triedtestedand

Hey Dazel: Remember FBK just refinanced in July ... This is the time for mgmt to buttress the balance sheet, and they are now incentivized via long-term stock grants to do it, so aligned with long-term shareholder interests (although I would have hoped they'd write their own cheques). That said, presuming a carbon copy set of results Q3 vs Q2 (easy to say, basing on similar results at Mercer and Canfor), balance sheet for Sep30/10 could include: -$78M Quebec loan (less first principal payment) -$0 drawn on their credit line -$50M for their debenture +~$10M in cash/equivalents Then, presuming another carbon copy of Q4 vs Q3, cash/equivalents will grow another +~$20M to +~$30 ... so that if Q1/11 is anything similar, then >Jan1/11 they can announce redemption of $50M debenture, pay it all off and still end out the quarter with no other major liabilities except the Quebec loan. I'd say that's quite a turnaround, as it means that in less than 5months from now, they could: have a full year of restored profitability, debt/equity of <20%, remaining debt due 4+ years out, and potential $80M FCF. The kicker is this last item ... I don't think the market really appreciates the balance sheet transfer of PPE into cash ... which is being masked by the $10M/quarter in depreciation ... it is not alchemy. Lots of flexibility then to institute dividend, buy back shares, etc. Anyway ... that a long's view of things

Last year FBK reported on Oct. 30th, so without any other info, might guess they announce on Oct. 29th ... Canfor reports on the 26th, so that should provide a corollary. I wouldn't suspect a big move until the new year, as people wait to see where prices trend, if they do anything w/ debentures, if they institute dividend, etc. If you are on the bull side, this is period to be opportunistic and (slowly) accumulate ...

Uccmal: Canfor has dropped prices to $970/tonne (or is that ton?!!) from Oct. 1 ... you can practice your Swedish reading skills at the following site: http://di.se/Default.aspx?pid=1124559__TelegramPageProvider There's also another swedish article this morning which translates (thanks to Google) as follows: http://di.se/Default.aspx?pid=1125296__TelegramPageProvider FOREST: PRICE NBSK PULP 5.1% LOWER THAN 2011 2010 - SME-DIREKT2010 09-28 12:08 LONDON (Reuters) Following a sharp rise in prices in 2010, analysts expect that the price of NBSK pulp (long-fiber pulp) generally keeps a presence on the continuing high price levels in 2011. It shows a survey of eight analysts forest SME Direkt have done. The survey shows that analysts expect the average price of NBSK pulp will be 5.1 percent lower in 2011 than 2010. The price of NBSK pulp has risen sharply in 2010. Since January, prices have risen by $ 174 to $ 973 per tonne which is a recent quotation from Finnish Foex, 28 September. Fears of price adjustment downward in the autumn has not yet materialized, and analysts point to a continued limited supply of the pulp market in the fall and into next year. "While it would be a small price downward correction during the autumn, it is wrong to mass market will remain strong ahead, especially in the wake of the general economy improves," said Claes Rasmuson, analyst at Swedbank. He is backed by an analyst colleague who had expected a weaker market development in the autumn. "If you look at the progress to date in the autumn so I can only conclude that the mass market did not feel as weak as I had anticipated," said Michael Jåfs, forestry analyst at Cheuvreux. A look at the producers' stocks of pulp reinforces the picture of the situation on the mass market looked like in the fall. "At the end of summer, we saw a slight increase in producer inventories of pulp, but it was only a rise of two days and it will be no more, it's still a tight market," said Claes Rasmuson. Judging by one of the big mass producers, the South, so there are not any indications that the mass market would weaken during autumn or early winter. "Our inventory levels are very low and there is therefore correct to say that the economy of long-fiber pulp remains strong," said Södra CEO Leif brother in an interview with the News Agency Directly in the middle of September. Analysts also expect the market situation, and the high price of pulp, largely composed in 2011. One overarching reason is the general economic situation and demand for paper products along with the continued limited supply of pulp globally. "As I see it, the price of NBSK pulp to remain at relatively high levels even in 2011. Indeed, the global market is such that access is limited and there will be no new capacity by 2012," said an analyst and continues: "If the demand for pulp will remain at about the same as now in Europe and North America and the Asia market continues to grow, so will the supply of pulp to be even more limited." The fact that no new capacity is expected to come on the global mass market until 2012-2013 is another factor which, together with the behavior of strong Chinese buyers will steer the development of pulp prices ahead. Södra CEO Leif Brodén testified in mid-September about a situation where the mass of buyers from China are now active in the European market, after an absence in the first half of this year. "The Chinese pulp buyers are now coming back even though prices have not fallen is an additional factor that may be supported by mass stay at these levels," said Claes Rasmuson. The analysts were asked how much they expected the dollar price would change on average in 2011 compared to 2010. Among the Nordic forestry companies are particularly Stora Enso, Billerud and Rottneros major players in terms of mass. Stora Enso expects, for example that this year net sell 900 000 tonnes of pulp on the market. Although SCA is a major player in mass market, the company net purchase about 1.1 million tons of pulp per year. Participants: CA Cheuvreux, Danske Market Equities, Deutsche Bank, Goldman Sachs, Morgan Stanley, Pohjola Bank, SEB Enskilda and Swedbank. Gunnar Vrang +46 8 5191 7920 Johan Eriksson, +46 8 5191 7910 Direkt Listen Read phoneticallyDictionary - View detailed dictionary

