FBK

[Cardboard]

SD,

 

Fairfax exercised all their basic subscription rights which gave them 7,635,495 additional shares. Then backstopped for an additional 8,549,506 shares not taken by other FBK holders under their basic subscription privilege minus for those who asked for oversubscription privileges. Fairfax press release below is pretty clear:

 

http://www.fairfax.ca/Assets/Downloads/Press/fpr2010-07-16.pdf

 

Cardboard

[alertmeipp]

- $78 million term loan

- $75 million revolving facility

- $48 million convert.

 

+40m cash

+29m cash on hand Q1.

+15m generated from Q2

 

They do have lot of liquidity. They will save quite a bit of interest expense by having this larger revolving facility as they can put their cash in there without affecting their liquidity.

Mostly likely, for the rest of this year, they will mainly just need to pay interest on the term loan and the convert. And the should have enough cash to pay off the covert by year-end if they like to.

 

We are talking about 10millions interest saving per year in 2011, that's 9 cents per share to the bottom line. (I am assuming they can generate 30million cash from Q3+Q4).

 

thoughts?

[Cardboard]

I think that there would be a gap of about $15 million or missing to pay off the convertible ($51.749 M) and keep nothing on the revolving facility by year end using your assumption of $15 M generated per quarter. We would also carry $0 cash, but yes could dip in the revolving to satisfy temporary cash needs. The key to get there is EBITDA and pulp prices.

 

Unfortunately, I am not sure that time is on our side:

 

http://www.paperage.com/2010news/07_13_2010pulp_db.html

 

I really hope that these "favored" customers to whom we have given big discounts vs spot prices over the past 6-9 months, will return the favor by accepting higher prices than spot for a while if we have a sharp decline. Not sure how the contracts are structured, but logically we should see something better than spot if prices go down sharply. Like a long term lease vs spot. A sharp decline in SOP cost could also help the profitability of the RBK mills.

 

That is why I have stretched so much the importance of generating more EBITDA per $ of sale than we have so far. The power contract with Hydro is in that direction and excellent. We need a few more items. Financial engineering can get us only so far.

 

Cardboard

[SharperDingaan]

 

Missed the FFH notice - since arbing our common holding, we haven't paid much attention.

 

We still think the re-engineering isn't done yet, but at this point it's going to be asset sales and/or fiber purchases to get security over feedstock. That said; FFH has increased its position 34%, the remaining institutions have collectively taken up additional shares (oversubscription), there was insider buying in Q2, & pulp prices moved up materially over the quarter.

 

Q2 results/guidance should be interesting.

 

SD

 

 

[QLEAP]

 

Unfortunately, I am not sure that time is on our side:

 

http://www.paperage.com/2010news/07_13_2010pulp_db.html

 

 

Oh, I think time is certainly on your side if the date/year on that article is correct :)

 

Market Pulp Prices Backing Off as Supply Grows, Demand Slows

July 13, 2020 - The typical slowdown in summer demand, coupled with the restarts of a number of pulp mills in North America and Europe, is quickly cooling off the hot market pulp sector, say industry observers.

[alertmeipp]

Cardboard,

 

Obviously, pulp price is going to correct eventually...Many forecast the pulp price will drop 100+ dollars toward year end. But don't you think the current price has priced into a dull future already?

 

[alertmeipp]

 

Unfortunately, I am not sure that time is on our side:

 

http://www.paperage.com/2010news/07_13_2010pulp_db.html

 

 

Oh, I think time is certainly on your side if the date/year on that article is correct :)

 

Market Pulp Prices Backing Off as Supply Grows, Demand Slows

July 13, 2020 - The typical slowdown in summer demand, coupled with the restarts of a number of pulp mills in North America and Europe, is quickly cooling off the hot market pulp sector, say industry observers.

 

I am thinking those those price cuts are done for some specific reasons, at least I don't see any price cut from any major producers yet. Pulp producers pps has been going down for awhile while the pulp price was increasing so obviously, a price cut is widely expected.

 

Hopefully, Fairfax did their homework.