petec

Atlas has just renegotiated the $600m of Fairfax debt into $300m of debt and $300m of prefs The debt remains at 5.5% and matures in 2025 and 2026. Fairfax's mandatory redemption and put rights are eliminated and, as I read it, removes any collateral requirements. The prefs are at 7% for 5 years and then rise 1.5% a year until they reach 11.5%. The deal also comes with 1m warrants for Fairfax exercisable at $13.71. I think the rate on the prefs is an interesting insight into the Fairfax team's thinking on inflation. I also guess that Atlas expects to be able to repay those prefs before the rate steps up, using the cash from their newbuild deliveries.

Hopefully the price they pay to repo shares from CVC is reduced by dividends paid.

How certain are we about this? Bloomberg still says 30.55 million.

Separately, Quess stock is regaining its mojo.

Interesting! https://www.wsj.com/articles/berkshire-hathaway-to-buy-500-million-stake-in-brazils-nubank-11623153600

Ha! I can only apologize for the disaster about to befall us both. Should’ve bought GOOG

Exactly. I want to be able to vent my frustrations, but I don’t want them to listen to me!

Out of interest, why not just do this yourself? Part of the reason I own Fairfax is they generate ideas that I probably wouldn't (and have access to private opportunities that I don't). I'd be livid if they bought "obvious" megacaps like Alphabet and just sat there sucking their thumbs, unless they carefully articulated (not their strength) a divergent view. Separately, as I have argued elsewhere, we need to be careful about lazily assuming that Stelco and RFP should be sold just because their stocks have gone up. I don't follow Resolute closely, but there is a decent chance that Stelco will generate so much free cash flow over the next 12 months that its enterprise value will actually have gone down over the last few months. If so, it would be quite reasonable to hold on, so long as you think the cash will be allocated effectively (management has a record of special dividends).

My solution is to own all three!

Yeah, fair enough. I took (perhaps too much) exception with the implication in your earlier post that the kids of reddit run ups we have seen in BB has any real meaning when it comes to investment decisions. But these points are broader and fairer. The one point I would make in reply is that you’re assuming you know which investments Fairfax like and which they don’t. Rightly or wrongly, they may well see value in the “relics”. I find it interesting that they didn’t sell a single share (to my knowledge) of RFP in 2018. Perhaps they couldn’t sell the whole thing, but they could easily have chipped away at it. I think they held for a reason. My guess is their playbook puts a lot of emphasis on averaging down and then exiting via a strategic move. It just hasn’t worked well with these names.

Dazel, how realistic is it to split up BB? I'm not an expert on it but my understanding was that all the different revenue streams are built on the same tech, namely QNX and the ability to securely manage endpoints. If so, I don't see how it can be split.

I agree with you regarding boneheaded decisions and lack of exit strategies. But at no point did Prem say that doing nothing was the right move. Later, at the AGM and on the 1q call, he explicitly said that they looked at whether they could sell and they could not. In hindsight it is astonishing to think that what looked like a reasonable deal at the time (repricing the converts to $6) tied their hands when they could have made a windfall profit. But that is what happened. Prem can be justly criticised on many fronts. There's no need to criticise him for things he didn't say.

Leaving aside the fact that the size and liquidity of the position had nothing to do with Prem's inability to sell it last time, are you seriously suggesting that he should size positions on the off chance that they might get gripped by a short term mania and he might want to exit fast? If so, I am not sure you understand how he thinks, and I suspect you shouldn't own Fairfax stock! For my part, I hope he goes large in great opportunities and makes a lot of money.

In hindsight, that's more or less been my entire investment thesis for FFH for several years

I'm not sure it's rational to differentiate between the common and the converts at this point. I'd view it as one equity position and expect them to sell the entire position at the right price. But my guess is they won't get the chance, in which case the only way to benefit is by having BB issue shares into the rally (while warning everyone not to buy them like AMC!).

It might be time for me to concede defeat in my long-running debate with SJ about whether Prem being a director would be an issue in offloading Fairfax’s shares. I always assumed the company would be sold or that the share price would be moderately stable at around the exit price!

You couldn’t make this up

Mine too! I’m just saying, he could be desperate at $20 and not at $11 so let’s not get our hopes up!

Oh come on. The prices are totally different. You can’t infer anything from that comment about how he feels at these levels.

+1, and I would add that there might be a good chunk more revenue backlog added as Seaspan contracts its small/short term ships onto 3-5y contracts at current levels. This was discussed on the last call and gives them the opportunity to raise finance against these new contracts to finance the newbuilds.

3.3bn EV. Highest est on the street $900m ebitda in peak year. Highest est FCF $430m vs 1.3bn market cap. Both estimates *way* above where reasonable long term estimates lie. Pulp and lumber prices already seem to have rolled over unless I’m looking at the wrong things. Can’t say it excites me. Parsad, what makes you confident they can sell, and in particular time the sale well, given the liquidity issue?

I am not nearly smart enough to know whether this will work out but it's a cool idea with serious long term potential: https://www.heliosinvestment.com/uploads/files/HFP-NBA-Forms-New-Africa-Entity-and-Partners-with-Strategic-Investors-May-24-2021.pdf News reports suggest various investors including HFP have taken an 8% stake at a $1bn valuation.

$100m investment into Foran Mining alongside Pierre Lassonde: fom_nr_-_fairfax_strategic_investment_-_final_may_25-_2021.pdf (foranmining.com)

Possible, but more likely it’s a TRS. Remember they offer the total return, so dividends count. Prem is a somewhat vague communicator in my view, but usually doesn’t get things outright wrong, and I suspect they’d have had to issue a clarifying statement if he’d done that. Plus specifying the yield to a decimal point suggests knowledge of the stockS

Or they used TRS’s?