SD: If there was intent to repay the debs in shares, and not cash, then there wouldn't have been need to secure (what is a new) provision in either the SGF or ABL credit agreements to allow repayment of debs in cash, correct? And why would FFH backstop the rights offering only to get rediluted via repayment of debs in shares? No, I think an Occam's razor style scenario will play out in the next 90-180 days: - EBITDA and other provisions will be maintained - ABL credit agreement balance will go to zero - cash balance sheet will be built up - early Q1/11 announcement to redeem debenture within Q1/11 timeframe What then appears in late April is much stronger balance sheet ... at that point they consider mix of nominal share buyback, nominal dividend, and nominal cash build up (and/or SGF debt paydown) ... all very do-able if FCF continues at current rates (which itself is more than doable presuming NBSK pricing holds, wood chip prices continue to ease, interest payments drop, currencies don't start fluctuating wildly, etc.) The market is in a "prove it to me" period ... those with a bit more uncertainty (vs risk) tolerance could catch what may be a really nice wave.

SD: Cryptically enlightening as always! Gotta make people work for it, huh? Is the below what you're referring to? a) From SEDAR, final prospectus for the debs (Q3/2006): The Debentures will not be redeemable prior to December 31, 2009. On or after December 31, 2009, and prior to December 31, 2010, the Debentures may be redeemed, in whole or in part, from time to time at the option of the Fund on not more than 60 days and not less than 30 days notice, at a price equal to the principal amount thereof plus accrued and unpaid interest, provided that the Current Market Price is at least 125% of the Conversion Price. On or after December 31, 2010, the Debentures may be redeemed in whole or in part from time to time at the option of the Fund on not more than 60 days and not less than 30 days prior notice at a price equal to the principal amount thereof plus accrued and unpaid interest. b) From SEDAR, final prospectus for the debs (Q3/2006): The payment of the principal and premium, if any, of, and interest on, the Debentures will be subordinated in right of payment, as set forth in the Indenture, to the prior payment in full of all Senior Indebtedness of the Fund and its subsidiaries. The Debentures will also be effectively subordinated to claims of creditors of the Fund’s subsidiaries except to the extent the Fund is a creditor of such subsidiary ranking at least pari passu with such other creditors. The Debentures will not limit the ability of the Fund and its subsidiaries to incur additional indebtedness, liabilities and obligations, including indebtedness that ranks senior to the Debentures, or from mortgaging, pledging or charging its properties to secure any indebtedness. c) From SEDAR, final prospectus for the rights offering (Q3/2010) ... changes to the deb provision: Under the Existing Revolving Facility and the Existing Term Loan, the Corporation is restricted in redeeming Debentures for cash as permitted pursuant to the Debenture Indenture. The SGF Credit Agreement will allow the Corporation to redeem Debentures for cash provided its interest bearing debt to EBITDA ratio meets a certain minimum requirement. The ABL Credit Agreement will also allow the Corporation to redeem Debentures for cash provided it meets a certain borrowing availability requirement.

cwericb/uccmal: Agree that the website is an eyesore. This is a basic requirement for any business ... needs to be fixed ASAP. Regarding share buyback ... they just issued 40M shares as part of rights offering, so with 130M outstanding there's a lot floating out there, and given the historical trading volumes (<200K shares/day) and the rules around company buybacks (e.g. something like 20% max of daily float), it's not going to make significant dent in things for them to start buying some back. Further, if anyone knows how to do buybacks, FFH will be the ones to help FBK. Such share buyback may not attract immediate attention, or have immediate impact, but it can pay incredible dividends (pun intentional). As example, ORH's board bought back a significant % of their shares over a couple year span which helped keep floor on a relatively thinly traded stock, helped increase book/intrinsic value per share during that timeframe, and benefited ALL of the long-term ORH shareholders when FFH ultimately took ORH private. (I've got nothing to say bad about FFH in their dealings with FBK ... they backstopped the recent deal, didn't force anything on FBK, and put up some cash.) Here's part of my own thesis on this stock ... at this juncture, FBK is carrying about $10M of depreciation per quarter ... this is real, but it's non-cash ... the important thing IMHO for FBK is FCH, as it changes the quality of the balance sheet asset mix (more cash/less debt, less PPE) ... if last quarter repeats itself going forward ($10M earnings, $20M FCH), then on on an annual basis the company is trading at ~3.3x earnings, ~1.6x FCH, and some ridiculously low price-to-book ratio ... and this would only get better with a conservative share buyback. This is doable ... the $CDN has traded a bit lower this quarter than last, the NBSK pricing is higher on average this quarter than last (and doesn't appear to be in imminent danger of collapse), the company is carrying about $2M/quarter ($8M/yr) less in interest costs after the refi, they're not spending money on websites and press agents, etc. ;-)

