What are you buying today?

[wabuffo]

PDLI @ $2.87

 

wabuffo

[sculpin]

CRWN - CROWN CAPITAL PARTNERS INC - Company Website http://www.crowncapital.ca

 

Wed 24 Jun 14:25:15 EDT - Trade times are ET. News times are ET. Bid/ask/vol sizes in thousands.

 

Sym-X Bid - Ask Last Chg % Vol $Vol #Tr Open-Hi-Lo Year Hi-Lo Last Trade News Delay

CRWN - T 0.2 3.56 · 3.65 0.2 3.60 14.1 51 13 3.60  3.65  3.60 8.53  3.49 14:00:26 Jun 15 realtime

 

I have been buying some of the convertible debt (low $70’s) & equity ($3.60) in Crown Capital CRWN (TSX) this week. Book is currently over $10 but I would expect it to drop due to loan impairments in the current environment – Current share price is probably way overdone to the downside though. Management is large holders of shares.

 

In May they suspended their dividend to conserve capital that they say will be used to deploy into their strategy and repurchase shares. There has been some insider buying at these levels. This Company would be a great candidate to be taken private or purchased by a larger player in the mezzanine, private debt market. Latest research from May…

 

CROWN CAPITAL PARTNERS INC. (TSX: CRWN) 12-Month Target: $8.25

Last Close: $4.15 Recommendation: BUY

SPECIAL SITUATIONS RESEARCH Implied Total Return: 98.8%

COMPANY DESCRIPTION: Crown Capital Partners Inc. (“Crown”, the “Company”, or “CRWN”) is a specialty finance company which provides

tailored capital solutions, with minimal or no ownership dilution, to middle-market companies. In addition, management is currently working

on Income Streaming Initiatives (power).

 

May 6, 2020

Event. Q1/20 Results, Strategic Update, Dividend Suspension.

Highlights.

▪ Revenue for the quarter of $6.4M came in below our

estimate of $9.8M and the street at $11.5M

▪ Net loss of $1.2M for the quarter was below our estimate

of $1.7M of earnings which was driven by a net unrealized

loss on investments of $3.6M.

▪ Total assets increased to $338M at quarter end from

~$300M at the end of 2019 as a result of the previously

announced new loans completed during the quarter to

Centric Health and CCI wireless.

COVID-19 Impact.

▪ Management expects most companies in the portfolio to

be impacted to some degree while the analysis of the

impact is ongoing.

▪ The portfolio is currently highlighted as stable, and CRWN

does not expect any failures at this time.

▪ Interest payments have been steady to date.

▪ Energy exposure is focused on natural gas.

Dividend Suspension and Business Repositioning.

▪ In light of the current market environment, CRWN is

accelerating a repositioning of the company/balance sheet

to focus on:

 

Development of revenue sources where CRWN can be

a direct investor and asset manager of capital pools

such as the distributed power opportunity.

 

Increased focus on capital light business through a

decreased position in the Crown Partners Fund toward

a target of 20% or less from the current 39%.

▪ In order to maximize funds available for the repositioning

of the business and share buybacks CRWN is suspending

dividends for the time being (likely 9-12 months).

Outlook.

▪ Management highlights the fact that economic crisis has in

the past created opportunity for alternative finance

providers which they hope to capitalize on.

[Junto]

Bought VZ today. Full position

[Spekulatius]

Various Defense stocks :

 

Adds: BAESY, NOC

New: LHX

 

Also GMED add to MSGS and a few shares of PKE.

[Lance]

ESRT

 

Thanks

Lance

[LC]

SSD

[Lance]

Fairfax India

 

Thanks

Lance

[K2SO]

PM

[Spekulatius]

SCHW, LEVI, PDLI and a few adds to existing positions.

[wabuffo]

bought more PDLI (a liquidation special situation) and some BRK.B at the lows at the end of the day (couldn't help myself - even though I already own some).

 

wabuffo

[Spekulatius]

bought more PDLI (a liquidation special situation) and some BRK.B at the lows at the end of the day (couldn't help myself - even though I already own some).

 

wabuffo

 

Same here, got both PDLI and BRK.b.  PDLI’s Management mentioned something about benefiting from Cares tax changes, which can be substantial, since it is replied retroactively. Do you have any idea what sums we are talking about.

 

[wabuffo]

PDLI’s Management mentioned something about benefiting from Cares tax changes, which can be substantially, since it is replied retroactively. Do you have any idea what sums we are talking about.

 

Spek - the only comments I've seen PDLI mgmt make are from the recent 10-Q in May:

Income tax benefit from continuing operations for the three months ended March 31, 2020 and 2019, was $14.5 million and $0.8 million, respectively, which resulted primarily from anticipated use of Net Operating Loss carrybacks as allowed by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

and from the conference call for Q1:

So, 2020 Cares Act provides the opportunity to carry certain losses incurred in the 2019 and 2020 tax years back five years. PDL, had significant taxable income and paid cash taxes in eligible carryback years.

