01-10-13 Silver Standard (SSRI)

Silver Standard (SSRI)

$200m (30m) sen unsec cb coming tonight from CITI. Terms: 20 yr, 2.875-3.375% up 37.5-42.5%, puts 7,10,15 s/call 5 yr @130% (m/whole), h/call 7 yr, full pctns. UOP=repay 4.5% cb & gcp. Silver miner w/1 producing mine in Argentina & developmental projects in Mexico & Peru.

LTM ebitda = 29m

fcf = -81m

lev 6.9x

PF debt = 200m (CB)

Cash = 409m

We’d assume CCC+ & L+700, ADV = 242k, v low OI in LEAPS. Not a vol trade again so we’ll use model as a sanity check. Using 700/35 vol = 100/102.1/104.4 Model output disappointing but the equity/credit story is unique being the only silver play in market. There will be domestic & equity interest which will skew pricing. We like story as well.

Push for mids or better

Canadian silver miner w/Pirquitas mone in Argentina & dev stage properties in Mexico and peru

Piraquitas mine in argentina prod at stable level & generating EBITDA, however mine life < 7 years is short. Proved reserves at FY11 were 58.3m oz silver versus FY12 prod of 8.6m oz. Dev proj in MX (Pitarrilla) promising w/478mm oz prob reserves but nothing proven & it will take years & lots of cash to dev. Dev proj in Peru (San Luis) is quite small currently. Converts are only debt. Cash will fund dev for a while but more needed.


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