bearprowler6 Posted March 30, 2020 Posted March 30, 2020 Status of OMERS purchase of 40% of Riverstone UK? When the deal was announced on December 20/19 it was expected to close by end of Q1 2020 (subject to regulatory approval). Well here we are...at the end of Q1 2020. Any news on this deal?
Cigarbutt Posted March 30, 2020 Posted March 30, 2020 Status of OMERS purchase of 40% of Riverstone UK? When the deal was announced on December 20/19 it was expected to close by end of Q1 2020 (subject to regulatory approval). Well here we are...at the end of Q1 2020. Any news on this deal? FWIW, the European Commission cleared the merger on Feb 26 (simplified merger review procedure).
Xerxes Posted March 31, 2020 Posted March 31, 2020 From the blackberry call this evening: Analyst: given macro environment, how much do you need and what are your plans for the convert Chen: after paying the convert we $385m of cash/equivalent. we made some assumptions (guessing he means scenarios. We will pay back the convert, but saving $23m on interest, obviously cash balance will go down, we also assume the debt market is closed so assumed no financing ...…. quite comfortable that they liquidity
petec Posted April 1, 2020 Posted April 1, 2020 From the blackberry call this evening: Analyst: given macro environment, how much do you need and what are your plans for the convert Chen: after paying the convert we $385m of cash/equivalent. we made some assumptions (guessing he means scenarios. We will pay back the convert, but saving $23m on interest, obviously cash balance will go down, we also assume the debt market is closed so assumed no financing ...…. quite comfortable that they liquidity "We have made some assumptions under a stress test environment": 1. repay the convert. 2. no refinancing. 3. no layoffs. 4. revenue down "20%, 30%, 50%". Result: they're comfortable for a couple of years except in "extreme scenarios", whatever that means.
bearprowler6 Posted April 1, 2020 Posted April 1, 2020 Status of OMERS purchase of 40% of Riverstone UK? When the deal was announced on December 20/19 it was expected to close by end of Q1 2020 (subject to regulatory approval). Well here we are...at the end of Q1 2020. Any news on this deal? FWIW, the European Commission cleared the merger on Feb 26 (simplified merger review procedure). Since the "deadline" (end of Q1 2020) outlined at the time the sale of 40% of RiverstoneUK has now been missed I think we can fairly assume the sale to OMERS is in trouble? Or at the very least being repriced? Fairfax needs to communicate on this one...... Furthermore, their equity holdings are getting crushed including but not limited to: -Blackberry -Eurobank -Resolute Forest Products -Stelco -Recipe -Kennedy Wilson In my view and I fully expect that others will disagree with this....a lifetime of work is being wiped out. Fairfax does not have adequate liquidity. The long term does not matter when you can't pay your current bills. Prem said he learned his lessons. Obviously not. The tide is out and....well we know what that means.....ugly indeed....
petec Posted April 1, 2020 Posted April 1, 2020 Status of OMERS purchase of 40% of Riverstone UK? When the deal was announced on December 20/19 it was expected to close by end of Q1 2020 (subject to regulatory approval). Well here we are...at the end of Q1 2020. Any news on this deal? FWIW, the European Commission cleared the merger on Feb 26 (simplified merger review procedure). Since the "deadline" (end of Q1 2020) outlined at the time the sale of 40% of RiverstoneUK has now been missed I think we can fairly assume the sale to OMERS is in trouble? Or at the very least being repriced? Fairfax needs to communicate on this one...... Furthermore, their equity holdings are getting crushed including but not limited to: -Blackberry -Eurobank -Resolute Forest Products -Stelco -Recipe -Kennedy Wilson In my view and I fully expect that others will disagree with this....a lifetime of work is being wiped out. Fairfax does not have adequate liquidity. The long term does not matter when you can't pay your current bills. Prem said he learned his lessons. Obviously not. The tide is out and....well we know what that means.....ugly indeed.... I agree that a lot of value has been destroyed. But you're going to have to convince me they can't pay current bills.
