Multibagger speculative ideas

[dolce2think]

As the FNMA thread is doing very well, I'd like to start a new thread about multibaggers, please throw your ideas out, mine are:

 

1) FNMAS

2) Gold miners

3) Maxwell Technologies

 

Thxs,

Dolce

[bizaro86]

My current favourite speculative potential multi-bagger is STP.DB (trading in Toronto). The company is an oil producer with a  2 producing assets. One that they bought at a bargain price a few years ago and have started starving of capital due to their extremely distressed balance sheet/cashflow position. The other is an oilsands project that has been continually having performance issues. The company is not likely to be able to repay the debt they took on to build the oilsands project without a material improvement in its productivity.

 

I think the company is almost certain to require CCAA/restructuring, but I think the debentures are a potential multi-bagger anyway at their current price of $2.50 per $100 of par value. The company recently sold a non-core asset for $19.5 million, which gives them enough liquidity to meet their December debt payments and operate for a few more months after that (probably 3-6, depending on various factors). The debentures are owed $3 per $100 of par value this december, so a speculation could return all its capital in a short time if they make the payment.

 

If they don't, they would convert the debentures to shares at Par, at a 5% discount to the recent share price. This would be my preferred option, as although that would immediately tank the stock even further, I'd probably be able to sell the shares for more than the current debenture prices indicate, and likely for a 3-5 bagger.

 

The hugely speculative upside option is that they make the payments in december, and their production turns around from ICD installations (inflow control devices have been installed at the oilsands project, and scuttlebutt is they're starting to work). If they do, the debt could be worth 30-40 cents on the dollar easily.

[yadayada]

Outerwall LEAPS

[rukawa]

Coal miners currently being shorted by hedge funds

http://online.wsj.com/articles/hedge-funds-bet-on-coal-mining-failures-1416790137

[snow pea]

My current favourite speculative potential multi-bagger is STP.DB (trading in Toronto).

 

This is sort of a general question spurred by your suggestion.  Where do you find the documents describing the terms for such debentures as these?  I took a look on SEDAR for company filings but I have no idea what the filing would be called (if its even there).  Hopefully this isn't too dumb of a question.

[yadayada]

OPRX is another one. Huge operating leverage.

[Guest Schwab711]

ELDO

[bizaro86]

My current favourite speculative potential multi-bagger is STP.DB (trading in Toronto).

 

This is sort of a general question spurred by your suggestion.  Where do you find the documents describing the terms for such debentures as these?  I took a look on SEDAR for company filings but I have no idea what the filing would be called (if its even there).  Hopefully this isn't too dumb of a question.

 

Not at all. The prospectus is on Sedar. It is filed as Final short form prospectus, and dated Dec 23, 2010. I generally find it easier to search Sedar by date rather than filing type. If you google "Southern Pacific sells debentures" or something similar, you can find out when they sold the securities, and the prospectus will be on Sedar around that time. Hope that helps.

[original mungerville]

- I like silver (SLV) out of the money 2017 options; and

- Gold miners (Sprott Gold miner ETF, GDX, GDXJ - probably in this order)

 

You guys are going to think I am nuts but I think the Western central banks have pushed paper gold prices down so much, and there is so much physical demand right now for gold and silver that the jig may very soon be up (ie default on Comex due to inability to deliver physical - contracts could cash settle). Even without such an event, with backwardation currently at 6 months for gold futures, the physical price mechanism should assert itself soon.

 

This feels to me like Fairfax in 2003/04 with the hedge funds naked shorting. In this case, its coordinated central bank intervention pushing the paper market lower combined with similar banking manipulation of the precious metals markets. As bad as Fairfax was then, this seems worse in terms of what I am up against. Then, I lost a ton of money before making it all back and more. Same thing now: I have lost a ton of money. I am holding firm though - it may be a big mistake.

 

I think miners could double in a year and go up 10x from these levels over the next 5 years. As for the SLV out of the money options, 20-50x depending how out of the money you are.

 

The people on this board were viewed as crazy with regard to their positive outlook on Fairfax circa 2003/04. So call me crazy but this is what I am doing. 

 

[snow pea]

Not at all. The prospectus is on Sedar. It is filed as Final short form prospectus, and dated Dec 23, 2010. I generally find it easier to search Sedar by date rather than filing type. If you google "Southern Pacific sells debentures" or something similar, you can find out when they sold the securities, and the prospectus will be on Sedar around that time. Hope that helps.