Dividend schmividend ... with FCF from the last 6 months of the year, FBK needs to announce they are buying back the debenture (which they could use their line of credit to help cover) ... that would be the XMas present to solidify their balance sheet further. Then (presuming no other rabbits start getting pulled out of hats) they could simply initiate a share buyback ... that would put a floor on the stock, provide some liquidity for those who want/need it, and reward the patient longer term investors more than a dividend would. It would also align with motivation of the options granted to management to reward share appreciation.

Why don't you create a new poll and ask this question? ;)

Cardboard: I like the options grant because it encourages ownership mentality ... without it being a crazy high amount creating significant dilution (my one big beef remains that management doesn't have enough equity skin in the game) ... the $1.35 grant price is 35% greater than current price, so it isn't at the lowest floor price ... and the special grant condition is a high (but achievable) threshold over a 3-5 year window. How to get there ... keep buying back debt (ex the debentures - using cash vs shares), to make the balance sheet stronger ... they could then (or in parallel) initiate even a modest share repurchase, which would significantly enhance shareholder value given the low P/B ratio they currently have (would much prefer this at this juncture than a dividend)

It appears that ~4M debentures traded during the middle of the day on August 4th @ 99 ... and another 1M or so traded on July 16. On the conference call, there wasn't any mention of open-market debenture repurchases, was there? (They wouldn't need to announce intent for such as they would a share repurchase, would they?)

SD: If only the market is so linear ... ;-) I believe there were a number of sell orders at $1.04 as of yesterday that would need to get chewed through first.

Canfor's (record) results: http://www.streetinsider.com/Press+Releases/Canfor+Pulp+Income+Fund+Announces+Record+Second+Quarter+2010+Results/5824783.html

And Fibrek will report August 4th ... http://www.digitaljournal.com/pr/78741

Canfor Pulp is supposed to report today (or early tomorrow) http://www.canforpulp.com/_resources/news/2010/N100616_CPIF_MEDIA_ADVISORY_Q2.pdf

FFHWatcher/Dazel/SD et al: My $.01 worth ... I have a significant position in FBK (not sure totally that is good or bad, but that's the market for you!) ... and take similar view as FFHWatcher, that with exception of activity relating to the rights offering, the volatility in this stock (both down AND up) is mostly based on very small volume relative to the capitalization ... that they are much better shape now than they were in February, when the stock finally got back up to $1/share on a sustained basis (first time since the Q4/08 meltdown) ... and that increased FFH ownership will only have positive influence on mgmt, and benefit to all shareholders ... in the long term. Of course stuff might happen sooner ... but that'd be a bonus. My one yellow flag is consistent lack of mgmt buying ... if even nominal ... as that doesn't point to an owner/operator mentality, even as I think they've been doing a good job in a very difficult set of circumstances.

