Nu Skin's Uppercase Construction Makeover
Yesterday Nu Skin announced that they had a novel loan to supercede the sometime loan. This was essential because the sometime loan was almost to breach its covenants in addition to an effect of default would non hold out a practiced thing for Nu Skin shareholders or their management.
So prima-facie the novel loan was practiced news.
The stock silent dropped almost 10 percentage (and was briefly downwards more).
The loan damage are onerous in addition to complicated in addition to in that location are roughly bizarre disclosures inwards the attachments to the loan document.
The showtime bizarre thing almost the loan is the Drawing the revolvers has precedent. It is seldom something that makes credit providers happy. There may hold out a practiced explanation (truly). The marketplace seat has non been provided with it.
The highlighted department makes it clear that the company may not pay dividends subject to sure enough exceptions, which agency provided they run across these exceptions they may pay dividends.
Indeed the loan documents allow the next utilization of proceeds:
An effect of default is disastrous nether the novel documents because it involves immediate acceleration. You do non wishing immediate acceleration ever.
That said - in addition to it is a clear positive for Nu Skin - the default based on trailing operating cash menstruum has been removed. As indicated inwards past times weblog posts Nu Skin is peculiar - it generates substantial net in addition to huge negative operating cash flows. Nu Skin breaches its cash menstruum based covenants - in addition to these convey been removed.
The entirely explanation (that is non genuinely nasty) that I convey for drawing the revolvers is a deep wishing to utilization the cash (whilst it is available) to purchase dorsum stock. However given the nasty gustatory modality that drawing revolvers gives to credit providers this is an aggressive thing to do. [But it is possible. I am non dismissing it.]
Receiveables from offshore entities
The disclosure that caused most amazement with Nu Skin watchers was a disclosure at the dorsum of the credit understanding almost how much coin their offshore subsidiaries ain them. This is a list:
The full is almost $406 million. This is large - almost one-half the stockholders equity in addition to the volume of tangible stockholders equity.
If the unusual subsidiaries convey the cash (and it is presumed they do) in addition to then they should - dependent area to payment restrictions - but pay it.
There is $24 1000000 owed to caput portion past times Venezuela. Good luck collecting that. But exterior that the amounts should hold out collectable if the unusual subsidiaries are practiced for it. There is $133 1000000 owed past times China. This mightiness hold out hard to collect based on the amount of activity nosotros convey seen inwards China. However if they ain the real large portion complex nosotros saw (see the post) they could collect roughly of it past times selling up.
But the to a greater extent than pertinent enquiry is why haven't all those subsidiaries been able to pay the coin they owe to caput office? Inquiring minds are asking. Especially every bit the fellowship drew the revolvers.
--
Venezuela
The Venezuela amounts are irrelevant inwards Nu Skin (and Herbalife for that matter) but in that location is a contradiction betwixt what the tabular array inwards a higher house shows in addition to the management says. According to recent presentation at the Wedbush conference they entirely had $10-15 1000000 of sales inwards Venezuela.
It is hard to reckon how they are owed $24 1000000 past times a subsidiary that entirely has one-half that inwards sales. I can't foursquare it. Influenza A virus subtype H5N1 clearer explanation of Venezuela exposure would hold out nice.
John
So prima-facie the novel loan was practiced news.
The stock silent dropped almost 10 percentage (and was briefly downwards more).
The loan damage are onerous in addition to complicated in addition to in that location are roughly bizarre disclosures inwards the attachments to the loan document.
The showtime bizarre thing almost the loan is the Drawing the revolvers has precedent. It is seldom something that makes credit providers happy. There may hold out a practiced explanation (truly). The marketplace seat has non been provided with it.
Dividend restrictions
The floor from yesterday was that the debt covenants involved dividend restrictions. This came from slightly ambiguous wording inwards the press release.