 

Very helpful, thank you very much. 

[sculpin]

Marrett High Yield Strategies Closed End Fund trades on the TSX in Canada with the symbol of MHY.UN. Currently trading at $0.11 with last reported NAV of $0.98.

 

Almost 90% discount to NAV due to the net asset value being made up by 75% by the senior and convertible debt of Cline mining (has cash to continue for several years until a sale) and 25% being senior debt of Data and Audio Visual Holdings which is the holding company of Mobilicity - currently under bankruptcy but containing very valuable wireless spectrum that is being held hostage by the Canadian government.

 

Very interesting situation as the NAV of $0.983 is after the debt situations listed above have been already somewhat written down.

 

http://www.marret.ca/pdf/MHYSF-SIP-14Q3.pdf

 

Marret High to continue trading on TSX after May 30

 

 

2014-05-16 15:35 ET - News Release

 

 

An anonymous Marret Asset Management director reports

 

MARRET ASSET MANAGEMENT PROVIDES UPDATE ON MARRET HIGH YIELD STRATEGIES FUND

 

Marret Asset Management Inc. is providing an update on Marret High Yield Strategies Fund.

 

The majority of the net assets of the fund will be distributed to unitholders of record on June 12, 2014. The fund had been scheduled to terminate on May 30, 2014. Instead, the fund will continue in order to hold two private positions. The Toronto Stock Exchange has confirmed that the fund will continue to be listed after the distribution record date. Marret's intention is to distribute the net proceeds from the private portfolio when the holdings are sold and the proceeds are received by the fund.

 

As of April 30, 2014, the private portfolio accounted for $1.18 of the fund's net asset value per unit of $8.75 or 13.5 per cent. The remainder of the fund, which accounted for 86.5 per cent, or $7.57, of the net asset value per unit at April 30, 2014, is the liquid portion of the portfolio and will be distributed on June 16, 2014, to the fund's unitholders. The actual distribution per unit will be based on the net asset value of the fund and the value of the liquid portfolio on May 30, 2014, which will be announced on or about June 2, 2014.

 

As previously disclosed, the private portfolio consists of bonds issued by Cline Mining Inc. and Data & Audio-Visual Enterprises Holdings Inc. (Mobilicity). Cline holds various mineral assets, including the Elk coal mine in Colorado, which has almost 620 million tons of in-place coal. The Cline bonds are secured and represented 83 cents of the fund's net asset value per unit as at April 30, 2014.

 

Mobilicity owns a mobile communications network, including valuable wireless spectrum licences. The fund holds secured and unsecured bonds issued by Mobilicity accounting for 29 cents and six cents, respectively, of the fund's net asset value per unit as at April 30, 2014.

 

Marret intends to publish a net asset value for the units on a weekly basis on its website and will provide updates on the status of the private portfolio as warranted. No continuing management or other fees will be charged by Marret for overseeing the liquidation of the private portfolio and the winding up of the fund. Normal operating expenses of the fund payable to third parties (such as audit, custody and transfer agency services) will be payable by the fund from the proceeds of the private portfolio.

 

Given that the fund is maintaining its listing on the TSX, the trust units will be considered to be qualifying securities for registered plans. Unitholders who hold their units within a registered plan will not be subject to tax on the distribution. The fund anticipates that the majority of the distribution(s) received by unitholders who do not hold their units within a registered plan will be received as a return of capital. The exact treatment will depend on the unitholder's own circumstances. Unitholders are encouraged to consult with their own tax advisers.

 

We seek Safe Harbor.

[sculpin]

Most recent update (August 28th) on Marrett high yield's 2 bond positions i left out in prior post...

 

RECENT DEVELOPMENTS

 

As previously announced, the Fund had been scheduled to terminate on May 30, 2014. The bulk of the Fund’s assets were distributed to unit holders on June 16, 2014. Rather than terminate, the Fund will continue in order to hold two private positions; (Cline Mining and Mobilicity the “Private Portfolio”). The Fund will continue to be listed. Our intention is to distribute the net proceeds from the Private Portfolio when the holdings are sold and the proceeds are received by the Fund. No ongoing management fee or other fees will be charged by Marret for overseeing the liquidation of the Private Portfolio.