 

I can't tell from the 10-Q, if the tax benefit they quote is equal to the expected cash refund they expect to receive.  It's also unclear if they have factored any tax refunds in their original liquidation estimate of $3-$6 per share (including the common shares of EVFM that have since been distributed to PDLI shareholders).

 

PDLI has 116.3m common shares o/s, IIRC.

 

wabuffo

[lnofeisone]

PDLI’s Management mentioned something about benefiting from Cares tax changes, which can be substantially, since it is replied retroactively. Do you have any idea what sums we are talking about.

 

Spek - the only comments I've seen PDLI mgmt make are from the recent 10-Q in May:

Income tax benefit from continuing operations for the three months ended March 31, 2020 and 2019, was $14.5 million and $0.8 million, respectively, which resulted primarily from anticipated use of Net Operating Loss carrybacks as allowed by the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

and from the conference call for Q1:

So, 2020 Cares Act provides the opportunity to carry certain losses incurred in the 2019 and 2020 tax years back five years. PDL, had significant taxable income and paid cash taxes in eligible carryback years.

 

I can't tell from the 10-Q, if the tax benefit they quote is equal to the expected cash refund they expect to receive.  It's also unclear if they have factored any tax refunds in their original liquidation estimate of $3-$6 per share (including the common shares of EVFM that have since been distributed to PDLI shareholders).

 

PDLI has 116.3m common shares o/s, IIRC.

 

wabuffo

 

 

wabuffo - digging through 10Ks/10Qs from 2018-2020, it looks like this is the ballpark of an estimated cash refund they would be eligible to receive from the operational losses they've accumulated and effective tax rate of year's prior (2015-2020). It doesn't look like they included the tax benefit in their estimate however the skeptic in me says I'm missing something somewhere.

[writser]

On page 34 of the preliminary proxy they say:

 

which implies a per share distribution with an aggregate value of between approximately $2.98 and $5.97 based on 117,285,043 shares outstanding as of April 24, 2020 .

[..]

We used the following assumptions when calculating the range of estimated distributable value of cash and other non-cash assets:

[..]

(vi) certain tax provisions of the recently enacted Coronavirus Aid, Relief, and Economic Security Act, which allow net operating losses generated in tax years beginning after December 31, 2017 and before January 1, 2021, to be carried back to each of the five preceding tax years for federal income tax purposes

 

And  as Bill mentioned, The ~$14.5m CARES tax benefit is already reflected in the Q1 2020 financials dated May, 8 and discussed in the May, 7 conference call. So I would guess that that number is also included in the per share estimates in the proxy filed on May, 7.

 

Of course the information in the proxy is quite sparse so far, the company gives no actual scenarios or examples. So what numbers they are precisely using in the low- and high-end of the range is anyone's guess, as far as I know. But I wouldn't say it has not been taken into account.

[Gregmal]

Bought some SWKH

[benchmark]

bought more PDLI (a liquidation special situation) and some BRK.B at the lows at the end of the day (couldn't help myself - even though I already own some).

 

wabuffo

 

What's the PDLI liquidation play? simple google didn't yield anything

[wabuffo]

What's the PDLI liquidation play? simple google didn't yield anything

 

https://www.sec.gov/Archives/edgar/data/882104/000088210420000057/pdli-2020def14adoc.htm#se100117011f048748132db3631831519

 

You got some reading to do.  Cop a squint at the sections entitled:

"general information about the dissolution and plan of dissolution."

"Proposal #3"

 

wabuffo

[Gregmal]

Starter in RPTX

[Spekulatius]

More D-Fens: BAESY and a bit of LHX.

[Maple Fun]

Bought some preferred shares of Husky Energy: HSE.PR.A, HSE.PR.G; 9%+ dividend yield from a solid investment grade issuer;

Its ultra-long term (2037 maturity) bond trading at 5.4% YTM, so the credit spread is simply too large to ignore...

[Every Banana Counts]

TWTR

[cknucks]

IAC.

[lnofeisone]

Added some CEQP preferred.

 

Some highlights of my thinking:

1) CEQP's contracts with CHK were changed in 2017 and I don't think CHK will be able to reject these in Ch11

2) If CEQP fails to pay on the preferred, the preferred rate starts to go up

[Orchard]

1) CEQP's contracts with CHK were changed in 2017 and I don't think CHK will be able to reject these in Ch11

It's nice to see that you got to set your own terms for the bankruptcy while everyone else has to play according to the country's laws.

[lnofeisone]

1) CEQP's contracts with CHK were changed in 2017 and I don't think CHK will be able to reject these in Ch11

It's nice to see that you got to set your own terms for the bankruptcy while everyone else has to play according to the country's laws.

 

Orchard - I think this is a snarky comment but I'm going to assume positive intent here and ask. What part of my statement shows that I set my own terms while everyone else has to play according to country's laws? CEQP has a MRG contract for CHK. There is hardly a contract that's more favorable to CHK (or anyone really) so why would the court reject it?