bearprowler6 Posted April 1, 2020 Posted April 1, 2020 Status of OMERS purchase of 40% of Riverstone UK? When the deal was announced on December 20/19 it was expected to close by end of Q1 2020 (subject to regulatory approval). Well here we are...at the end of Q1 2020. Any news on this deal? FWIW, the European Commission cleared the merger on Feb 26 (simplified merger review procedure). Since the "deadline" (end of Q1 2020) outlined at the time the sale of 40% of RiverstoneUK has now been missed I think we can fairly assume the sale to OMERS is in trouble? Or at the very least being repriced? Fairfax needs to communicate on this one...... Furthermore, their equity holdings are getting crushed including but not limited to: -Blackberry -Eurobank -Resolute Forest Products -Stelco -Recipe -Kennedy Wilson In my view and I fully expect that others will disagree with this....a lifetime of work is being wiped out. Fairfax does not have adequate liquidity. The long term does not matter when you can't pay your current bills. Prem said he learned his lessons. Obviously not. The tide is out and....well we know what that means.....ugly indeed.... I agree that a lot of value has been destroyed. But you're going to have to convince me they can't pay current bills. Depends how you define it (not being able to pay their current bills) but consider the following: -They are already drawing on the bank line and that's before the current corona situation arose -Can't supply the capital needed to support the hard market in their insurance subs -Private investments must be starved for cash and looking to Fairfax to stay alive? -Selling off portions of long held assets (RiverstoneUK) to raise cash and now that's perhaps in jeopardy -Unknown funding sources to complete the minority interests in various insurance subs including Eurolife and Allied World -Capital markets don't offer a solution (but it would not surprise me if Prem dilutes his shareholders yet again even at these levels) Prem and the team go to Omaha every year. Buffett laid out the case for growing over time yet Prem and the team did not listen or thought they were smarter. At best Fairfa's share price flatlines for the next long while at its new share price level. Just like it fluctuated between $600 and $700 CAD for the last 10 years. Folks the market got this one right. One for the efficient market believers!
petec Posted April 1, 2020 Posted April 1, 2020 Status of OMERS purchase of 40% of Riverstone UK? When the deal was announced on December 20/19 it was expected to close by end of Q1 2020 (subject to regulatory approval). Well here we are...at the end of Q1 2020. Any news on this deal? FWIW, the European Commission cleared the merger on Feb 26 (simplified merger review procedure). Since the "deadline" (end of Q1 2020) outlined at the time the sale of 40% of RiverstoneUK has now been missed I think we can fairly assume the sale to OMERS is in trouble? Or at the very least being repriced? Fairfax needs to communicate on this one...... Furthermore, their equity holdings are getting crushed including but not limited to: -Blackberry -Eurobank -Resolute Forest Products -Stelco -Recipe -Kennedy Wilson In my view and I fully expect that others will disagree with this....a lifetime of work is being wiped out. Fairfax does not have adequate liquidity. The long term does not matter when you can't pay your current bills. Prem said he learned his lessons. Obviously not. The tide is out and....well we know what that means.....ugly indeed.... I agree that a lot of value has been destroyed. But you're going to have to convince me they can't pay current bills. Depends how you define it (not being able to pay their current bills) but consider the following: -They are already drawing on the bank line and that's before the current corona situation arose -Can't supply the capital needed to support the hard market in their insurance subs -Private investments must be starved for cash and looking to Fairfax to stay alive? -Selling off portions of long held assets (RiverstoneUK) to raise cash and now that's perhaps in jeopardy -Unknown funding sources to complete the minority interests in various insurance subs including Eurolife and Allied World -Capital markets don't offer a solution (but it would not surprise me if Prem dilutes his shareholders yet again even at these levels) Prem and the team go to Omaha every year. Buffett laid out the case for growing over time yet Prem and the team did not listen or thought they were smarter. At best Fairfa's share price flatlines for the next long while at its new share price level. Just like it fluctuated between $600 and $700 CAD for the last 10 years. Folks the market got this one right. One for the efficient market believers! In order: - True, although they also have $1.1bn in cash at the holdco level. - Agree with this, although 2 of the subs have material space to grow with current capital. - Possible, but who knows. - Maybe Riverstone was purely done to raise cash. But maybe not. Part of the thesis is that there are lots of runoff portfolios for sale coming out of Lloyds. It may be that this is a one off, capital-intensive opportunity that Fairfax didn't want to fund all on its own. - The funding for Eurolife will come from Eurolife. That's known. Brit is $100m. Allied is bigger but they have 4 years. - Likely agree. In summary: 1) I totally agree that it depends on how you define "current bills". Fairfax is not going to go bust. But nor is it going to grow the way it could have done. 2) I disagree on the share price staying flat. I don't believe Covid-19 permanently impairs value in several of the big holdings like Eurobank and Atlas. Presumably Covid-19 is temporary, and when it proves to be so, these stocks will come back. Atlas may not regain its recent heights for a while. Eurobank could surpass them, as I wrote on the Fairfax stock positions thread recently.
Xerxes Posted April 1, 2020 Posted April 1, 2020 If they couldn’t do well in a bull market and couldn’t do well in a bear market, than the mistake is mine to hold them.
petec Posted April 1, 2020 Posted April 1, 2020 If they couldn’t do well in a bull market and couldn’t do well in a bear market, than the mistake is mine to hold them. Agreed. Sob.
