEII can't do anything without that final traunch of funding. Each day that goes by without that money is costing VEII dearly. Wait and see what they ultimately have to give up in order to obtain the balance of their funding before you draw any conclusions.
2) "All you really said is that VEII management consists of shrewd negotiators. Of course they'll bend to get the other $25 million if they have to. You just reduced my concern from $86 million in dilution to $25 million, MAYBE, in dilution .... AKA practically nothing."
Its still too soon to make that judgement about being shrewd negotiators. It was a nice move getting the RIO Las Vegas to convey them the property for the Voyager. As for the $61 million L.O.C., banks don't make those types of loans without strong collateral behind them. They obviously were able to provide sufficient collateral to satisfy the loan committee. Understand though, that this is a variable rate loan. That 7% rate isn't good forever. If key short term rates head higher, so will theirs.
Yes, most assuredly they will have to bend to secure the other $25 million. Do you know how far they will have to bend? That is the unknown variable in the equation. Its safe to say they haven't come anywhere near to establishing that inflection point yet. Again, there is nothing to get excited about until they have secured ALL of the financing. You can't draw ANY conclusions about dilution until that funding is in place.
3) "Of course they haven't had any revenues in 3 years. What were you expecting them to sell - cotton candy?"
What kind of a response is that? How do we even know they are capable of selling cotton candy?
This company is a one trick pony, period. Until that pony executes that trick on a revenue generating basis, how confident can you be?
4) Their current cash needs are $25,000 per month. They dilute by a tiny amount to keep from being "tapped out." Raising funds to keep from being "tapped out" for $25,000 for an .80 stock price isn't even worth talking about.
You obviously haven't looked at their current balance sheet lately. Believe me, it is worth talking about, because each day that goes by without their funding in place gradually reduces their leverage strength. Not that they have much at this point anyway.
Thanks for the info - $61 mil of $86 mil being credit at 7% interest is very encouraging news although I'm sure they've had several offers on the table for the other $25 million. The company has stated they are NOT looking for investors, they don't need investors, a call to the design company says they are in the last phase just before breaking ground, and Harrah's/RIO both say they're breaking ground shortly and the plan is an absolute done deal (call 800-PLAY-RIO for example and ask any employee).
Raw, I think you are kidding yourself at this point. You can't make the statement that you are sure they've had several offers on the table for the other $25 million. However, I'll give you the benefit of the doubt, since I don't know either because this is something won't disclose.
The key is, what are the terms of these offers?
Do the VC's want 50% of the company? 60%? 70%? I can assure you that they won't invest that kind of money without a substantial ownership position. And there goes your anti-dilution theory down the drain.
The company has stated they are NOT looking for investors, they don't need investors
That is true. They are looking for private lenders. Which is inherently the problem. What do they have to offer to secure that debt? Read my response to your question #1. They don't have anything to offer IMO.
Until they change their stance on investors, I doubt they make any headway in securing the balance of their funding.
a call to the design company says they are in the last phase just before breaking ground, and Harrah's/RIO both say they're breaking ground shortly and the plan is an absolute done deal (call 800-PLAY-RIO for example and ask any employee).
I guess thats why they felt compelled to solicite my client for that "last phase just before breaking ground". That "last phase" is always the toughest. And what exactly does "breaking ground shortly" mean? Please define "shortly" for me. Otherwise, its meaningless hype to me.
Good luck.
Regards,
Naz
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