10.15
Paramount has announced that it has crystallized $41.4MM of hedge gains
at September 30, reducing its outstanding debt to $290MM. The crystallized
hedges ran November 2009 to March 2010 and have essentially been
replaced with 110,000 GJ/d of contracts at an average price of $5.38/GJ.
As well, the trust is seeking to amend and extend its 6.25% convertible
debentures, which are due in 2010 and 2011, offering a coupon increase to
6.75%, a reduced conversion price of $8.40 (from $19.35 and $23.80), a
four-year non-call period, and an extended maturity to 2016.
We believe the crystallized hedge position (including the new hedge book)
and the potential extension of the convertible debentures provides the trust
with an improved liquidity outlook in the short and medium term, allowing a
better focus on capital development activity moving into 2010.
However, with spot natural gas prices remaining weak on record storage
levels and a semi-annual credit facility review at the end of October, we
maintain a cautious view on the trust given its higher-than-average debt
levels.
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