Member Info for devonplay

PMO1

"Decommissioning liabilities rank ahead of debt liabilities, which was one of ARCM's objections. ARCM argued that they were less likely to be repaid hence why the deal was restructured with BP retaining the major of decommissioning liabilities whilst PMO gave up the cash flows accruing from the deal date."
PMO1 is down today, glad I'm out,

I think that's likely to be the outcome as well, for me there was just too many moving parts at the moment, so for the time being I've taken my profit off the table. I'm hoping there will be an opportunity to buy back PMO1 when there's more clarity of what's going on. I'm also keeping an eye on Rolls-Royce to see if they equity raise come off with the sovereign wealth funds and if HMG take an equity stake. I haven't held the equity in years, the debt never, and last time I did it was when they were selling off the UK's shareholding. What goes around, comes around sometimes.

"Devon, you are missing one point."
I'm not missing any point as far as I'm concerend, are you sure you aren't?
No they don''t live in a bubble, and just for the record the debt markey is a much bigger market then the capital equity market, but they do consider capital return as the most significant stance, debt is tradeable, and so you can make monet trading, but it doesn't benfit directly in equity return, so return of capital is a crucial element of it.

"So why 30 September?"
because that's the date they have put off testing the covenants until, after that date they test the convenents and if they fail the company could be in breach of them and the runs the potential of the investors voting to call in the debt.

"You are a smart cookie for sure,"
Thank you, more compliments!
Something more positive and constructive, like considering all the options before commiting, or recommiting my capital?

"demanding payments now"
they aren't demanding payment now, if you read the RNS, the company basically says it's in breach of the June covenents test so it's been extended to the 31st of September after that point creditors can vote to request return of their capital and they may be defaul of the 21 maturities. So, it's not quite a binary outcome, but it's significant as the price of oil in my opinion. They haven't vote on the deal yes, so as it says "with a subset of creditors"

"something like 40 creditors"
True, but it only requires a small number of them to form a syndicate. For the rest, life just carries on as usual if they are lucky.

"Administrators would be the ones to work out how best to facilitate payment not the creditors."
Yeah, but I think I'm right in saying either a Board or Creditors can apply to the Courts for Administration, but the Creditors can apply to appoint an Administrator of their own choice.
As we know debt is a big problem for potential acquires, so then a creditor syndicate debt for equity swap and securing other creditors is attractive, it secure continuity of the business, one of the objectives of admin, and satifies the creditors. Crumbs there may be for shareholders, or any number of other outcomes.

"pat on the back"
Thank you, I appreciate that :)
But deramping it's not, it's discussing the reality of the situation. I don't know any more about corporate finance than many other retail investors, but I'm always willing to listen. I think the BP deal was good for everyone, but I also try to understand what other players in the capital of the company might be doing.
I think I'm correct in saying the projections were good if the deal went ahead and the oil price stopped at a reasonable level - then they'd eat through debt. Alas, it appears not everyone believes that. That's why there's some potential of rsistance to the deal, but again alas, tha takes place behind closed doors so we don't really know. They make say it's going through yet.

"8% is a fantastic return"
Not on risk adjusted basis if you think the BP deal won't deliver the long term de-leveraging the company has promised, if the BP deal delivers some de-levereging, but also increase the level of risk of default and decommissing costs then it's not a bigger enough return for the risk of default..and I'm presuming some of the creditors are resistant to signing off the deal for those reasons. If decommissionings costs are higher than anticipated and the leve of oil doesn't stay above $65 - it just makes the creditors risks greater.

Creditors take control of business all the time, that's why I gave the example of Debenhams.
That become a vehicle owned by a syndicate of it's larger creditors and they inherited the debt.
They look to secure continuity and settle the outstanding demands. If they belive that's possible without breaking the business up they will do so, they could look for a trade sale, but only if it didn't disadvantage the creditors further. If the creditor are willing to swap some debt for equity and service the remaining debt holders without breaking the business up , that can be be the best route out of Administration. Was hasn't happened with Debenham, so far, is any post Admin(2) corporate action like a merger.

"But what makes PMO so different from other companies?"
It's greater leverage for one.

"Not legal, surely."
It can become legal if they decided to call in the debt, they or the Board, can then place the business in Administration. I guess that's what he's getting at. The company de-lists as part of the process, the shorts celebrate!, and then they pheonix the business with creditors being the holders and only equity. They then later merge 2 private business and the debt get secured against the newly created group. The Administrator would have to settle in favour of the creditos and that's their opportunity to take control. The old company, alongside with existing shareholders, gets dissolved a la Debenhams (but without the merger - so far) For my sins, I hold some of Debenhams defaulted debt.

Booked my profit, too much going on, too many turning cogs. Sometimes it's better to site on the side and just waive at the train passengers as they go by.

Hi Quintus, no longer. I got shot of my small holding this morning on the news about ARCM trying to sell debt.
There's a very long process, but as I've said before, I question who owns a business when it has so much debt that it's struggling to service it and it's in potential breach of it's covenenants. Reuters are reporting that one source says they might struggle to sell the debt, that's never a good sign. So, I've bagged a small profit and moved on. It remains an interesting conundrum of what happens next.
You are right debt holders can make a play for assets as an extreme measure, but you also have to ask who; wants to own an oil company at the moment? I'm sure the fixed income desks of the banks don't. There's ways around that, exchange some of your debt for equity, once you've pushed existing holders out, and then do a trade sale with lower debt on the books. There are of course parties who've indicated they would be interested in buying it with the debt reconstructed. I bet they don't care who own it at the time. As I keep saying all speculation, and I'm in the dark as much as anyone. The one thing I do know, is most people think investing is about making money, investors who been doing it for decades know it's the opposite. It's about not losing money. LOL

Well as I said @SauerKraust, it's only a possible scenerio and so it's only a possible explanation of what he means.
No one really know what's going on.

""Everything points to shareholders being wiped out ".
Because they appear to be concerned there's going to be a credit default at some stage and they've undertake not to add to their short positions. As I understand it.
Hence, there's no hedge against the short, and they can't hedge agains the long debt position with a short.
There's no way of knowing, but if a major holder of the debt wants out then it might to spook other holders, so they may be come very reticent about the company taking on more obligations . That could mean no deal and we get closer to a creditor call for their cash, cash PMO don't have.
All speculation of course, we don't really know what going on, so it's an explanation to your question. A possible scenario.

"Devon, I held Pmo bonds a" yeah, they've done well since the low of 32p (sh), I've still only got a small percentage of my dosh in them. Back in March & April, there was some really good stuff, in fixed income, on offer and from companies with strong balance sheets. PMO1 was just a punt for me. Still even with a potentially revised maturity date and increased coupon, they should yield 14% YTM and double digit yield on todays price.

"They may have to rethink."
Yeah, I think you are right there. I'm factoring into my thinking a change of attitude on that front mid 21, and reaction in bonds.
But, I still think it's all so uncertain, I'm still interested in BBB/ and high yield, but some what in the face of experts I'm trying to work through and inflation mitigation plan that doesn't rely on just holding gold .