Santayana Posted April 1, 2020 Posted April 1, 2020 The way insiders have been buying the Preferreds, it's hard for me to believe they have a serious liquidity problem.
petec Posted April 1, 2020 Posted April 1, 2020 The way insiders have been buying the Preferreds, it's hard for me to believe they have a serious liquidity problem. They don’t, but I didn’t know that - do you have a link?
Santayana Posted April 1, 2020 Posted April 1, 2020 https://www.canadianinsider.com/node/7?menu_tickersearch=FFH+%7C+Fairfax+Financial+Holding
petec Posted April 1, 2020 Posted April 1, 2020 https://www.canadianinsider.com/node/7?menu_tickersearch=FFH+%7C+Fairfax+Financial+Holding Took me a while to find the pref data but thanks. I trust Brian Bradstreet's instincts. Slightly worrying to see Barnard selling $1m of common. Perhaps he was buying a house. But the one thing that has kept me in FFH all these years is Prem's incredible ability to keep (what I judge to be) superb people in the business. There has to be a point where someone like Barnard, who has unquestionably delivered, gets p1ssed off that Prem isn't upholding his side of the bargain.
Xerxes Posted April 1, 2020 Posted April 1, 2020 Thanks Santayana, My concern is very simplistic, i know; it is just that FFH cannot have it both ways, being unable to capitalize on a bull and bear markets. In terms of liquidity. I think their constraint does play a part in some of the things they want to do but don't believe it is a liquidity crunch. The upcoming AGM meeting would be very useful for me to decide to if by back end of the year, I need to sell FFH or not. I hope not. Either way, I plan to keep FIH till 2030 at least. Have a look Bill Ackman who was able to change and become an activist against himself when he screwed up with the Valeant bet. He stepped back, reformed and came back. And most recently he was able to turn his long macro view a on dime and decide that coronavirus would a major problem for his long portfolio; he made a bet on CDS and made billions. That is pro-active hedging and a flexible mindset. In FFH, as early March 2020, in the letter to shareholders, Prem talk about his short duration bond portfolio not having any exposure to rising interest rate. How is rising interest rate was a concern in Feb./March in a world that was on the edge of getting toppled over by the compounding mathematics of COVID-19 ? it seems his macro point of view once solidified (through '16 Trump election) refuses to change. But then again, I could be completely wrong, ;-) we could all be pleasantly surprised, when at the AGM in a few weeks, they reveal their hidden CDS hedges (ala Ackman) and reveal that now they are sitting on a massive realized gain. Gains that they plow back on those insurances business and their own shares …. with enough leftover to buy the rest of RPF that they don't own. That would be acceptable.
petec Posted April 1, 2020 Posted April 1, 2020 In FFH, as early March 2020, in the letter to shareholders, Prem talk about his short duration bond portfolio not having any exposure to rising interest rate. How is rising interest rate was a concern in Feb./March in a world that was on the edge of getting toppled over by the compounding mathematics of COVID-19 ? it seems his macro point of view once solidified (through '16 Trump election) refuses to change. But then again, I could be completely wrong, ;-) we could all be pleasantly surprised, when at the AGM in a few weeks, they reveal their hidden CDS hedges (ala Ackman) and reveal that now they are sitting on a massive realized gain. Gains that they plow back on those insurances business and their own shares …. with enough leftover to buy the rest of RPF that they don't own. That would be acceptable. Prem can change views - he proved that when Trump was elected. Very few people saw the Covid impact coming - my view frankly is Ackman got lucky, but I give him full credit for finding a way (unlike Prem) to hedge with little downside. Fairfax is not about to report a big gain magicked out of thin air. What is horrible for Prem, if he claims to be a value investor, is that he failed to pick up high quality value in 2010 and instead hedged a cheap market; and then turned on a dime when Trump was elected and decided that the economy was going to take off, but felt quality was too expensive and chose to express that view by investing in cyclical value which crapped out the minute a cloud appeared. It is a staggeringly poor series of decisions.
Santayana Posted April 1, 2020 Posted April 1, 2020 I'm definitely not saying that liquidity issues won't prevent them from executing some things they may have wanted to do, but I don't think they are "swimming naked" as bearprowler6 suggested.
mranski Posted April 1, 2020 Posted April 1, 2020 The comments about Barnard make me wonder about the reasons for Paul Rivett ‘retiring’ at a young age. It has to be a big negative to lose someone who was touted as Prem’s successor.
petec Posted April 1, 2020 Posted April 1, 2020 The comments about Barnard make me wonder about the reasons for Paul Rivett ‘retiring’ at a young age. It has to be a big negative to lose someone who was touted as Prem’s successor. Yeah I wondered that.
