lessthaniv
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Posts posted by lessthaniv
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Agreed, but then again they gave Michael Milken a lifetime ban ... Does anyone actually believe he is not involved in the markets?
:P
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Yes, the trading was odd. Perhaps a margin call. That was not a small trade.
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What did I miss?
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Patrick had a big win with the California Supreme Court recently upholding the decision the make their market rigging court case discovery documents public. Goldman and Merrill can't be too happy I'd imagine.
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So market conditions are improving, but Yellen is unwilling to provide any concentrate time frame for raising rates. It seems a little weird. Mostly everyone thinks rates will increase sometime this year, but will they? I think when interest rates do rise, it won't be the Feds that will do the deciding, rather the market.
It's just annoying how every month for the past several years it's been the same. "We'll raise rates, but when things improve. Things are improving, but we'll wait a little longer."
What are they so afraid of?
Perhaps the Japanese experience as discussed by Richard Koo?
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Leon Frazer & Associates has been managing Canadian Equity since 1950 in a similar fashion. They are around 9.2% since inception in their mutual fund. (dividend grower model). Probably slightly better net returns on institutional money.
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I'm not really sure.
I do know the logistics aren't ideal in getting it to Asia at the moment and I believe that may be why it wasn't taken out when others were. Although, with Chinese steel companies moving more towards coastal areas the long term implications are positive for imports once the oversupply/overcapacity situation is resolved. That may be a while.
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FWIW, these assets supported $600M market cap in early 2011
During that period of time, Asian companies were targeting domestic Met Coal companies. (Fording, Western Coal Corp, Grande Cache etc...) There was a quite a bit of talk at the time that Cline was next on the list and the premiums being paid were quite large. I believe part of the increase in Cline was based on comps but I'm not sure we'll see that type of market again any time soon.
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About 70% of that is owned in the funds and the balance would be direct ownership.
Great summary. Where did you get the relative split of Cline bonds among funds and Marret direct ownership?
I look at cline as an out the money call option on met coal. I believe Marret said that there is enough cash in Cline to carry at least another year of expenses.
FWIW, these assets supported $600M market cap in early 2011
http://cfcanada.fticonsulting.com/cline/docs/Applicants'%20Factum.pdf
Item 6:
Specifically, certain of the Secured Noteholders are regulated investment funds that are
restricted from holding certain types of debt and equity instruments under applicable
securities laws. These restrictions affect the ability of these Secured Noteholders to hold
the new debt and equity allocated to them under the existing terms of the Plan. The
Secured Noteholders originally wished to receive the new debt and equity in the form set
out in the Plan to minimize their administration costs following Plan implementation.
The preferred alternative of Marret Asset Management Inc. (“Marret”), which exercises
management discretion and control over all of the Secured Noteholders, was to obtain an
exemption from the applicable regulatory restrictions from the Ontario Securities
Commission (the “OSC”) prior to Plan implementation. Marret sought that exemptive
relief from the OSC; however the OSC did not ultimately grant the requested relief.
Item 12:
The Plan, as approved pursuant to the Plan Sanction Order, provides that each Secured
Noteholder will receive its pro rata share of the New Cline Common Shares and New
Secured Debt. Approximately 70 percent of the Secured Noteholders are regulated
investment funds that are subject to regulatory restrictions with respect to the nature of
the debt and equity instruments that they can hold. The OSC has informed Marret that it
is not prepared to grant the exemptive relief requested by Marret with respect to such
regulatory restrictions. Without such exemptive relief, Marret’s regulated investment
funds are unable to hold the consideration to be received by Secured Noteholders
pursuant to the existing terms of the Plan.
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Yes, I've been making my way through the filings too. They've had to make some adjustments to account for the OSC not giving them an exemption to hold non-qualified investments (received upon implementation) in the investment funds. The ammended plan seems to account for this with no economic change to the outcome. At the same time they are trying to extend the stay period to Aug 17th to give them time to organize everything. Given all stakeholder are in agreement, I anticipate this all to be approved.
