Sherritt International CEO confident that debt issues will be fixed without painful restructuring – by Peter Koven (National Post – May 11, 2016)

http://business.financialpost.com/

TORONTO — The chief executive of Sherritt International Corp. said Tuesday he is confident the company will avert a painful restructuring despite its big debt load and woeful nickel prices.

“I expect we’ll be able to do something that works for all stakeholders,” David Pathe said in an interview at the company’s annual meeting in Toronto. He did acknowledge that the situation is highly dependent on what happens in the nickel market.

Toronto-based Sherritt is a victim of timing. The company and its partners spent a staggering US$5.3 billion to develop the Ambatovy mine in Madagascar over the past several years, and nickel prices plummeted just as production was ramping up. As a result, the mine is not generating the cash its owners expected.

Now Sherritt is saddled with $2.1 billion of debt, versus just $370 million of cash at the end of March. It has an untenable financial situation at Ambatovy that needs to be resolved, and significant public debt repayments that start coming due in 2018.

The most immediate problem is at Ambatovy. Sherritt owns 40 per cent of the mine, but until certain loans are repaid, its effective interest is only 12 per cent. Sherritt decided this scenario makes no sense, so it has simply stopped funding the mine.

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