BargainValueHunter Posted August 30, 2011 Posted August 30, 2011 http://www.ft.com/cms/s/0/f584d5ac-d226-11e0-9137-00144feab49a.html#axzz1WYEoGyjL Its bond price falls bode badly for shareholders in the Toronto-listed company – which include Richard Chandler, the secretive New Zealand billionaire who acquired an 18 per cent stake in the company last month, after its shares had plunged more than 80 per cent.
FFHWatcher Posted August 30, 2011 Posted August 30, 2011 Are we really having this conversation? Valid question at this point. It may have been a valid discussion on a regular North American corporation with somewhat verifiable financials but the OSC has largely confirmed that something significantly wrong has occurred and that the financial statements and the assets are completely unreliable. Advantage Block. I still can't believe he was able to uncover something so substantial. A similar situation occurred at Puda Coal with Arthur Little and he turned out to be right as well. Why North American investors ever give $1. more to a Chinese company before there is some sort of substantial investor protection system overhaul is beyond me.
AZ_Value Posted August 30, 2011 Posted August 30, 2011 Are we really having this conversation? OMG... Why guys? Why would anybody even consider? I don't care if you have billions laying around earning nothing and burning a hole in your pockets, by now, if someone hasn't realized that SINO is "at best" a situation to stay away from, then something is wrong.
Parsad Posted August 30, 2011 Posted August 30, 2011 Are we really having this conversation? That was pretty funny! ;D My question would be: Aren't there easier ways to make money than companies that are implicated in fraud? If we cannot put any guarantees or even estimates on what the assets are worth, then how can you come to any real margin of safety for equity or bonds? I wouldn't touch it with a ten foot pole. Cheers!
nodnub Posted August 30, 2011 Posted August 30, 2011 from the article: A further complication is that much of Sino-Forest’s cash, and most of its assets, are located on the Chinese mainland. Foreign bondholders do not have direct security over the onshore assets, and may therefore have difficulty in recovering much money if the company defaults. This is not like buying bonds in a US based company. Good luck! LOL
Guest Hester Posted August 30, 2011 Posted August 30, 2011 Where's the emoticon for that face you make when you lose all faith in humanity? For now this will have to do :'(
Kraven Posted August 30, 2011 Posted August 30, 2011 from the article: A further complication is that much of Sino-Forest’s cash, and most of its assets, are located on the Chinese mainland. Foreign bondholders do not have direct security over the onshore assets, and may therefore have difficulty in recovering much money if the company defaults. This is not like buying bonds in a US based company. Good luck! LOL Agreed. In addition, the amusing part is not only is there an issue with the ability to realize on any kind of security interest, it is unclear in fact what the "onshore assets" even are. So someone investing in these bonds has an uncertain security interest (or lack thereof) over uncertain assets. Sounds like a fantastic deal. I can see why people might be interested.
Myth465 Posted August 30, 2011 Posted August 30, 2011 Where's the emoticon for that face you make when you lose all faith in humanity? For now this will have to do :'( LOL
twacowfca Posted August 31, 2011 Posted August 31, 2011 Yes, there will be value for the bonds, but not until the greatest mathematical mystery of all time is solved. . . . . . . How to multiply by zero. ;)
given2invest Posted August 31, 2011 Posted August 31, 2011 Where's the emoticon for that face you make when you lose all faith in humanity? For now this will have to do :'( LOL
BargainValueHunter Posted August 31, 2011 Author Posted August 31, 2011 I'm going to go ahead and say that we've reached a consensus. (lol.) How would you compare Sino-Forest Bonds with Worldcom, Tyco, Satyam or Global Crossing bonds at the point of deepest pessimism in those companies? In other words, what is the best way to determine cigarette butt value in bonds of fraudulent companies?
Kraven Posted August 31, 2011 Posted August 31, 2011 I'm going to go ahead and say that we've reached a consensus. (lol.) How would you compare Sino-Forest Bonds with Worldcom, Tyco, Satyam or Global Crossing bonds at the point of deepest pessimism in those companies? In other words, what is the best way to determine cigarette butt value in bonds of fraudulent companies? The primary difference, at least with respect to Worldcom, Tyco and Global Crossing, is that those were US companies where US laws applied. Their primary assets were also in the US and there was (presumably) a valid and perfected security interest in certain assets. So one could simply count up the liabilities, value the assets and voila. In the Sino case, you aren't sure what rights you have at all as it related to a security interest and you aren't sure exactly what the assets are even if you did know what your rights were. Completely different animals.
given2invest Posted August 31, 2011 Posted August 31, 2011 I'm going to go ahead and say that we've reached a consensus. (lol.) How would you compare Sino-Forest Bonds with Worldcom, Tyco, Satyam or Global Crossing bonds at the point of deepest pessimism in those companies? In other words, what is the best way to determine cigarette butt value in bonds of fraudulent companies? The primary difference, at least with respect to Worldcom, Tyco and Global Crossing, is that those were US companies where US laws applied. Their primary assets were also in the US and there was (presumably) a valid and perfected security interest in certain assets. So one could simply count up the liabilities, value the assets and voila. In the Sino case, you aren't sure what rights you have at all as it related to a security interest and you aren't sure exactly what the assets are even if you did know what your rights were. Completely different animals. That's the only difference? Shit. I should take a look at these!
