Q: Is it possible for Sherritt to file bankruptcy due to debt and what would happen to assets/operations? Nickel prices have been poor. They have a complex asset structure entangled with Cuban businesses so it's not foreseeable to be bought out due to political risk but their large refinery in Fort Sask also poses a concern for environmental reclamation to the government.
5i Research Answer:
It is certainly not beyond possibility. Bloomberg default ratio is 7.36%, which is very high for that indicator. Cash flow was negative in the last quarter, yet 12-month interest expenses were $36.1M net. With its small size and Cuban and other issues, we are not sure it could raise a lot of money with a dilutive equity issue. Most debt matures in 2026. Certainly any investment here needs to be considered extremely risky.