 

Cline Mining

 

The rationale for the Cline write-down is the recognition that met coal prices have declined recently and we have seen some large companies shut in higher cost mines in response. It is important to note that we consider this prudent and conservative, but it does not change our long-term view of the company’s assets nor does it imply that we are seeking a reduced price for Cline’s assets. In April, Cline received $9.8 million cash as a final settlement of claims that the company had outstanding against the Province of British Columbia, pursuant to which the company agreed to abandon certain coal licenses and applications. The company is seeking a buyer and the proceeds will be used to settle its debt obligations held by Marret.

 

During the second quarter, Cline completed its mine plan and began the fatal flaw analysis. The fatal flaw analysis is a second independent review of the major variables inherent in the mine plan to ensure validity. Once this is complete, a U.S. investment bank will implement a sales process for all the assets of Cline. Given the very weak state of met coal prices, it is likely that the sales process will not produce any acceptable interest.

 

Mobilicity

 

It has been reported that Telus has terminated the proposed going concern transaction to purchase Mobilicity. As a result, we have reduced the value of the bonds to reflect the uncertainty surrounding the potential sale or realization on the assets.

 

We originally made the investment in Mobilicity on the premise that the spectrum the company controlled was in limited supply, would appreciate over time and would support the value of the company in a workout situation. The terms of the spectrum auction included a clause that precluded a sale of the spectrum to Bell, Telus or Rogers for a period of five years. This moratorium expired in February 2014. Despite this, the government has refused to approve the sale of Mobilicity to Telus on the premise that it would hinder competition in the Canadian wireless industry. We are currently exploring legal options and alternative buyers/consolidation scenarios, but the government’s stance has been detrimental to all investors in new entrant wireless companies.

 

[alertmeipp]

My current favourite speculative potential multi-bagger is STP.DB (trading in Toronto). The company is an oil producer with a  2 producing assets. One that they bought at a bargain price a few years ago and have started starving of capital due to their extremely distressed balance sheet/cashflow position. The other is an oilsands project that has been continually having performance issues. The company is not likely to be able to repay the debt they took on to build the oilsands project without a material improvement in its productivity.

 

I think the company is almost certain to require CCAA/restructuring, but I think the debentures are a potential multi-bagger anyway at their current price of $2.50 per $100 of par value. The company recently sold a non-core asset for $19.5 million, which gives them enough liquidity to meet their December debt payments and operate for a few more months after that (probably 3-6, depending on various factors). The debentures are owed $3 per $100 of par value this december, so a speculation could return all its capital in a short time if they make the payment.

 

If they don't, they would convert the debentures to shares at Par, at a 5% discount to the recent share price. This would be my preferred option, as although that would immediately tank the stock even further, I'd probably be able to sell the shares for more than the current debenture prices indicate, and likely for a 3-5 bagger.

 

The hugely speculative upside option is that they make the payments in december, and their production turns around from ICD installations (inflow control devices have been installed at the oilsands project, and scuttlebutt is they're starting to work). If they do, the debt could be worth 30-40 cents on the dollar easily.

 

say they convert the debt to equity... how would their balance sheet look like?

 

[sys]

mbac.  it's either going bankrupt, going to be diluted to the near equivalent or going to be a multiple of current market cap.  i wish i better knew how to evaluate the probabilities.

 

here's what drew my attention to it.

 

http://www.valuewalk.com/2014/06/tim-mcelvaine-annual-meeting-full-transcript/

[bizaro86]

 

say they convert the debt to equity... how would their balance sheet look like?

 

In that situation they would have $135MM USD of first lien debt and $260MM CAD of second lien debt remaining. Which is still an awful lot for a company that did ~4MM of EBITDA in their most recent quarter. They still would end up in CCAA unless operations improve.

 

They do have some low hanging fruit at their first project, but they need $18MM in capex to drill the next phase of wells. The company has huge operating leverage, so if they are able to make even small improvements they'll be able to make the payments on the 1st and 2nd lien debt, but I don't see the debentures getting paid in full under any scenario.

 

I don't mind the conversion before the december payment scenario, because I think the equity would still have some turnaround/option value, and the converts would own essentially 100% of the company in that situation.

 

This definitely fits the speculative criteria at the top of the thread, which is why I haven't written it up for the forum.

