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OEG OMIB, new Covanta and other debt ?3

18:54 24-Aug-20


Covanta has refinanced $129.4M in debt due in 2043 & 2045 with new tax-exempt bonds through the National Finance Authority (New Hampshire).  The transaction save 1.45% over the combined interest on the old bonds.  This is much smaller than Covanta's last bit of refinancing, but at far better terms.  In my eyes, CVA is still overpriced, even after the declines since then, but it's good to see that the company is getting some environmental credit.

That's more than can be said for Orbital Energy.  The stock has settled down around 60 cents and earnings last week did nothing to change that.  The company lost $9.3M and had under $4.4M in cash, but the loss was mainly due to one time costs associated with the completion of the Reach acquisition, but management sees "a resurgence of customer activity, reflecting the reopening of the U.S. and U.K. economies and decreasing impact of COVID-19."   The adjusted terms mean Orbital got Reach for $11.4M in stock, but the pandemic has also cut the backlog almost in half. 

To me, this looks like the corporate analog of the new K-shaped recovery that economists have been bandying about lately.  The CEO has just evidenced confidence in the company by buying another 28K shares on the open market.  That is not necessarily misplaced, as the $1.9M in forgivable PPP loan is helping and things could improve for Orbital heading into year-end.  However, the pace of pandemic recovery and the impact of Brexit add too much uncertainty for my taste.

Then there's East-West relations... So, I'll also document that EMT has broken ground on the plant announced a year and a day earlier in partnership with UDC.  Is there anyone who believes that EMT will be paying UDC a decade from now, when the FOMC just issued a statement essentially saying that there are no explicit banking rules regarding Politically Exposed Persons and its all down to judgement (and politics).  Yes, the post-earnings summer doldrums are making even the market seem more like a soap opera.  Invest patiently.