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As Chesapeake (CHK) confirms its $3B bridge loan has turned into $4B, Sanford Bernstein notes if...
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Tuesday, May 15, 2012, 5:25 PM ETAs Chesapeake (CHK) confirms its $3B bridge loan has turned into $4B, Sanford Bernstein notes if CHK’s debt pile amounts to more than 4X its trailing four quarters of EBITDA, it would trigger a cascading bond default. Given anticipated producing asset sales decreasing EBITDA, along with lower natural gas prices, "the ratio has the potential to approach, if not exceed" the threshold by Q3 or Q4.
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$CHK Aub confirms his hedge fund is interested in $CHK shares if priced appropriately to nat gas prices.
He is playing hardball...developing
each one of their individual bonds have covenants related to ebitda ratios?
or does this just relate to the revolver and the recently issued bridge loan?
2= CHK already knows that for shale acerage to command rich pricing, time value must be maximized with large capex drilling. It no longer can do that. Thus it is tearing up lease agreements. It no longer is honering many of its lease agreements. Nor is it making that public.
3= It has one good oil field which I beleive they will sell next. But there is a problem. The company wants to sell that asset, but the sale would affect production cash flow in such a way that its debt covenants will push the loan into default. I believe Icahn can step in and solve that covenant probelm by paying that loan off for a fee.
4= The drill equipment IPO company will then serve CHKM and CHKR TOT STO and others who have an interest in CHK. They in turn will get more ownership control of what they have a % in for a price.
5= CHK has considerable real estate it can sell and that should give shareholders a few dollars per share as a token for being the proud owner of CHK, if if everything goes ok.
6= However like in 2008 I beleive oil price will head south do to the economy falling apart. The entire commodity complex is presently being shorted big time. I see $50 oil in November and 0.60 natural gas price. I forsee dry gas drilling collapse. I see CHK not honering its land lease agreements. So all that acerage will simply go back to former lease owners.
also coal to nat gas conversion is consuming alot more natgas, but this needs to continue for months to chew up the overhang in storage
Why would GS and Jeffries shell out $4 billion ? That is an easy one:
First, it won't be their money, and second they will pocket about $200 million in fees. Remember, Goldman cooked the books for the Greeks so they could join the EU and only charged $300 million for that caper.
Plenty of studies out there by capable folks that conclude the GDP multiplier for federal, state and municipal spending is one or less; whereas, in the private sector it can be up to three. One of those folks is Christina Romer who was Obama's Chairman of the President's Council of Economic Advisors until she got tired of being ignored and went back to Berkeley.
I recognize the dangers of acting on what others are saying when my intellect is insufficient to grasp the full extent of what they are advocating. I see the results of such actions demonstrated frequently in the ongoing transmogrifications enacted by Congress.
P.S. The "really ?" meant are you really a non-surfer.
The comparison between what we would have had w/o the stimulus and what we do have (with the stimulus) is a difficult one to make. It's not something you can "see" as you live your daily life because you don't have the alternate universe view needed for the comparison. The CBO has made extensive efforts to analyse the effects of the stimulus and they update that analysis every quarter. Their analysis shows a substantial improvement in unemployment and in GDP due to the stimulus. In other words, things would have been much worse w/o it.
I actually think the CBO is UNDERestminating the effect of the stimulus. We came very close to having another great depression -- 30% unemployment, maybe even 50% unemployment given the political gridlock. It wasn't only the stimulus that prevented that. There were other actions too. But the stimulus was a significant part of what transitioned the country from freefall towards stasis and the beginnings of recovery. Even though it's rough, it could so very very easily have been many times worse than it is. Imagine an airplane with engine problems and stuck landing gear. You survive because the pilot manages to land the plane w/o it exploding into a fireball. Would you then spend the rest of the day complaining that it wasn't a smooth enough landing?
I agree that had nothing been done, we would now be much worse off. I just think the government could do a whole lot better job than it has done. If this is all the fault of George Bush and the Republicans, then why didn't Obama and the Democrats reverse all those mistakes when they had the power to do so ? The first step in that direction would have been to put Glass-Steagall back on the books. Instead, many of the people who created the mess have moved from Wall Street into the government to fix things.
As for your pilot metaphor, a good pilot wouldn't take a chance on a fireball. He or she would burn or dump the fuel and land with empty tanks. If there were sufficient fuel on board, the pilot could proceed to the nearest runway with foaming equipment, work to get the gear down while burning any remaining excess, and bring it in on the belly, satisfied that he or she had done everything possible to avoid a fire.
The old Sears and Roebuck mail order catalogues labeled their merchandise "Good, Better and Best." Even if the government's performance has reached the level of Good, it is far from the Best that can be done. If that observation brands me a complainer, so be it.
In the report I reviewed (probably still the most recent one), the CBO isn't looking at unemployment figures. They were looking at job creation figures. The problem I have with these sorts of armchair critiques is that people just sit around fabricating imaginary criticisms instead of actually looking at the report and doing a real analysis of their own. If you were doing the work of looking at specific things that are actually IN the CBO's analysis and discussing their validity, then we'd have something to discuss.
Could it be better? Maybe. Probably. Gridlock in Washington limits what the gov't can do. But then that's how our system of government was designed. It's by design of the nation's founders that gov't can only do so much, even in a semi emergency. Some say that if the stimulus had been larger, for example, that it would have had a much bigger difference. I'm not convinced of that but I don't go around claiming to know that to be the case in the absence of actual substantive data and analysis.
"If this is all the fault of George Bush and the Republicans"
It's not. The financial crisis was a bi-partisan effort.
I have only one further question: If the present government is what the Nation's founders designed, why do the majority of people (according to various polls) think the government is on the wrong track as compared to 20 or 30 years ago ?
Harry, on the contrary. You chose the topic by asserting that the stimulus had done nothing. You have offered zero substantiation for that assertion. I pointed you to the CBO's analyses that reach the opposite conclusion. You've not only failed to address even a single topic in those reports, you also haven't offered a single bit of data or analysis to support your completely baseless assertion.