Xerxes Posted April 1, 2020 Posted April 1, 2020 In FFH, as early March 2020, in the letter to shareholders, Prem talk about his short duration bond portfolio not having any exposure to rising interest rate. How is rising interest rate was a concern in Feb./March in a world that was on the edge of getting toppled over by the compounding mathematics of COVID-19 ? it seems his macro point of view once solidified (through '16 Trump election) refuses to change. But then again, I could be completely wrong, ;-) we could all be pleasantly surprised, when at the AGM in a few weeks, they reveal their hidden CDS hedges (ala Ackman) and reveal that now they are sitting on a massive realized gain. Gains that they plow back on those insurances business and their own shares …. with enough leftover to buy the rest of RPF that they don't own. That would be acceptable. What is horrible for Prem, if he claims to be a value investor, is that he failed to pick up high quality value in 2010 and instead hedged a cheap market; and then turned on a dime when Trump was elected and decided that the economy was going to take off, but felt quality was too expensive and chose to express that view by investing in cyclical value which crapped out the minute a cloud appeared. It is a staggeringly poor series of decisions. :-) now he has a chance to buy Berkshire at 1.05 BV or so
petec Posted April 2, 2020 Posted April 2, 2020 In FFH, as early March 2020, in the letter to shareholders, Prem talk about his short duration bond portfolio not having any exposure to rising interest rate. How is rising interest rate was a concern in Feb./March in a world that was on the edge of getting toppled over by the compounding mathematics of COVID-19 ? it seems his macro point of view once solidified (through '16 Trump election) refuses to change. But then again, I could be completely wrong, ;-) we could all be pleasantly surprised, when at the AGM in a few weeks, they reveal their hidden CDS hedges (ala Ackman) and reveal that now they are sitting on a massive realized gain. Gains that they plow back on those insurances business and their own shares …. with enough leftover to buy the rest of RPF that they don't own. That would be acceptable. What is horrible for Prem, if he claims to be a value investor, is that he failed to pick up high quality value in 2010 and instead hedged a cheap market; and then turned on a dime when Trump was elected and decided that the economy was going to take off, but felt quality was too expensive and chose to express that view by investing in cyclical value which crapped out the minute a cloud appeared. It is a staggeringly poor series of decisions. :-) now he has a chance to buy Berkshire at 1.05 BV or so Ha! Sadly he doesn't even have that. He can't add to equities and there's very little he can realistically sell to redeploy cash, because his stock picks are either 1) very undervalued, 2) illiquid, 3) sponsored by Fairfax, or all three. They will have to be very smart to make hay in this crisis, and I think their opportunity is in the bond market, not the equity market.
TwoCitiesCapital Posted April 2, 2020 Posted April 2, 2020 In FFH, as early March 2020, in the letter to shareholders, Prem talk about his short duration bond portfolio not having any exposure to rising interest rate. How is rising interest rate was a concern in Feb./March in a world that was on the edge of getting toppled over by the compounding mathematics of COVID-19 ? it seems his macro point of view once solidified (through '16 Trump election) refuses to change. But then again, I could be completely wrong, ;-) we could all be pleasantly surprised, when at the AGM in a few weeks, they reveal their hidden CDS hedges (ala Ackman) and reveal that now they are sitting on a massive realized gain. Gains that they plow back on those insurances business and their own shares …. with enough leftover to buy the rest of RPF that they don't own. That would be acceptable. What is horrible for Prem, if he claims to be a value investor, is that he failed to pick up high quality value in 2010 and instead hedged a cheap market; and then turned on a dime when Trump was elected and decided that the economy was going to take off, but felt quality was too expensive and chose to express that view by investing in cyclical value which crapped out the minute a cloud appeared. It is a staggeringly poor series of decisions. :-) now he has a chance to buy Berkshire at 1.05 BV or so Ha! Sadly he doesn't even have that. He can't add to equities and there's very little he can realistically sell to redeploy cash, because his stock picks are either 1) very undervalued, 2) illiquid, 3) sponsored by Fairfax, or all three. They will have to be very smart to make hay in this crisis, and I think their opportunity is in the bond market, not the equity market. +1 Good things opportunities will be abundant in both
gfp Posted April 14, 2020 Posted April 14, 2020 Update from Fairfax - preliminary first quarter results: https://www.fairfax.ca/news/press-releases/press-release-details/2020/Fairfax-Reports-Recent-Developments/default.aspx
Santayana Posted April 15, 2020 Posted April 15, 2020 So now trading at something around 70% of book.
Xerxes Posted April 15, 2020 Posted April 15, 2020 Thx $2.9 billion plowed into high-yield. That is 7% of the 40% portfolio.
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