Jump to content

Any value in Sino-Forest Bonds?


Recommended Posts

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.

Link to comment
Share on other sites

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.

Link to comment
Share on other sites

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.

Link to comment
Share on other sites

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!

Link to comment
Share on other sites

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

Link to comment
Share on other sites

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.

Link to comment
Share on other sites

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?

Link to comment
Share on other sites

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.

 

 

Link to comment
Share on other sites

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!

Link to comment
Share on other sites

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!

Link to comment
Share on other sites

Guest Hester

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.

Link to comment
Share on other sites

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! 

Link to comment
Share on other sites

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.

 

 

Link to comment
Share on other sites

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.

Link to comment
Share on other sites

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!

Link to comment
Share on other sites

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.

Link to comment
Share on other sites

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...