StubbleJumper

They started doing that after the market went wacky two years ago during the initial COVID panic. It was helpful at the time because we knew that they were getting hammered by Mark to market losses, some of the subs (recipe among others) were basically shut down, significant COVID insurance claims were rumoured and access to credit markets was dubious. A mid quarter release provided shareholders with the necessary clarity that they had little exposure to BI claims in North America, they had addressed liquidity by completely drawing the revolver before the bank could invent a reason to pull it, and to quantify the equity market shit-show. I have no idea why they made a similar release last year, or why they would do so this year. Just release the quarterly results when they are ready unless there's a compelling need to provide urgent disclosure to shareholders. SJ

Yeah. Not too sure why Prem keeps saying that's. C&F has been visibly capital constrained for two or three years now. ORH, on the other hand, hasn't had any problem. SJ

Ok. One dollar of capital allows NB or C&F to write about $1.60 or $1.70 of premium. At a 94 CR that generates about 10 cents of UW profit, and then hopefully they make another 8 cents by investing the premiums. So, if they make 18 cents on that $1 of capital, ignoring taxes and the return on investing the original dollar, how much more business can they write the following year? About 28 or 30 cents more (ie 1.6x or 1.7x incremental capital). That would be growing the book by about 17 or 18 pct. But, in 2021, the book grew *faster* than that. Need to inject a bit of capital if you want 20+ pct growth! The subs will gush cash when growth slows and capital will be in surplus. SJ

This afternoon, BB is trading at US$5.98, which is below the conversion price on the convertible debentures that FFH holds. It's looking more and more like a missed opportunity. SJ

Sharper, if you are going to use Canadian gallons, you should be clear about it. Better to use the US gallon if you want people to understand. SJ

Yep. And as long as that cash payment from the counterparty from Q4 hasn't been spent already, it's no big deal. But, it's a set up where if things go well for FFH, they go extra well because of the TRS. But if they go poorly, they go extra poorly... SJ

That's to say nothing of the TRS. FFHs share price is down $50 over the past few weeks. What is 2m x $50? SJ

Really, what it amounts to is expensive debt. If FFH were in a stronger financial position, the approach would be to float $1b of notes at 4ish percent. But it is what it is. Instead they must revert to opaque deals with 9 percent coupons. As I've said, as long as the destination of the proceeds meets a 12 or 15 percent hurdle, you can plug your nose and "borrow" at 9 percent. Thankfully @cigarbutt is willing to dig through the more obscure filings so that we get a bit of clarity on these deals. And thankfully this most recent pair of deals was used for a purpose that appears to be a slam dunk. My hope is that the improved earnings capacity results in a stronger financial position in a few years and then perhaps FFH can revert to more traditional financing arrangements at a lower cost. SJ

As I said, it has the characteristics of non-recourse debt because technically you don't have to repay it. But, failing to repay it also has a similar consequence of skipping out on non-recourse debt. If you don't repay your non-recourse debt, you'll never again find a lender to provide credit under those terms. And, if there actually is a gentlemen's agreement that the Brit and Odyssey positions will be repurchased by a particular date, it's the same problem -- if you don't respect that gentlemen's agreement, you'll never again find a partner for that OMERS kind of transaction. In the end, why do we even care about the level of debt and "quasi-debt?" I propose that the reason why we should care is that there are four basic things that you can do with your FCF: pay divvies, buy back common shares, make new capital investment and repay debt. And, make no mistake. The need to "repurchase" the Brit and Odyssey positions basically ear-marks $1.275B+ of near-term FCF that cannot be used for the first three purposes. Now, this is not the end of the world. But, when a company reduces its debt levels, the theory goes that it provides additional room to maneuver in allocating future FCF. That did not really occur at FFH in 2021, despite an apparent debt reduction of ~$500m. I promised that I would not belabour the point, and I swiftly broke my promise. Sorry everyone. It's one of my many character faults. SJ

Down to 0.7x BV this morning. It's getting silly again. If it drops much more, Prem might have to start digging through the cushions on his sofa to see whether he personally can find another US$150m like he did 18 months ago... SJ

Yeah, 150m people could also have physical Euros/dollars/gold stored under their mattress and that would be even easier. SJ

Yep. Now if you want to use your foreign domiciled assets, you actually need to leave Russia. SJ

If someone from FFH even phones OMERS' general 1-800 number and offers 9% on $500m, you can bet that the call will be returned. It's not dependent on a single relationship. SJ

The preferred coupon for the Brit sale of 2021 is 10%? Oy vey. I had hoped that the days of 9% were over, but that hope was anchored in the notion that the coupon would be *less* than 9% rather than more. SJ

No argument with any of that. My point is simply to look at the financials with a critical eye. We should not celebrate that debt has notionally decreased by ~$500m because we know very well that it was backfilled with quasi-debt. I don't have a big problem with that as long as the funds from the issuance of quasi-debt were used for value-accretive purposes, and in 2021, that definitely seems to be the case (ie, to buy back shares at 0.8x BV and perhaps 0.66x IV). But, look beyond the financial statement numbers and don't give management credit for something which they've not done, even if they do deserve credit for all of the great things that they *did* do during 2021. I have a similar recurring caution about the paper gains that FFH triggers and reports from time to time. If operations in a year have been great, then say that operations in the year have been great. But, if a large EPS number is reported and half is the result of paper gains, then don't say that management had a great year. The paper gains reflect good work in the previous 4 or 5 years, and that is to the credit of management. But, for the question of, "What have you done for me lately?" paper gains are cold comfort. So you will often see a quality of earnings caution from me because the financials don't always tell the entire truth. I don't want to come off as negative about 2021 or about the sale of Odyssey to repurchase shares. The year was excellent and the repurchase of shares financed by quasi-debt is almost certainly a good thing for shareholders. But, let's not deceive ourselves about what's been done and what hasn't been done during the year. SJ

