SafetyinNumbers

Are you or anyone else aware if they would have to disclose in this filing if they also had a position in the preferred shares?

The up valuation of CNSX at Urbana, ECS and DPM have stopped going down for now at least and bounced a little. Also, your comment implies when the common were in freefall to $1.09, it was for good reasons and the bounce is not justified.

There has been a decent amount of news on the holdings, it’s just not coming directly from the company.

If they issue 40m shares, the stock will definitely go a lot lower so that negotiating leverage still exists.

Any thoughts on a paired trade--long E and short Common? Right now the E is trading at par with the Common assuming conversion. This seems to assume there is zero chance of the E getting paid cash--even partially. And in Jim's "haircut" scenario the haircut would have to do less damage than a conversion or why would the E's vote in favour? The only risk I can see is that the company comes into some good luck with asset sales and maybe strong results from Delonex and the Common soars. At the same time the company has enough new liquidity to pay the E in cash. E's would get $25, but the loss on the short side of the trade would be much higher. I think the risk would be that in an extension scenario that is a haircut as suggested, the common could rally as it would avoid dilution in the near term at least and the upside on the DC.PR.E would be limited.

The proposal to offer a discounted extended security to replace the DC.PR.E is a new one that was mentioned on this board before. Obviously any discount would be accretive to NAV and improve the liquidity position which would support the valuation of the DC.PR.B and DC.PR.D.

Well it’s a few more years of dividend payments and perhaps a chance at par again. A potential loss later versus a certain loss now, I suppose.

I don't think they will wait until next summer. Last time, the E's were heading towards their June redemption date, they pulled the trigger in November. The timing will probably be similar this time. I also think the stock would have to be well above $2 for the E shareholders to be ok with the outcome of getting all stock as trying to sell ~40m shares, isn't easy.

I think they are going to use the conversion option as leverage on the DC.PR.E holders to extend their retraction feature again while keeping the coupon. Maybe they will even throw in a warrant again. Basically, if preferred holders don't agree to terms, they will use their option to pay with shares which will materially hurt the preferred holders. If they agree to extend, they have a shot at getting their cash back in a few years and earning a reasonable return while they wait. Dundee gets the benefit of having access to that capital for a few more years and does not dilute shareholders much. It's a win-win versus paying all cash or diluting shareholders.

I agree, it's about preserving the option value of the equity especially versus the current share price which shows little to no optimism! FWIW, I keep buying the DC.PR.B/D as it drops. At the AGM, John Goodman, also mentioned that he was interested in buying more common and preferred. Not sure why we haven't seen any insider buying unless they think they are restricted. Anyone buying the DC.PR.E, yet? The YTM is looking very good at these levels if you believe they will be cash settled.

"Moreover, investors have time on their side. Dundee effectively has permanent capital given a combination of perpetual preferred securities and one preferred series that can be paid off in common stock." How much lower would the stock go if they decided to pay off the DC.PR.E with common? I would bet the other pref classes would trade off too despite their credit improving. It's an interesting situation for the company. They could come back to preferred holders asking for another extension or threaten to pay in common which would be a big haircut from $25.

If the market was really worried about that, you would think the DC.PR.E would be a lot lower since those are puttable in June and the conversion would be set at $2. That is, 12.5 shares at $1.37 is ~$17.13 vs the current quote of $23.12.

It would be nice if the family started buying stock too. Jonathan indicated that he wants to buy common and preferred but I’m really not sure what’s giving him pause. Perhaps, conversion of the DC.PR.E’s to common is a possibility and the common would get hit in that scenario so maybe he wants to save his firepower or perhaps they consider themselves restricted while they are sorting out the balance sheet.

I wasn't sure of the answer so I asked my CFA tutor, who seemed to think that the preference shares would likely just be converted to common at maturity. So no bankruptcy fears. With the stock at $1.50, that means the DC.PR.E would be worth $18.75 in that scenario and with that class trading ~C$24, it shows very little concern on the part of those preferred holders. In addition, if they did issue ~41m shares to pay for those preferred, the stock would likely be under significant pressure which would take the stock even lower meaning $18.75 is generous.

They used to but now at a small premium but maybe because they yield so much (not sure when deal is expected to close). I have heard some chatter that a deal break is possible after Ford fires the CEO and the BOD resigned, in which case you will get $33.3 back vs the $24.50 quote but I’m not sure of the technical aspect.

