Royal Gold (RGLD)
$325m (+$45m) sen unsec cb coming tonight from GS. Terms : 7yr 3.125-3.625% up 30-35%, s-c yr4 @130% (m/whole table), full pctn. UOP = pay down debt, gcp. Mexican, Chilean & Canadian levered gold play. PF Cash = 405m, CB only debt, LTM ebitda = 231m FCF -194m, low lev =1.4x (see credit color). We’d use L+500, ADV = 800k, 0/14 same delta calls = 37 iv bid, we’ll use 35 vol. Theo = 104.2/106.2/108.2 NEM = itm, GG=fat, GSS=balanced but not for all, KGC = no delta so demand for a balanced, pure gold play on a good credit with low country risk is obvious. Oh, we forgot cheap. We’ll keep this short GOLDman for this right so far. BUY
Precious metals royalties and interests, primarily gold & to a lesser extent silver, copper, nickel.
PF cash 405m
PF debt = 325m
LTM EBITDA $231m
LTM FCF -$194m
Leverage 1.4x
Mkt Cap = $4686m
RGLD’s royalty portfolio incl 38 prod, 26 dev-stage & 127 exp stage props. Co is very leveraged to gold, which accounts for 2/3 of royalty rev, w/limited exposure to cost inflation. Geo-political risk low w/royalties concentrated in Canada, Chile and Mexico, each accounting for ~25 & balance in US, Australia, & Africa. Liquidity good wboost to cash & full $225m rev avail (L+187 due 2/1/14). New converts are only debt & 7 yr. Our assigned spread L+500