Morning Mumble: The Banks Nightmare another $50M for KMR and...SXX (another victory), ZPLA into price comparison and Cliff's unnatural Disaster (Australia)

Good Morning,

Iluka Resources (ASX: ILU) have cleverly bided their time, with an update from Kenmare on "possible" acquisition. Holders of Kenmare (KMR), if you're a long-term holder might need to rethink your investment strategy, have been granted a lifeline not only from the banks but Iluka. Although the "pre-conditions" may yet be pushed lower than the 0.016 Iluka share for every Kenmare share. 

The board do go some way to explain the rational, "The Board of Kenmare has reviewed the proposal carefully and has considered Kenmare's financial position, prevailing market conditions and the terms of the debt amendment announced today. Having taken independent advice and subject to its fiduciary duties, the Board of Kenmare believes that it is in Kenmare's shareholders' and other stakeholders' interests for Kenmare to continue to work with Iluka towards satisfaction of the pre-conditions to Iluka's proposal. 

Apparently it’s in KMR's shareholders, stakeholders and banks interests to continue discussions, this may be so, but put simply, they have no other choice. They owe the banks a significant amount, the company model, in a real world wouldn't have survived (EMC view) and whether the asset is strategic or not to supply, it's simply been jam tomorrow. The interim management statement reiterates how crap their market is, but there's hope, the Chinese producers are scaling back or ceasing production. 

The positive being Iluka is a well-run company with a significant understanding of their market place and operations, those out of the money could do worse than to look longer-term, albeit on the rise cash is king! 

Their finances are summed up from their annual report, Iluka have KMR by the short and curlies!

Finance 

A consequence of the low ilmenite prices being experienced is that the Company has needed to engage with its lenders to further restructure its debt obligations. Since the February 2014 Amendment described in the 2013 Annual Report, there have been further discussions since mid-2014 aimed at providing the Company with a stable platform both during this period of market weakness and for the future. Despite good intent on all parts, the complicated nature of the present debt structure has made progress slow.  Nonetheless, I am pleased to say that we have agreed a debt restructuring.
The key terms of the debt restructuring include:

• The provision by the lenders of US$50 million in additional standby funding.

• Extension of debt maturities.

• Removal of most fixed amortisation requirements to be replaced with a cash sweep leaving a minimum balance of US$30 million in the Group.

• A requirement for deleveraging in the medium term. 

• A lender-approved Non-Executive Director appointed to Kenmare's Board.

Sirius Minerals (SXX) have yet more cheers, with a positive decision has been made on its planning application for its materials handling facility (MHF). It would have been nice had SXX published the proposed terms whether contractual or implied regarding the Section 106 Agreement. Admittedly this may all still be up for negotiation. 

For those unaware of such S106 regulations, it’s not uncommon to have restrictive measures applied. Some have already been proposed such as underground operations, the finer detail may relate to costs/payments for infrastructure changes and potentially some more meaningful arrangements such as a 'trust fund' for local charities to assist them with their activities (plus various other measures, but the idea is simple) i.e. a Youth Club needing a new roof. 

Zoopla, (ZPLA) had an acquisition. One could be forgiven for thinking it's an overseas brand or similar. Nope, it's Uswitch.com, that utility comparison site. If the gossip is correct Uswitch.com have been seeking a buyer for some time with little interest, with the possibility of a listing. Now they have a white knight in the form of Zoopla giving them a nicely timed exit. 

ZPLA appear desperate, with their market share slowly being eroded by competition. There is also the question of the implications from mis-selling, Has Ofgem just created the next energy mis-selling scandal? What are Uswitch.com's liabilities? This is in contrast to Labours paper on  Better Choices: Better Deals Consumers Powering Growth. This will be one to watch with interest...

It was amusing to receive some oddly timed abuse on Pure Wafer (PUR) yesterday, apparently the muppet contingent are bathing in their glory of the stock having rallied since their interim results. Always more than willing to take criticism but surely it would wise to read the commentary correctly first. EMC selling all PUR on director sale April 2014. When a director sells, it's wise to take note. 

Amusement in the iron ore markets with the Cliffs Natural Resources chief executive Lourenco Goncalves (NYSE: CLF) sparing no punches in his summary of the Australian iron ore market. One assumes Cliffs are not looking for a buyer for those assets!

Atb Fraser

N.B. Another lesson for AIM investors when your main shareholder controls the entire company. Optare PLC are to cancel trading on AIM. Anyone surprised?