Wouldn’t they just pay with common priced at $2 in that scenario? Lots of new shares issued but cash is saved and no default.

Also, the DC.PR.E, don’t “mature”. It’s just that holders are allowed to force the company to buy them back. If history is any guide, not every holder will do so. I think in a case where the preferred has matured it needs to be paid off or extended by a vote. Otherwise the company would be taken into bankruptcy.

I added some EFR.DB. In the last month (June 4), the common (EFR) is up 22%, the warrants (EFR.WT) are up 33% and the convertible bonds (EFR.DB) are basically flat. Has the bond's value diminished so much in the past month or is the conversion option underpriced. I'm betting on the latter.

I added a little more PPR.TO. I’m not sure how sustainable these oil prices are but I’m calculating about $0.12 in cash flow for Q3 (before the impact of FX and hedges). Annualized, that’s about $0.48 vs the current share price of $0.36. They have been guiding to end the year with debt of around $0.50 but that should be lower if these prices persist. Is that cheap enough for anyone to care? That part is not clear!

There is an assumption that these DC.PR.E will all be put next June but it’s unlikely to happen. These same preferred holders have had chances to put their preferred twice already and have undersubscribed to that option each time. These will probably end up trading DRM.PR.A, slightly above par as everyone who wants to put does and everyone else sits and does nothing.

The only thing they have said publicly about the problems in Nicaragua were at the AGM as far as I know. It’s a sensible strategy as no one knows who is going to end up being in charge in the long run. Management indicated they are unaware of any power assets that have been nationalized and they do not expect this to happen. Unlike other resources, like gold and oil where stuff is taken out of the ground and sold outside of the country, all of PIF’s power is sold in country and mostly to retail buyers. If anything, the political changes indicate a push to more centre right policies from leftist policies which may end up being constructive for the country. They are obviously biased but I think their conclusions follow logically from the fact set that we can see looking in. The CEO said he would buy stock if he wasn’t restricted and I believe him.

wow. How did this company go from $500/share to a microcap in five years? Issued a bunch of debt and then struggled starting up operations. The debt had to be restructured and they issued equity for the convertible debentures followed by a share consolidation.

Added some PIF.TO today. The stock has recently been weak based on unrest in Nicaragua. There are a multitude of reasons why there is unlikely to be a nationalization or impairment of the asset but uncertainty often provides opportunity. Ironically, the company's financial and operating performance is currently the best it's ever been and the stock is trading around 4.3x EV/EBITDA 2019E EBITDA. which is pretty low for a renewable asset with a PPA. Every multiple point increase is worth about C$5/share. I attended the AGM today and management seems to be considering all of their options for their extra cash, including a NCIB/SIB and investing in projects outside of Nicaragua (this is something they have talked about for years so it's not a reaction to the events in Nicaragua). They also maintained that they will keep a 40-50% payout ratio and move towards a US$1.00 dividend from US$0.60 currently within the next 12-18 months which is about a 10% yield at the current share price/exchange rates. They are reporting earnings in the second week of August so expect updates on all of these initiatives at that point.

Probably the guy who asked about the share buyback.

Agreed on Delonex. Apparently they expect a well to be drilled this calendar year, so a reasonably near term potential catalyst. Do you mind sharing his response to being pushed on the prefs? I understand the company not buying back the common at this point. I don't understand insiders staying out of the market -- not even a nibble -- and I really don't understand why the company doesn't at least make an attempt at taking out some of those prefs. Instead, they're talking about building out a merchant banking business. Do they seriously think they can outlay capital in any manner that competes with the risk-free return they'd get from buying the prefs? Of course there's very likely not enough liquidity for them to buy much anyway, and I don't know the costs of maintaining a buyback program. Maybe those are big factors. But my guess is that they overestimate their ability as investors/businessmen and are simply being irrational. The pushback was mainly that capital is finite and that they need the liquidity for paying off the DC.PR.E (which by the way shows no fear like the rest of the capital structure does) and running the business. I think they are just afraid of spending the capital on enhancing shareholder value in the short term and then having to do something dilutive later on. He did say that he is considering buying some common and preferred personally but didn’t say what he was waiting for.