[sculpin]

With respect to MHY.UN's position in Mobility thru Data & Audio Visual, the holdings are listed below. The 2018 9.55 listed at small discount to face, the 15.5% at 50% of face value and the $21MM of the Payment in Kind are given no value in the lastest NAV calc.

 

Face Value                                                                                  Instrument

 

1,451,000        Data & Audio Visual Enterprises Wireless Inc., Callable, 9.500%, 2018/04/29        1,414,725      1,416,539

875,000          Data & Audio Visual Enterprises Wireless Inc., Callable, 9.500%, 2018/04/29            853,125        854,219

8,529,857        Data & Audio-Visual Enterprises Holdings Inc., 15.500%, 2014/06/30                    4,264,928    4,264,928

20,987,222      Data & Audio-Visual Enterprises Holdings Inc., PIK, Callable, 15.000%, 2018/09/25              -              -

 

Below is today's Globe article on Mobilicity..

 

http://www.theglobeandmail.com/report-on-business/mobilicity-weighing-paths-out-of-limbo/article21782060/

 

Perhaps a catalyst...

 

Mobilicity says it is in ongoing, early-stage discussions with “a number” of interested parties over a possible transaction that could end the restructuring limbo the wireless startup has been in for more than a year.

 

Although Mobilicity is deep in debt – it had long-term debt of $415-million (Canadian) and total liabilities of $510-million as of March 31 – it is now operating on a “cash flow break-even basis,” according to this week’s court filings, which also note its customer base is stable and sat at 154,914 as of Oct. 31.

 

It will ask the court on Thursday to grant an eighth extension of the stay period shielding it from legal action by creditors to Jan. 30 from Dec. 1.

 

Another article about Catalyst Capital involvement...

 

http://www.androidheadlines.com/2014/11/catalyst-capital-group-willing-back-mobilicitys-bid-spectrum.html?utm_source=dlvr.it&utm_medium=twitter

 

 

[bizaro86]

Thanks Sculpin, that's a very interesting idea. How are you valuing Cline? They look pretty distressed if you just look at the financials. Do you have an opinion on the quality of the mine and technical or price assumptions necessary for it to be worth enough to cover the debt?

[sculpin]

Marret has the first lien debt so the process to extract value is in their hands. That said, the potential value to be received is dependent on what someone else will pay. In the current environment they state they have not received reasonable bids but with the current cash position they can wait for coal markets to improve. Below is Marret discussion from last Fall where they state...

 

"Marret’s internal valuation of Cline’s assets in a distressed scenario, such as

a sale under CCAA, supports the current face value of the debt outstanding.

 

 An independent report from an advisor to Marret on the late 2012 proposed

restructuring provided a valuation range of par to considerably higher than par using

various valuation methods. It should be noted, we have not relied on this in a

material way, other than to provide support for our internal valuation. "

 

Whether this is true now in a much more depressed market is doubtful however the the current trading price of MHY.un is already factoring little recovery (<10% of face?). Here is the link to that quote from above....

 

http://marret.ca/pdf/MHYSF-PR-131031.pdf

 

 

[dolce2think]

ACRX.

There is a good writeup on VIC,

it depends on if they need to issue shares for finance,

but the product/approval looks good, it could go

easily into the 20ies

 

[sculpin]

For anyone who has put some casino money in the Marrett High Yield Fund (MHY.UN) (there is also another play on this too – MMF.UN) there are some encouraging signs that there may be some recovery from the Data & Audio Visual Enterprises debentures that MHY holds. Hopefully, an acquisition is allowed to take place by the Feds. I am not sure what the potential recovery could be at this stage but the Fund had $31,842,000 in DaVE bonds in its portfolio on Dec 31/2014 with 36.7 million shares outstanding – so the upside could be substantial. GLTA….

 

Canada’s Rogers, Telus Said to Compete to Acquire Mobilicity

 

Rogers Communications Inc. and Telus Corp. are vying to acquire Mobilicity, the Canadian wireless carrier currently in creditor protection, people familiar with the matter said.

 

The companies have made preliminary proposals to the federal government valuing Mobilicity at a minimum of C$300 million ($245 million), said the people, who asked not be identified because the information is confidential.

 

No formal deal has yet been submitted to the government and talks between Rogers, Telus and Mobilicity’s creditors could still fall apart, the people said. Any deal that is reached would need to be approved by the federal government and the bankruptcy courts.