Cardboard, Sharper, etc: With the final prospectus now out, can you clarify your understanding of some details of the rights offering. I get the main points ... if I was beneficial owner of 100,000 shares on June 18th, then I would have right to purchase another 43773 shares (=100000/2.2845) at $1.01 ... and these rights will trade (somewhat more easily for Canadians?) until July 15th. That said ... What if I want to buy more? There is an "Additional Subscription Privilege" which is available if you subscribe in full to your "Basic Subscription Privilege", but I'm not sure how it all works. Here's the language: Each holder of Rights who has initially subscribed for all of the Common Shares to which he or she is entitled pursuant to the Basic Subscription Privilege may apply to purchase additional Common Shares, if available, at the price equal to the Subscription Price for each additional Common Share (collectively, the "Additional Common Shares"). The number of Additional Common Shares available for all additional subscriptions will be the difference, if any, between the total number of Common Shares issuable upon exercise of Rights and the total number of Common Shares subscribed and paid for pursuant to the Basic Subscription Privilege at the Expiration Date (the "Additional Subscription Privilege"). Application for Additional Common Shares will be received subject to allotment only and the number of Additional Common Shares, if any, which may be allotted to each applicant will be equal to the lesser of: (a) the number of Additional Common Shares which that applicant has subscribed for under the Additional Subscription Privilege; and (b) the product (disregarding fractions) obtained by multiplying the number of Additional Common Shares by a fraction, the numerator of which is the number of Rights exercised by that applicant under the Basic Subscription Privilege and the denominator of which is the aggregate number of Rights exercised under the Basic Subscription Privilege by holders of Rights that have subscribed for Additional Common Shares pursuant to the Additional Subscription Privilege. If any holder of Rights has subscribed for fewer Additional Common Shares than such holder's pro rata allotment of Additional Common Shares, the excess Additional Common Shares will be allotted in a similar manner among the holders who were allotted fewer Additional Common Shares than they subscribed for. To apply for Additional Common Shares under the Additional Subscription Privilege, holders of Rights must forward their request to a CDS Participant prior to the Expiration Time. Payment for Additional Common Shares, in the same manner as for the Basic Subscription Privilege, must accompany the request when it is delivered to the CDS Participant. Subscribers should contact their particular CDS Participant for complete details on how to exercise the Additional Subscription Privilege. Any excess funds will be returned by mail, or credited to a subscriber's account with its CDS Participant, without interest or deduction. Payment of such price must be received by the CDS Participant prior to the Expiration Time, failing which the subscriber's entitlement to such Common Shares shall terminate. So: - What if I sell some of my rights, and subscribe in full to the rest? Am I still eligible? (I think the answer is NO?) - What if I buy some rights from others? Am I eligible to buy into the extra? (I think the answer is NO?) - What constitutes beneficial ownership? If you subscribe in full to some in a registered account, but not to others that are in a cash account, and/or there are others that are in a spouse's account ... or are shares in different accounts treated wholly independently? (I think each will be treated separately?) - Then, if you do want to buy more ... how many more can you buy? (I think it's the lesser of as many as you ask for, or your pro-rata amount of those available, based on your pro-rata subscription to the basic shares that were subscribed.) Any thoughts?

Looks like the preliminary prospectus is being filed. http://www.digitaljournal.com/pr/44572

My questions are these: - It's great that they've been able to refinance, but besides the amounts and terms, what are the other details on the refinancing? Better rates? Better covenants? - Presuming the rights offering goes ahead (at whatever price), will FFH subscribe at their pro-rata 20% shareholdings, or simply backstop and see if rest of the shareholders pony up first? The way it sounds, FFH could simply pass on the main offering, and even if all other shareholders picked up their pro-rata portion, FFH would still be able to pick up their own pro-rata portion after the fact, but at a discount ... what's with that??? - And if this is a piece of a larger puzzle, what might they know/suspect given their position and discussions with SFK that other shareholders might not (e.g. other plans , info r.e. Q2 earnings, etc?). Or maybe this announcement had to be made to provide full disclosure to other shareholders in context of some other such discussions?? Without clarity on this, and with anticipation of having to hold cash in anticipation of such offering, some existing shareholders who's been continuing to accumulate would freeze in the interim, no? (There goes one source of buyers in the near term, and a potential source of sellers.) And some prospective shareholders would conceivably wait until further details are announced, no? I don't totally get it ... on one hand it sounds like "Hey everyone, FFH is a great shareholder and has our back ... just wait for some more details, this is a good news story" ... but on the other it could be construed as "Hey everyone, we're so hard up for $40M that we need to pre-announce an offering and give just one of our shareholders - we didn't even bother reaching out to any of the others - a sweet deal to try and sell it."

Sharper: Welcome back! I figured there was a reason we hadn't heard from you. As always, looking forward to your review.

Q4 #'s are out ... http://www.sfk.ca/EN/docs/CPDistr/2010/2010_0224%20Q4%202009_FINAL.pdf Thought they would be stronger ... looks like RBK is acting as bit of a counter-balance?

This should add grist to the mill ... NBSK price increases for February (as Canfor alluded to in their earnings report) starting to show through http://www.paperage.com/foex/pulp.html

Canfor's results are out for Q4/09 http://www.marketwatch.com/story/canfor-pulp-income-fund-announces-fourth-quarter-2009-results-and-monthly-distribution-2010-02-05?newsid=984322726&dist=bigchartssymb%3DCFXUN&sid=2365021 Should bode well for SFK's results.

The Globe and Mail's screener has worked for me ... http://www.globeinvestor.com/v5/content/filters

T-bone1: Am curious ... where did you source this info? Is it available from some source on the web? I usually check the industry averages posted at: http://www.paperage.com/foex/pulp.html

Speaking of Vancouver real estate ... Google just launched "street views" for a number of Canadian cities ... Vancouver included ... cool stuff!