Jump to content

Canwest


NumquamPerdo
 Share

Recommended Posts

I don't know if anyone still follows Canwest but they another waiver on their interest payment and their senior lenders are actually lending them more money:

 

Canwest Global Communications Corp. (“Canwest” or the “Company”) announced today that its subsidiary, Canwest Media Inc. (“CMI”) and its senior lenders have agreed to extend the waiver of certain borrowing conditions until May 5, 2009.

 

The members of an ad hoc committee of 8% noteholders, which collectively hold approximately 70% of the outstanding notes, have also agreed not to demand payment of their notes for a period ending May 5, 2009 to coincide with the expiry date of CMI’s waiver agreement with its senior lenders.

 

During the two week period, CMI’s senior lenders have agreed to provide the Company with additional access to credit.

 

CMI continues discussions with its senior lenders and representatives of an ad hoc committee of 8% noteholders.

 

It hasn't been reported as such but I get a strong feeling that either the senior lenders or the 8% noteholders are Fairfax, which to me would bode better for Canwest stock.  Just a thought, but it still looks to me like a 75% chance of BK.

Link to comment
Share on other sites

  • 3 weeks later...

That is pure speculation at this point.

 

I am beginning to wonder where FFH is getting the money for all of these deals?  I will be curious to see if we get a bond, preferred or other issue from FFH at some point. 

Link to comment
Share on other sites

I am beginning to wonder where FFH is getting the money for all of these deals?  I will be curious to see if we get a bond, preferred or other issue from FFH at some point.

 

 

Why do you think they would issue capital for this type of investment?  I would guess that they're selling treasuries that yield 3% and using the proceeds for deals like Canadian Western Bank, H&R, the Brick, etc.  Whether we ultimately do better than 3% on the aggregate of these special investments remains to be seen.

 

Overall, if FFH had to do a debt issue, what do you think it would cost them?  ORH-A yields 10% right now....  Some Canadian bank preferreds are yielding north of 6%....  So an FFH bond would cost perhaps 7.5% or 8% and a preferred would be perhaps 10%?  IMO, not worth issuing capital just to reinvest at only slightly better returns....

 

SJ

Link to comment
Share on other sites

To me it seems that FFH has 80% of its equity investments (approx $5B out of a $20B portfolio) invested in undervalued largecaps. The rest seems to be in (hopefully) high-yield, merchant bank type investments such as helping Canwest and the Brick restructure. These may or may not payoff but if they do, they might be very profitable in the mid to long term.....

 

cheers

Zorro

Link to comment
Share on other sites

It looks to me that the subs are not participating in all of these deals equally. The Canadian deals (Mega Blocks, Canadian Western Bank, Canwest) are likely financed through Northbridge float and the US deals (USG) are financed through ORH, C&F & Runoff.

Link to comment
Share on other sites

Stubble, no reason in particular.  I haven't done a tally but they have spent enormous amounts of money on investments.  I am sure they could sell debt at 7.5-8.0% you suggest, whether it would be worth it is another matter. 

Link to comment
Share on other sites

Personally, I think all of these "little moves" are brilliant. 

 

For example, the most recent Brick transaction was underwritten by GPM Securities (another one of those little moves late last year).  From a pure business perspective and FFH shareholder, this is exactly what you want.

 

Regarding, Canwest, I haven't done a valuation on it, but from my point of view it's very strategic just from a media perspective.  FFH is considered a financial and having come from the 2008 experience of "shoot first, ask second" mentality fueled by fear mongering ala theory of reflexivity having a media outlet on our side continues to disseminate a positive outflow of information for FFH.  This in turn allows us to make more "fair and friendly" transactions.  .

 

Now, make no mistake, I'm not judging Canwest purely on future goodwill for FFH because they have also made an investment in Gannett...so they must see some value.  Also, BAM and Onex want in on this deal (Canwest) as well, so we're not the only village idiot.

 

Thus far, the only humbling investments have been ABH and media.  I place the media investments as a wash based on the positive feedback loop (10%-12% preferred) and good reputation.  ABH is still in the 5-6th inning imo.

 

These investments of course cost money...but the future earnings power of FFH with these small investments as a whole can be tremendous.  Crum made a $100 M dividend to FFH at the end of the quarter, available cash for new investment/reinvestment is not a huge concern.  We also have upwards of 200M tax-free coming from our Municipal bond portfolio.  Next you have the steady dividend portion of the equity portfolio (PFE, JNJ, KFT) and using rough estimates that's almost 40M. 