The press unloose states:
The Credit Agreement requires the Company to keep a consolidated leverage ratio non exceeding 2.25 to 1.00 in addition to a consolidated involvement coverage ratio of no less than 3.00 to 1.00. The Credit Agreement besides includes other covenants, including covenants that, subject to sure enough exceptions, confine the powerfulness of the Company in addition to its subsidiaries (i) to create, incur, assume or permit to be whatever liens, (ii) to incur additional indebtedness, (iii) to brand investments in addition to acquisitions, (iv) to locomote into into mergers, consolidations or like transactions, (v) to brand sure enough dispositions of assets, (vi) to brand dividends, distributions in addition to prepayments of sure enough indebtedness, (vii) to modify the nature of the Company's business, (viii) to locomote into into sure enough transactions with affiliates, (ix) to locomote into into sure enough burdensome agreements, (x) to brand sure enough amendments to sure enough agreements in addition to organizational documents in addition to (xi) to brand sure enough accounting changes.
Indeed the loan documents allow the next utilization of proceeds:
Section 6.11. Use of Proceeds. Use the proceeds of the Credit Extensions (i) for working capital, upper-case missive of the alphabet expenditures, in addition to other lawful corporate purposes, including (without limitation) investments, acquisitions, stock repurchases in addition to dividends non prohibited past times the Loan Documents in addition to (ii) to destination the RefinancingSo they may purchase dorsum stock in addition to pay dividends provided they run across a fairly burdensome listing of possible events of default.
An effect of default is disastrous nether the novel documents because it involves immediate acceleration. You do non wishing immediate acceleration ever.
That said - in addition to it is a clear positive for Nu Skin - the default based on trailing operating cash menstruum has been removed. As indicated inwards past times weblog posts Nu Skin is peculiar - it generates substantial net in addition to huge negative operating cash flows. Nu Skin breaches its cash menstruum based covenants - in addition to these convey been removed.
The entirely explanation (that is non genuinely nasty) that I convey for drawing the revolvers is a deep wishing to utilization the cash (whilst it is available) to purchase dorsum stock. However given the nasty gustatory modality that drawing revolvers gives to credit providers this is an aggressive thing to do. [But it is possible. I am non dismissing it.]
Receiveables from offshore entities
The disclosure that caused most amazement with Nu Skin watchers was a disclosure at the dorsum of the credit understanding almost how much coin their offshore subsidiaries ain them. This is a list:
Intercompany Receivables | |||
Nu Skin Enterprises United States, Inc. | |||
Nu Skin Canada, Inc. | 146,199 | ||
Nu Skin Enterprises, Inc. | |||
Nu Skin Enterprises New Zealand, Inc. | 175,787 | ||
Nu Skin Enterprises Hong Kong, LLC | 7,675,959 | ||
Nu Skin Nippon Co., Ltd. | 620,350 | ||
NSE Korea Ltd. | 5,824,767 | ||
Nu Skin Enterprises Singapore, Pte. Ltd. | 230,681 | ||
Nu Skin Israel, Inc. | 165,000 | ||
Nu Skin Taiwan, LLC | 1,363 | ||
Jixi Nu Skin Vitameal Co., Ltd. | 430,500 | ||
Pharmanex (Huzhou) Health Products Co., Ltd. | 5,432,400 | ||
NSE Asia Products, Pte. Ltd. | 8,035,931 | ||
Nu Skin International, Inc. | |||
Nu Skin International Management Group, Inc. | 44,301,819 | ||
Nu Skin Mexico, S.A. de C.V | 5,672,930 | ||
Nu Skin Guatemala, S.A. | 3,488,701 | ||
Nu Skin Republic of El Salvador S. A. de C.V. | 104,543 | ||
Nu Skin Honduras, S.A. | 131,853 | ||
Nu Skin Costa Rica | 377,841 | ||
Nu Skin Venezuela, C.A. | 6,421,303 | ||
Nu Skin Colombia, Inc. | 128,188 | ||
Nu Skin Argentina, Inc. | 759,321 | ||