No, you are correct. Riverstone is gone forever. I meant to say Brit and Odyssey were the mechanisms to "borrow" money without having additional debt appear on the balance sheet. We know that those will almost certainly be repurchased in a few years, and we are guessing that OMERS/CPP will get their traditional 9% return on the deal! Anyway, I don't want to belabour the point, but it's about $1.275 billion of cash that they received during 2022 and if the intention from the outset is to repay buy it back with interest at a premium that provides a 9% return, then I consider it to be "quasi-debt" that should be mentally tacked onto the official debt number that appears on the balance sheet. SJ

Viking, I'm not particularly offended. It seems to me that Greg is suffering from the Fox News effect, where relatively minor things are exaggerated and blown out of proportion. The asset freezing scandal is a prime example. Last month, assets for a grand total of four people were frozen in a country of 38 million. And, as it happens, three out of four of those people are currently in prison pending trial on criminal charges related to the freezing of their assets, while the fourth person is out on bail while he awaits his court date. Christ, since September 2001 at the request of the United States, we've been routinely freezing assets of people suspected of being engaged in terrorist groups. Investigations are conducted and either the assets are released or the guy faces criminal charges for terrorism. And we also do it with organized crime when criminal charges are pending. It's pretty routine stuff. But, the Fox News version is that we are a totalitarian state. Whatever. And the news that a single restaurant has nixed the word "poutine" in a country of 38 million? It's not fake news, but it sure is focusing on the obscure. SJ

Did you know that those funds and the bitcoin wallets are still frozen? Yep, and it's not the executive branch of government this time, it's the courts. The funds and crypto are frozen pending the outcome of a class action lawsuit on behalf of the citizens of Ottawa against the participants of the three week occupation of Ottawa and the donors who funded it. Last time I read, the lawsuit was for CAD$300m+. I doubt they'll get a judgement of that magnitude, but certainly double-digits wouldn't surprise me. Those donated funds will likely be tied up for years before they are either released following an unsuccessful lawsuit, or used to satisfy part of the ultimate award. I would not want to be one of the John Doe's named on that lawsuit because the Province of Ontario employs the legal doctrine of joint and several responsibility. Somebody who is found to be 0.1% responsible for the damages to the citizens of Ottawa would be on the hook for any shortfall if the other parties are unable to pay their share of the ultimate award. Most of the John Doe's won't have a pot to piss in, so it could be bad news for the few who have meaningful assets. SJ

The balance sheet is definitely more attractive, but it's not because debt has been reduced, but rather because the asset side has improved dramatically. The main debt ratios are dramatically better than they were in September 2020. But, let us not deceive ourselves about the company's level of debt. On paper, total borrowings are down ~$500m between 2020 and 2021. However, this has been effectively back-filled by borrowing money against selling a portion of Odyssey in 2021 and Riverstone in 2020. Everyone is entitled to their opinion of those transactions, but I hold the view that they are effectively a form of non-recourse debt which likely carries a high single-digit interest rate (er, I mean dividend). It has the characteristic of non-recourse debt because it technically doesn't have to be repaid, but I don't think that anyone in this forum has any doubt that FFH's intention is to reverse those transactions over the coming years by repaying buying back the positions that OMERS/CPP currently hold. It doesn't appear on the balance sheet as debt, but let us not deceive ourselves. If it looks like a duck, swims like a duck and quacks like a duck, it's probably a duck. Absolute debt levels and "quasi-debt" levels aside, the earnings capacity is cause for optimism. Short of another acquisition spree or further debt-financed share buybacks, it appears as if those debt ratios will be headed lower for the next few years, which is definitely good to see. SJ

Those "dumb fuck" Canadians are French Canadians. And, in French, the correct pronunciation of the food "poutine" and the person "Putin" are identical. The dish is not banned, but rather one restaurant in Drummondville has elected to change the name of the dish at least temporarily. SJ

Isn't the letter to be released tomorrow? I haven't actually checked, but usually it's Berkie one Saturday and then FFH the next. SJ

Check out @Viking's spreadsheet. He has the ownership at 44%. You'd have to do a bit of school-boy arithmetic to calculate today's value. SJ

I hope that FFH is making use of its NCIB these days. The price is currently US$461, which is a considerable improvement over what they paid for the SIB. You don't get much volume from the NCIB, but it would be nice if they could even get 100k discounted shares during March. SJ

And that's also why crypto doesn't work at all if you seriously hope to protect yourself from hypothetical government overreach. You cannot spend crypto at the supermarket, you cannot use it to pay your phone bill and you can't use it to fill your tank with gas because it is not accepted anywhere. To spend your crypto, you must first convert it to actual currency, and that is exactly how the Canadian government was able to freeze those assets. You are far better off to have a foreign domiciled account as that remains out of reach of your domestic government and then you can actually use your foreign bank card or credit card to buy the things you need. SJ

If you lived in Russia for any length of time, you would know that stability of constitutional government and predictable valuation of the currency was, at best doubtful. Owning *anything* other than just roubles wouldn't be the worst thing in the world. Euros, dollars, physical gold stored under your mattress would look pretty good about now. SJ