Kraven Posted August 31, 2011 Posted August 31, 2011 I'm going to go ahead and say that we've reached a consensus. (lol.) How would you compare Sino-Forest Bonds with Worldcom, Tyco, Satyam or Global Crossing bonds at the point of deepest pessimism in those companies? In other words, what is the best way to determine cigarette butt value in bonds of fraudulent companies? The primary difference, at least with respect to Worldcom, Tyco and Global Crossing, is that those were US companies where US laws applied. Their primary assets were also in the US and there was (presumably) a valid and perfected security interest in certain assets. So one could simply count up the liabilities, value the assets and voila. In the Sino case, you aren't sure what rights you have at all as it related to a security interest and you aren't sure exactly what the assets are even if you did know what your rights were. Completely different animals. That's the only difference? Shit. I should take a look at these! Ah, yes. I did say "primary" and was thinking solely in terms of security interests and collateral. But I can see where my comment might make Sino's debt seem pretty attractive. Just like the oil guy who rushes from the gates of heaven to hell because there's a rumor that there's oil there, I might take a look at these now myself!
Guest Hester Posted August 31, 2011 Posted August 31, 2011 I'm going to go ahead and say that we've reached a consensus. (lol.) How would you compare Sino-Forest Bonds with Worldcom, Tyco, Satyam or Global Crossing bonds at the point of deepest pessimism in those companies? In other words, what is the best way to determine cigarette butt value in bonds of fraudulent companies? There's no comparison. Those were clearly real companies that massaged earnings or invented some revenue. This is a company where we have no idea what, if anything is real. The assets, if they haven't already been stolen, are offshore, and there is NO RECOURSE TO THE OFFSHORE ASSETS for North American investors. We don't know the customers, the suppliers, if any of those exist, there could be undisclosed liabilities, there will be shareholder/debtholder lawsuits, etc... If people still want to buy this after the discovery of fraud, it must be easier for these crooks to sell their story than I thought.
Parsad Posted August 31, 2011 Posted August 31, 2011 In other words, what is the best way to determine cigarette butt value in bonds of fraudulent companies? I wouldn't touch them. You have incalcuable risk from class-action litigation, fines, etc and in many circumstances have no idea what the actual value of the underlying assets legitimately are, so you cannot come to any reasonable estimation of what the bondholders may walk away with. On top of that, fraudulent companies obviously have an impaired corporate culture that would be difficult to change. It's tough enough changing the culture at companies that just need to be turned around, but the culture at a company that perpetrated fraud could be damn near impossible to improve without ripping it apart. Unless you can either come to a reasonable estimate of what the assets are worth, or see someone walk in who is going to change everything about the company, it's just simpler to move on to something much easier to define and value. Cheers!
oec2000 Posted August 31, 2011 Posted August 31, 2011 In TRE's case, even cash, which is arguably the easiest asset to value, cannot be reliably determined (since much of it is held by intermediaries whose accounts TRE have themselves admitted they cannot verify). This gives you an indication of the scale of the problem here.
Uccmal Posted August 31, 2011 Posted August 31, 2011 The line up for lawsuits have already started according to the news feeds. By the time Sino's lawyers finish with the carcass the entire company will be worthless, and all of OECs unrealiable cash will be spent. No offense to anyone on this board but I would not touch a Chinese listed stock of any kind until there is some sort of rule of law. Reminds me of the circus represented by the Canadian junior exchange only worse. I have been buying Leaps on more companies with real GAAP accounting in NA, and the UK and that is bad enough to have to weed through for the truth. I have no issue with NA/Euro/Asian multinationals that do business in China. They have people in place who can manage things on the ground, where necessary. In retrospect when I owned Sino 4-5 years ago I never really understood what was going on. It was purely a numbers play. Now I know why Francis never held it, and he has a language advantage over me.
Parsad Posted August 31, 2011 Posted August 31, 2011 In retrospect when I owned Sino 4-5 years ago I never really understood what was going on. It was purely a numbers play. Now I know why Francis never held it, and he has a language advantage over me. Actually, Francis grew up in India, and he can speak and understand Hindi. I'm not sure how much Chinese he can actually speak! ;D Cheers!
Uccmal Posted August 31, 2011 Posted August 31, 2011 Sanj, I dont know Francis' specific situation but I have met a few other "Indian" Chinese and they still all speak the old language. And you certainly know many Chinese in Vancouver that still speak Chinese at home after multiple generations. Anyway we are way off topic and you are correct that I made a cultural assumption. Al.
Parsad Posted August 31, 2011 Posted August 31, 2011 Hi Al, He may speak Chinese. Not sure though. I do know he speaks Hindi, and of course English. ;D Cheers!
Parsad Posted August 31, 2011 Posted August 31, 2011 Nomura Securities analyst says the TRE bonds are worth at best 17 cents, and at worst...one penny! Cheers! http://www.theglobeandmail.com/globe-investor/investment-ideas/streetwise/nomura-values-sino-forest-bonds-at-17-cents/article2148326/
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