Jump to content

MartinWhitman

Member
 View Profile  See their activity

  • Posts

    48

  • Joined

  • Last visited

 Content Type 

Posts posted by MartinWhitman

    Distressed debt analyst

    in General Discussion

    Posted

    Pretty obvious your security is Pfleiderer AG`s hybrid paper.

     

    In a bankruptcy, I would be surprised if there was enough value for secured creditors to be paid in full. They are trying to restructure out of court so hybrid security holders might not be wiped out completely. Company is cash flow positive if you back out capex and interest payments;-). I mean, there are 900+ mln. in bank debts and ebitda of 120 mln. minus capex of 100 mln. So even secured creditor should be way under water.

     

    Berkshire - Gen Re - Kölnische Rück

    in Berkshire Hathaway

    Posted

    148,90 EUR was the squeeze out offer price by Berkshire for the minority shares. In Germany, the AGM has to vote on the squeeze as they did with more than 95% of Berkshires votes in favor of the squeeze out. However, dissenting shareholders can go to court and file a motion against the AGM vote. This of course extends the whole squeeze out so that oftentimes there are court settlements: The majority shareholder increases the price while the dissenting minority shareholders withdraw their claim. This is why the squeeze out actually took that long (intention announced in april 2007, actually taking place in feb 2009) and thats why the price increased to 165,57 EUR.

     

    The outcome of the appraisal is very unsure, it depends on the expert opinion and his "fair" valuation of Cologne Re as well as the judge. But on average, squeeze outs resulted to an increase of 25% in german courts. It can be anything from zero to unlimited.

     

    This is all very complicated and there are specialised "investors" in Germany who are doing nothing but squeeze out situations. The beauty of this approach is of course that there is virtually no downside and you get your money back while waiting for the appraisal decision.

     

    Berkshire - Gen Re - Kölnische Rück

    in Berkshire Hathaway

    Posted

    In Germany, if you are squeezed out (majority shareholder can file for a squeeze out when owning 95%+ of the shares), minority shareholders can demand a valuation appraisal in court ("Spruchstellenverfahren"). This process can take quite a long time. However, if you voluntarily sold your stock on the stock exchange, you are not eligible. You had to wait till your shares were effectively taken from your account to get the opportunity for a higher payout. This happened in feb 2009.

     

    There are studies that courts statistically increase the squeeze out price by roughly 25% and in the Cologne Re situation I am personally hoping for more. I mean, Warren Buffett is not famous for paying full value and I hope the court will recognize it.  ;D

     

    Unfortunately I do not have any insight in the court proceedings regarding the appraisal.

    WEB bought more than 3% of Munich Re

    in Berkshire Hathaway

    Posted

    @twa

     

    Thanks for your assessment of the Munich Re options. I especially liked your back-of-the-envelope approach because that is how i prefer to do financial analysis. ;-))

     

    As regards to the exercise date Grenville mentioned: Isn`t it possible that these are simply equity swap derivatives or something? I would consider it extremely unlikely WEB would by short term calls.

     

    By the way: My nick on this message board is just purely fictional. Sorry for confusing you, twa.

    WEB bought more than 3% of Munich Re

    in Berkshire Hathaway

    Posted

    Is anybody familiar with option pricing?

     

    I bought shares (5%+ dividend yield) and a few options of Munich Re.

     

    These expire in dec 2013 and you are paying 17,- EUR for the right to buy a share of Munich for 100,- (currently around 110,-). I like options in the Munich Re case because their business (reinsurance pricing + managing the investment portfolio) is volatile so you can limit the downside somewhat. A negative in regard to the options is the high dividend payout for shareholders.

     

    But nonetheless I think the options are dead cheap. Other thoughts?

    WEB bought more than 3% of Munich Re

    in Berkshire Hathaway

    Posted

    By the way, here is a funny comment from Tilson`s notes from Berkshire`s 2003 AGM. I certainly hope Warren told Charlie about his recent purchase ;)

     

    Other Insurance Companies

     

    Munger: I certainly hope that we're better underwriters than Munich Re.

     

    Buffett: Let's not name names. Munich Re is a fine company. Our policy is that we compliment by name and criticize anonymously. They [Munich Re] lost their AAA because they were too exposed on the asset side -- they would tell you this. They have an important position and we do a lot of business with them.

     

    Some reinsurers we won't do business with. If there were a major financial or natural catastrophe, there are a number of reinsurers who wouldn't pay.

    WEB bought more than 3% of Munich Re

    in Berkshire Hathaway

    Posted

    I also think this is probably a "market play" on reinsurance.

     

    Whatsoever, Munich Re looks very cheap on the earnings side, but I would not feel confident investing in their 180+ bn. investment portfolio. Due to very low volatility in the stock, options are inexpensive and I consider buying LEAPs though.

     

     

     

     

    WEB bought more than 3% of Munich Re

    in Berkshire Hathaway

    Posted

    26 January 2010 

    Release of an announcement according to Section 21 WpHG [German Securities Trading Act]

     

    WKN 843002

    ISIN DE0008430026

     

    Warren E. Buffett, USA, informed us in accordance with Section 21, para. 1 of the German Securities Trading Act (WpHG) that its share of the voting rights in our company had exceeded the threshold of 3% on 18 January 2010 and amounted to 3.045% (6,011,029 voting rights) as per this date. Thereof 2.994% (5,911,029 voting rights) are attributable to him in accordance with Section 22, para. 1 sentence 1 item 1 of the WpHG.

     

    Munich, 26 January 2010

     

    The Board of Management

×
×
  • Create New...