Based on the Feb 28 filing, note 11: Outstanding bond values = $110,173,897. For purposes of the claim this sum is divided into two catagories; the secured noteholders allowable portion = $92,673,987 and the balance of $17,500,000 is the secured noteholders allowable unsecured claim.
The $92,673,987 gets settled with a $55M secured, first charge note of 7 years bearing essentially no interest + the common equity of Cline.
The $17,500,000 gest settled with a prorated portion to a claim of $225,000 in eight years. Essentially negligible.
Therefore, the existing $110M in secured bonds becomes $55M ($.50 on the dollar) + (an equity kicker that will have modest initial value) + (a relatively meaningless sum from the unsecured claim.) Cline has a current shareholder equity deficiency of $37M. The reduction in secured notes should wipe that deficiency clean and offer modest equity value.
So, post implementation of the plan, holders of the secured notes recieve about $.50 on the dollar plus some equity. Since Cline owns 100% of the secured notes they will own 100% of the equity going forward. About 70% of that is owned in the funds and the balance would be direct ownership. They will be steering the ship. The last update that Marret gave (end of Oct 2013) suggested the Cline bonds were then being carried just below par value. If we reduce that by half and place $0 value on the balance ... then the Cline assets still seem to carry value around $.40/unit MHY.un.
With a turn in the cycle, the equity could be worth much more.
Further to this, the fund is expected to distribute any excess capital back to unitholders. With the settlement of the MOB assets, we should get a distribution representing the better part of the existing stock value and be left with little to no capital involved on awaiting the outcomes with Cline.
Thoughts, Sculpin?
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As at March 31/15:
81.5% Cline = $29,334,539
18.5% Mob = $6,658,761
Units: 36,729,002
NAV = $.98/unit
As of today:
NAV adjustment to $1.44/unit
Assume no change to Cline
Mob Value = $.64/unit
Cline Value = $.80/unit
So, we are trading at a slight discount to Mob Value and the Cline Assets are free. Any opinions on the realizable value of Cline?
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Also sent a note requesting a press release to clarify NAV. Response today;
Marret’s goal is to have a press release issued as soon as possible, which will hopefully happen by today or Monday.
If you have any further questions or concerns, please do not hesitate to contact me directly via return e mail or at the number below.
Philip Oram| Financial Service Specialist | Marret Asset Management Inc., an affiliate of CI Investments Inc.
416-214-5800 ext. 7138 | Fax: 647-439-6471
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Great call on this one, Sculpin. I sucked my thumb for too long but still managed a reasonable entry as compared to IV.
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Interesting article on Patrick Byrne issuing a private bond using the blockchain technology.
http://www.wired.com/2015/06/overstock-will-issue-private-bond-powered-bitcoin-tech/
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I'm not quite sure that I understand why 41.8% control represents a problem for Prem. By my arithmetic, any group wishing to oppose Prem through a proxy fight or some other means would require 50/58.2 of the non-Watsa votes. Basically, you'd need 86% of the non-Watsa shareholders lined up against Prem to out-vote him.
Frankly, if somebody is able to secure 86% of the non-Watsa votes on a particular corporate governance issue, then Prem should step back and ask himself what the hell he's doing wrong to have so many of his partners lined up against him....
SJ
X2
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Any side bets on an upcoming Resolute offer? Restructuring Capital Associates is a Resolute shareholder too.
Between RCA, FFH and Steelhead I believe they have control now.
Is the James D. Bennett of RCA the Sandridge guy?
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Steelhead owned about 12.5% as of the last report I can see.
::)
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Fairfax has just bought 19.9% of Tembec....
Fibrek 2.0?
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There is a difference between what is legal and what is ethical. It is very well possible that what ffh and the other did was legal in Canada. I don't think it should be legal though, and luckily it wouldn't be legal in most developed countries.
Actually, squeeze out rules are common throughout the developed world. Canada, US, UK, Germany ...
The rules vary somewhat but the spirit of the laws are the same.
Hielko, (just to play devils advocate);
What if a company had 1M shares outstanding and a takeover occurred. 999,999 shares voted in favour of the deal and 1 shareholder decided he didn't like the terms.
