Mirabela Nickel Ltd is a Brazilian mining
company with significant nickel and other related assets. With nickel
prices under pressure in recent years due to overproduction, the price of the
stock (MRBAF) has fallen from $7 in 2008 to essentially $0 this year.
Capital proceeds reinvestment from the $375 MM debt issuance in 2011 did not
stem the losses in 2012; in fact, they accelerated.
Nevertheless, with profitability and other
financial ratios signaling red flags for the company throughout 2012 and with
the equity trading at $0.50 as recently as February 2013, the bonds continued
to trade near par. In fact, Moody’s and S&P upgraded the credit
rating of the company on December 13, 2012 and March 27, 2013,
respectively. On September 26, 2013 the company announced that it would
miss its upcoming debt payment and the bond price dropped by 50% in one day
(see chart below).
Mirabela Nickel Ltd has seriously
deteriorating fundamentals, in addition to nickel losing more than 20% of its
value this year. This mispricing of the bonds and the Q1-2013 upgrade was
further evidence of the disconnect between financial assets and the ‘Main
Street’ economy. Please contact Tradex Global to further
discuss our short high yield strategy.
Business Overview: Mirabela Nickel Ltd is a Brazilian mining company with significant nickel and other related assets.
Rating: Moody’s: Ca –
“Highly speculative and are likely in, or very near, default with some prospect of recovery of principal and
interest.”
S&P: D – “Payment default on
financial commitments.”
Rating Agency: Moody’s
|
From:
|
To:
|
12/13/2012
|
Caa1
|
Caa1 (upgrade from Negative to Stable)
|
10/2/2013
|
Caa1
|
Caa3 (downgrade to Negative)
|
10/22/2013
|
Caa3
|
Ca (downgrade to Missed a Payment)
|
Rating Agency: S&P
|
From:
|
To:
|
3/27/2013
|
CCC+
|
B- (upgrade to Stable)
|
10/2/2013
|
B-
|
CCC+ (downgrade)
|
10/23/2013
|
CCC+
|
SD (downgrade to Selective Default)
|
11/18/13
|
SD
|
D (downgrade to Default)
|
Issue Size: $375
MM
Use of Proceeds: “Repay/Refinance
Debt” and “General Corporate Purpose”
Call Prices/Dates: 4/15 104.3750
4/16
104.1875
4/17
100.0000
Financial Highlights: Income
Statement: ($millions, except per share data)
Period
|
12/31/2012
|
12/31/2011
|
12/31/2010
|
Revenue
|
343
|
303
|
210
|
Net Income
|
(452)
|
(51)
|
(48)
|
Earnings Per Share
|
(0.3)
|
(0.1)
|
(0.1)
|
Total Debt
|
450
|
402
|
263
|
Leverage (Total Debt/EBITDA)
|
12.1x
|
71.0x
|
8.7x
|
Recent Prices: 99.375
(2/12/13)
35.000
(11/26/13)
Yield to Worst: 43.5%
Company Outlook: The company’s
difficulties have mimicked the long secular decline in the price of
nickel. In addition to being concentrated within a single commodity, it
also was dependent upon having only 2 prime customers. When one of those
customers (Votorantim Metals) announced it was closing its nickel smelting
facilities, the price of Mirabela’s debt dropped 50% on September 24,
2013. The Company has delisted from the Toronto stock exchange and
entered in waiver and standstill arrangements with its major creditors.
Source: Bloomberg and Tradex Global Advisors
* The above trade case study may
not be an investment in an existing stand-alone investment entity. The
information for the trade case study was gathered from various sources. No
representation is being made that any vehicle managed by Tradex Global Advisors
will or is likely to have this position in any of its Portfolios. This
trade case is neither a recommendation to buy nor a recommendation to sell the
referenced security or securities.
Tradex Global Advisory Services, LLC
investorrelations@thetradexgroup.com
203-863-1500
@Tradex_Global
No comments:
Post a Comment