 

I think what's happening at Crum is really interesting, after having yoy decline in premiums of 20%, you look at the first quarter premiums and that's down around 11%, now granted it's listed under "insurance and reinsurance operations"; however I would not be surprised if a large % was at Crum.  The disappointment in insurance operations I've read on this board is a little over the top at times.  With the declines in yoy premiums, I believe Prem and Co. are right sizing Crum for sub-90 CR.  Barring a major natural disaster, I'll put a wager out there that Crum will have a couple of fat years going forward.  I wish they broke out retention within the insurance operations, because if in fact they are right sizing Crum, this will take some time to show up, but when it does, some will try to delete their negative posts on FFH insurance operations.

 

I could be wrong about that, but that's part of my analysis.  Last year, my projection was that by 2010 we would have around 20% of the investment portfolio in equities. 

 

I'm about 90% invested in FFH, part of that has to do with my confidence in future earnings power, the other with investment restrictions placed on me by my current employer.  Holding FFH simplifies crap that I don't have time to conduct thoughtful analysis like sizing muni's, corporate bonds, active investment portfolio, etc. and holding 90% FFH allows me to do everything that I want/can't in one single investment, it's efficient for me.

 

 

Link to comment
Share on other sites

Holding FFH simplifies crap that I don't have time to conduct thoughtful analysis like sizing muni's, corporate bonds, active investment portfolio, etc. and holding 90% FFH allows me to do everything that I want/can't in one single investment, it's efficient for me.

 

I liked your post Shah.  FFH is kind of like a no fee hedge fund isn't it.

Link to comment
Share on other sites

Some quotes, then my comments:

 

FFH is kind of like a no fee hedge fund isn't it.

 

It's even better than a hedge fund. We get our money from policy holders, we keep the profit for ourselves and we have some permanent capital, wich structuraly help us to have a longer term horizon (that's a competitive advantage).

 

Regarding, Canwest, I haven't done a valuation on it, but from my point of view it's very strategic just from a media perspective.

 

I hate the word "strategic". When a holding company start to make "strategic" investments, that's a bad sign. Every investment should care about the return on it first. That being said, I don't think they have done the Canwest deals mostly on a strategic point of view.

 

My 2003-2009 experience with Fairfax confirm me that the media mostly act like a voting machine, just like the stock market. The only thing it could do on a "strategic" point of view would be to help us build our good reputation as a "Fair and friendly" investor and that might help us get more phone calls. But it would be overall not significant. Our track record will speak louder than some articles from time to time. So, millions and millions $ of investment to hope to get some permanent ads from Canwest subsidiaries would be questionable as an "ad" investment, in my point of view. But, like I said before, I don't think that was the primary objective for Fairfax. Berkshire get far more free "ads" than Fairfax, mostly because of it's track record and the charism and brain of it's CEO.

 

Now, make no mistake, I'm not judging Canwest purely on future goodwill for FFH because they have also made an investment in Gannett...so they must see some value.

 

I'm 100% with you here.

 

"Also, BAM and Onex want in on this deal (Canwest) as well, so we're not the only village idiot".

 

Nearly all value investors fall into value trap from time to time. Sometimes, they fall alone and sometimes they fall together. I'm not saying that Canwest is necessarely a value trap. Time will tell if it was either that or a hidden treasure.

 

With the declines in yoy premiums, I believe Prem and Co. are right sizing Crum for sub-90 CR.

 

I don't know, but I like it. When prices aren't appropriates, a decline in premiums is a very good sign of underwriting discipline.

 

I wish they broke out retention within the insurance operations, because if in fact they are right sizing Crum, this will take some time to show up, but when it does, some will try to delete their negative posts on FFH insurance operations.

 

Well, I will not judge FFH overall underwriting performance based on one or two cycles only. What matter is the long term. So far, we do not have been a bad underwriter, neither a great one. We will be a great one if the cost of our float will be, on long term average, free. We will be a good one if we get it at a lower cost than the government and we will be a bad one if we get it at a higher cost than the government.

 

I don't have time to conduct thoughtful analysis like sizing muni's, corporate bonds, active investment portfolio, etc. and holding 90% FFH allows me to do everything that I want/can't in one single investment, it's efficient for me.

 

Me too. It's might sound ironic for an investor to delegate the particular investment decisions to someone else, but to me it makes perfect sense, and that's what I actually do too.

 

Cheers!

 

 

 

 

 

Link to comment
Share on other sites

It's might sound ironic for an investor to delegate the particular investment decisions to someone else

 

To be fair, even FFH delegates investment decisions to others such as Chou, Housington, and in foreign locales. 

Link to comment
Share on other sites

  • 3 weeks later...
  • 1 month later...

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
 Share

×
×
  • Create New...