What is the ethical outcome?
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Yes they went for their self interest, but what is wrong in my opinion is doing it at the expense of minority shareholders, using their special position to squeeze us.
Quebec, most respectfully, this statement shows a significant lack of understanding about Canadian Securities Law. There are in fact provisions for compulsory squeeze outs in Canadian Securities Law. The rules state clearly that under certain conditions minority shareholders can and will be forced to tender their shares .... As a minority shareholder in a company, it is incumbent upon you to know the rules of the game. If you don't and get caught, you've only yourself to blame.
Fairfax didn't write the securities legislation nor did Fairfax squeeze you out. They voted their shares in favour of the ABH deal as did most others. Because a majority of the shareholders preferred the ABH deal, ABH was able to squeeze out the remaining minority shareholders.
Therefore there is no valid reason why Fairfax should have to apologize to you for your own misunderstandings.
(not trying to fan the embers here ... just providing an honest assessment of what I see)
Ironically, if you go back and re-read the entire thread you'll see that this very topic was discussed on many occasions.
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I am not good at arguing but it is my opinion ffh was a conflicted insider. Mercer approached them with an 1.20$ offer and they said no, it's worth 1.50$. Then they turn around and hardlockup at 1.00$ with RFP where they are the largest shareholder . Why ? This Groia letter does a good job at explaining the wrongs of Fairfax, Steelhead and Resolute:
http://www.osc.gov.on.ca/documents/en/Proceedings-OTH/app_20120326_fibrek.pdf
I think that letter does an excellent job of explaining what ffh and others did wrong, and it should be illegal what they did.
That letter was written by representatives acting for Mercer. No bias there.
And, the ongoing comparisons of the nominal deal values are really misleading. These were not comparable all cash deals. They involved both cash/stock. Therefore, the intrinsic value of the paper you're receiving is an exceptionally important component to overall valuation of the deal.
In an all cash deal:
$1.40/share is better than $1/share. Here, its reasonable to directly compare.
In a cash/stock deal:
Not necessarily. It depends on the intrinsic value of the stock you're receiving. Your comfort with the new business model. Your comfort with the new management teams. Expected synergies. Tax implications. Friction costs ...... etc
The whole argument of $1.40 is better that $1 is rendered moot when this is considered.
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There is no denying the lock-up premium was beneficial, but when it was over - there was a 2nd HIGHER bid on the table, FFH was on both sides of the table, & they forced the firm into taking the related party LOWER bid. What one thought of the Mercer bid is really irrelevant; the fact is it existed, it was live, and it was the higher of the two bids
SD,
This comment is silly. You're assigning blame to the incorrect party.
A lockup agreement was well within the rights of Fairfax, Oakmont & Dala Street. If you're looking to point fingers ... then look at the inept execution of the management team at Fibrek whom failed on several fronts:
1) Operations at Fibrek and,
2) Failing to have in place any shareholder rights plan which would have prevented the hard lock-ups from being entered into.
The competing higher bid that you reference was a white night bid by Mercer that was based and dependent upon improper defensive tactics (warrants).
And, in the end the Bureau’s decision to invalidate those defensive tactics that it concluded interfered with contractual arrangements Resolute had put in place at the outset of its bid, allowed Resolute to succeed.
The higher bid you keep referencing was deemed to be illegal and properly squashed by the courts.
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Kind of extreme to call Prem's hard share lock-up agreement as Conrad Black-esque. Here was the original release, announcing a hard lock-up at a 39% premium before any news of a Mercer bid. In fact, thinking back on it, was Mercer ever really serious when it insisted on a majority tender as a stipulation to its bid? Seems like the whole bid was just noise thrown in to potentially protect a neighbor.
http://resolutefp.mediaroom.com/index.php?s=28238&item=92853
X2
Canadian Prefs
in General Discussion
Posted
January 8th,2016 RBC Interest Rate Forecast on 5 yr bonds:
http://www.rbc.com/economics/economic-reports/pdf/financial-markets/rates.pdf