Wounded mining services giant Boart Longyear (BLY) is in a grave situation, literally.
The ongoing tug-of-war between its banking syndicate and prospective financiers willing to stump up cash to refinance its debt may have been partly resolved over the weekend, giving the company some much needed breathing space.
But the cost is crippling. As speculated on Eureka Live last week, Boart Longyear this morning confirmed it will be slugged 10% on the new credit facility.
Those higher financing costs – on notes that will expire in 2018 – coincide with a sharp downturn in the company's revenue.
Almost exclusively tied to mineral drilling, Boart Longyear saw vast slabs of its business evaporate as resource houses drastically scaled back on new projects and expansions as mineral prices collapsed.
Even more alarming is its exposure to the gold sector which is estimated to provide almost 45% of revenues. The collapse in gold prices earlier this year forced many junior explorers to cease drilling altogether.
After shedding more than 80% of its value in the past 12 months, the company slid a further 3% this morning to 47.5c after it called for a trading halt on Friday as word leaked out about the refinancing battle.
The $300 million refinancing does nothing to alleviate the company's potentially lethal debt situation. It was driven by the company's bankers in an effort to reduce their exposure to $150 million while retaining full security over the company's assets.
On top of that, a couple of onerous covenants were added regarding liquidity and asset coverage.
Clearly, those interested in picking up the new debt issue jacked up at the proposal that would have seen only $260 million of the offering secured with the balance unsecured.
In addition to the penalty interest rates, they now have managed to have the full amount secured.