 

Vancouver-based Telus is interested in Mobilicity, and is prepared to transfer some cellular airwaves to wireless operator Wind Mobile or to another new entrant, spokesman Shawn Hall said.

 

Allowing Rogers or Telus, two of Canada’s three biggest wireless carriers, to acquire Mobilicity would reverse previous government decisions to reject takeover attempts by Telus on the grounds that it would limit competition. Canada has been working for six years to encourage the creation of a fourth national carrier to bring down prices for wireless services.

 

Canada “will not approve any spectrum transfer request that decreases competition in the wireless sector,” Jake Enwright, a spokesman for Canadian Industry Minister James Moore, said Saturday in an e-mailed statement. Moore announced Friday he would not run in the next federal election in October due to family reasons.

 

Once firm bids have been received, the federal government could move quickly in approving or rejecting a transaction, the people said.

 

“We continue to be interested in acquiring Mobilicity,” Hall, the Telus spokesman, said Saturday in an e-mail.

 

Previous Attempts

 

Canada’s government has blocked multiple earlier attempts by Telus to buy Mobilicity’s assets. In April 2014, Mobilicity said it had reached an agreement to be acquired by Telus for about C$350 million.

Aaron Lazarus, a spokesman for Rogers, declined to comment on whether the carrier had submitted a proposal to buy Mobilicity or transfer spectrum after a potential acquisition.

 

Mobilicity continues to “pursue a going-concern transaction that is in the best interest of stakeholders and we continue to engage with a number of parties,” Joel Shaffer, a spokesman for the carrier, said in an e-mail Saturday. “We can’t comment on the specifics of any potential transaction or the actions of others.”

 

Mobilicity is the brand name of Data & Audio Visual Enterprises Wireless Inc., while Wind is the brand name of closely held Globalive Wireless Management Corp.

The Globe and Mail reported late Friday that Rogers and Telus were in the running to buy Mobilicity.

[jawn619]

Crossroads. $30M market cap company with $200M of pending litigation damages coming in Jan 2016. Also has another patent portfolio that could be worth A LOT more. like near the $1B mark.

[sculpin]

For those of you who own MHY.UN on the TSX...

 

Mobilicity seeks court’s OK for $465-million takeover offer from Rogers

 

Mobilicity has accepted an offer from Rogers Communications Inc. and plans to seek court approval of the $465-million sale.

 

The small wireless carrier, which has been under creditor protection since September, 2013, will take the agreement to court Wednesday morning, according to a court filing.

 

The Globe and Mail reported Tuesday evening that sources familiar with the negotiations said the company had accepted the agreement after weighing competing bids from Rogers and Telus Corp.

 

The filing, which was posted on the website of the monitor in its restructuring process overnight, confirms that Mobilicity accepted a bid from Rogers and is asking the court to approve the deal on Wednesday.

 

Bill Aziz, Mobilicity’s chief restructuring officer, said in an affidavit that he understands the agreement has the support of “substantially all of [Mobilicity’s] secured debt holders.”

 

The filing said services for Mobilicity subscribers will continue uninterrupted. The carrier offers discount wireless services and has customers in Toronto, Ottawa, Calgary, Edmonton and Vancouver.

 

The company’s main asset is its spectrum – the airwaves used to build cellular networks – which it purchased for $243-million in 2008. The federal government must approve transfers of spectrum and has previously blocked Mobilicity’s attempts to sell its licences to Telus, one of Canada’s three largest wireless carriers. Telus offered $380-million in its original 2013 deal and $350-million in a deal last year.

 

But Ottawa’s policy on the wireless industry has been aimed at encouraging a fourth carrier in every region to give consumers an alternative to the Big Three and the government has said it would not approve deals that resulted in an undue concentration of airwaves in the hands of Canada’s dominant players.

 

Yet, the landscape has shifted thanks to recent policy changes allowing for more spectrum to be put to mobile use, as well as three public auctions in little more than a year plus the 2008 auction that first reserved airwaves for new entrants.

 

While Canada’s dominant carriers together held 98 per cent of available mobile spectrum in 2006, Industry Minister James Moore has said he expects new players to control 25 per cent by this summer. Wind Mobile Corp. has also emerged as a more viable competitor in recent months, with new ownership, a new CEO and a swath of new airwaves it purchased for a low price.

