Crius Energy Trust: An Unsustainable Collision Course

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About: Crius Energy Trust (CRIUF)
by: Hindenburg Investment Research
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Summary

Crius's non-IFRS “Payout Ratio” includes multiple questionable adjustments which have given investors a false sense of security. We think Crius is on the precipice of failure.

Crius is liquidity constrained with only $24.3m in cash as of September 30th. A new preliminary legal settlement of up to $18.5m will deplete much of its remaining cash.

Credit lines are similarly stretched. Crius had $104.6m of debt as of quarter-end with current estimated remaining available credit of only $25.2m.

The Company is borrowing at rates as high as 9.5% while paying out dividends at ~9.3%. Current dividend payout rates imply an unrealistic C$47.7m annual payout.

Crius's early backers and potentially current key holders include individuals affiliated with hedge fund Platinum Partners, whose executives were indicted for operating “like a Ponzi Scheme," according to federal prosecutors.

Introduction

We believe many investors look at Crius Energy Trust (TSE:KWH.UN, OTC:OTC:CRIUF) and mistakenly believe it to be similar to a traditional electric utility. After all, much like a utility, Crius ((i)) is