Nu Skin Enterprises New Zealand, Inc. | 436,748 | ||
Nu Skin Enterprises (Thailand) Limited | 627,077 | ||
Nu Skin Enterprises Philippines, LLC | 159,190 | ||
Nu Skin (Malaysia) Sdn. Bhd. | 1,321,469 | ||
Nu Skin Pharmanex (B) Sdn. Bhd. | 30,366 | ||
Nu Skin Israel, Inc. | 2,725,815 | ||
PT Nu Skin Distribution Indonesia | 6,427,129 | ||
PT Nu Selaras Indonesia | 924,291 | ||
Nu Skin Enterprises Viet Nam Limited Liability Company | 520,580 | ||
Nu Skin Enterprises RS, Ltd. | 283,453 | ||
Nu Skin Enterprises South Africa (Proprietary) Limited | 1,163,340 | ||
Nu Skin (China) Daily-Use & Health Products Co., Ltd. | 2,207,202 | ||
NSE Asia Products, Pte. Ltd. | 53,477,483 | ||
NSE Products, Inc. | |||
Nu Skin Netherlands, B.V. | 86,794 | ||
Nu Skin Germany, GmbH | 101,827 | ||
Nu Skin France, SARL | 27,185 | ||
Nu Skin Italy, Srl | 177,788 | ||
Nu Skin Enterprise SRL | 12,164,682 | ||
Nu Skin Eastern Europe Ltd. | 74,974 | ||
Nu Skin Enterprises Poland Sp. Z.o.o. | 8,814 | ||
Nu Skin Turkey Cilt Bakimi Ve Besleyici Uranleri Ticarel Limited Sirketi | 597,032 | ||
Nu Skin Islandi ehf. | 849,996 | ||
Nu Skin Czech Republic, S.r.o. | 217,724 | ||
Nu Skin Slovakia | 98,394 | ||
Nu Skin Israel, Inc. | 599,956 | ||
Nu Skin Enterprises South Africa (Proprietary) Limited | 71,231 | ||
Nu Skin International Management Group, Inc. | 2,272,938 | ||
Nu Skin Mexico, S.A. de C.V | 969,970 | ||
Nu Skin Guatemala, S.A. | 960,774 | ||
Nu Skin Republic of El Salvador S. A. de C.V. | 265 | ||
Nu Skin Costa Rica | 2,194,916 | ||
Nu Skin Canada, Inc. | 4,446,848 | ||
Nu Skin Venezuela, C.A. | 23,896,815 | ||
Nu Skin Colombia, Inc. | 7,811,575 | ||
Nu Skin Argentina, Inc. | 414,677 | ||
Nu Skin Enterprises New Zealand, Inc. | 4,010,293 | ||
Nu Skin Enterprises Australia, Inc. | 1,316,560 | ||
NSE Korea Ltd. | 18,651,855 | ||
Nu Skin Enterprises Philippines, LLC | 319,735 | ||
Nu Skin Enterprises Viet Nam Limited Liability Company | 224,177 | ||
Nu Skin Enterprises Ukraine, LLC | 377,261 | ||
Nu Skin Enterprises RS, Ltd. | 4,998,951 | ||
Nu Skin (China) Daily-Use & Health Products Co., Ltd. | 133,465,866 | ||
NSE Asia Products, Pte. Ltd. | 23,849,660 | ||
Total | 405,689,111 | ||
The full is almost $406 million. This is large - almost one-half the stockholders equity in addition to the volume of tangible stockholders equity.
If the unusual subsidiaries convey the cash (and it is presumed they do) in addition to then they should - dependent area to payment restrictions - but pay it.
There is $24 1000000 owed to caput portion past times Venezuela. Good luck collecting that. But exterior that the amounts should hold out collectable if the unusual subsidiaries are practiced for it. There is $133 1000000 owed past times China. This mightiness hold out hard to collect based on the amount of activity nosotros convey seen inwards China. However if they ain the real large portion complex nosotros saw (see the post) they could collect roughly of it past times selling up.
But the to a greater extent than pertinent enquiry is why haven't all those subsidiaries been able to pay the coin they owe to caput office? Inquiring minds are asking. Especially every bit the fellowship drew the revolvers.
--
Venezuela
The Venezuela amounts are irrelevant inwards Nu Skin (and Herbalife for that matter) but in that location is a contradiction betwixt what the tabular array inwards a higher house shows in addition to the management says. According to recent presentation at the Wedbush conference they entirely had $10-15 1000000 of sales inwards Venezuela.
It is hard to reckon how they are owed $24 1000000 past times a subsidiary that entirely has one-half that inwards sales. I can't foursquare it. Influenza A virus subtype H5N1 clearer explanation of Venezuela exposure would hold out nice.
John
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