 

Mr. Aziz stated in the affidavit, “It is my understanding, given recent developments in the Canadian wireless industry and specifically recent auctions of spectrum, that Industry Canada no longer has the same concerns it once did about ‘undue spectrum concentration’ among certain wireless carriers in Canada.”

 

Sources say the deal include the transfer of some cellular spectrum to Wind, which is believed to be a factor in the federal government’s willingness to approve a transaction at this time.

 

Telus, which has been pursuing Mobilicity for more than two years, is said to have offered more than Rogers, according to one source, and could seek to challenge the deal in court.

 

However, Mobilicity’s creditors felt the Rogers deal was more likely to be approved by the federal government.

 

Sources familiar with the negotiations said the Rogers deal would also see the company complete an option to purchase unused spectrum licences from Shaw Communications Inc.

 

Rogers and Shaw struck a broader deal that included the option in 2013 but have to date been unable to win government approval for the spectrum transfer. According to one source, Rogers is under pressure to get approval for that option as it is set to expire soon.

 

Mr. Aziz said Mobilicity has been in continuous discussions with potential buyers, including Rogers, for the past two weeks, a process that included multiple offers and counter-offers. He said the company was aware that Rogers needed to conclude a transaction by Wednesday, June 24 due to “other related dealings it had.”

 

Mobilicity therefore asked its suitors to provide their last and final offers by 10:30 p.m. Monday. Stakeholders considered the options into the night, held further discussions with the bidders and finally, the company’s board approved the Rogers deal on Tuesday.

 

Mr. Aziz said the carrier has outstanding secured and unsecured debt totalling approximately $600-million, including accrued interest and financing costs. The company’s original equity investors also invested approximately $250-million.

 

Funds from the proposed sale will be used to fully repay the company’s secured debt and repay its unsecured creditors on a pro rata basis. However, a portion of Mobilicity’s first lien bonds, which are held by Catalyst Capital Group Inc., will remain outstanding, Mr. Aziz said. The motion materials include an agreement between the company and Catalyst that was struck on Tuesday and filed with the court in confidence.

 

Rogers will assume Mobilicity’s outstanding debts to its trade creditors — such as suppliers and landlords – as well as its obligations to employees and dealers.

 

Representatives for Mobilicity, Rogers and Telus all declined to comment on the developments Tuesday evening before the court filing.

 

Mobilicity had 157,000 subscribers as of the end of April. In addition to its spectrum licences, it is also valuable to Rogers for its tax losses, which stood at $567-million as of the end of 2013.

 

Mobilicity will first seek the approval of the Ontario Superior Court judge who has been presiding over its creditor protection proceedings under the Companies’ Creditors Arrangement Act. It is then expected to seek approval from Industry Canada.

[bskptkl]

I'm long this and buying more today.

See monitor report for capital structure:

http://documentcentre.eycan.com/eycm_library/Project%20mike/English/Monitor's%20Reports%20(Sixth%20and%20Eighth%20Report%20are%20located%20in%20their%20own%20sub-folders)/Thirteenth%20Report%20of%20the%20Monitor%20Dated%20June%2023%202015.pdf

 

I get roughly 42% recovery for the Unsecureds...

 

[sculpin]

I'm long this and buying more today.

See monitor report for capital structure:

http://documentcentre.eycan.com/eycm_library/Project%20mike/English/Monitor's%20Reports%20(Sixth%20and%20Eighth%20Report%20are%20located%20in%20their%20own%20sub-folders)/Thirteenth%20Report%20of%20the%20Monitor%20Dated%20June%2023%202015.pdf

 

I get roughly 42% recovery for the Unsecureds...

Yes that looks about right but with all of the accrued interest on those pik's and the 1st/2nd lien notes the amount accruing to the MHY.UN may be higher than the amount shown on the portfolio updates (I assume they have not included accrued interest in these filings). I contacted Marret and they will issue a press release about this either later today or tomorrow. Another great thing about this situation is the cash extracted from the Mobilicity debt should be returned to the MHY.Un shareholders as a non taxable return of capital.

[Valuebo]

Emeco could probably be added here. Currently at only 1/3th the price some board members bought it at. Could pay off very well but much (if not all) is dependent on commodity prices going forward.