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If it was worth the value of the debt the secured lenders would not be doing what they are doing and would wind it up. It was a good buy six weeks ago and will be again. But today it is literally worthless as the shares cannot be traded, they are about to default, the bonds are junk and the “security” is valued at about 0-10% of the actual debt. See? The only upside for anyone is that they are still trading and are a fundamentally sound business saddled with huge paper debt that seems to be secured on fresh air, hope and an order book of uncertain value as regards profit. That’s why. Worth a punt though, eh?
PC
It is not my fault you are stuffed and holding junk bonds secured on a Hail Mary of “pari passu” worthless security. Maybe if you stopped ramping worthless junk bonds and considered matters objectively you would not be so angry that you are skint. Your predictions are 100% wrong, every time. You quote non existent sources and seem to believe that if you keep spouting nonsense it will, like magic, come true!
When someone like me tells it how it is you can only resort to insults.
You were sold a pup and now you’re stuffed.
Tough.
Some are ramping the bonds. Even suggesting that the additional credit will be secured with some sort of super seniority. Absolute nonsense. There is no security worth a carrot as it has all been pledged already. The bonds will not increase by three or four times. Far more likely they will lose 90-100%. The only real hope for the junk bond holders is time or a takeover. Two or three years of profitable trading and maybe you recover 20 or 30%.
DO NOT BUY BONDS THEY ARE JUNK!!!
BloodyRedFackwit
DYOR incel
Everyone is wrong, why? They know nothing.
Shares will be worthless? No, they are 10 not 3 or 4.
Bond holders are safe? Not likely. Lost 80 -90%.
Creditors are in control? No. The BOD is.
There will never be a takeover? Now THAT is the question.
DYOR. Most of the posts are complete horse. The ones who post the most talk the most horse****!
Unless you actually have inside information it is not insider trading. He could sell. He’s not on the BOD. The report in meed about the Algerian contracts is keeping me from selling. Got a low average as well and can take the loss if I’m wrong. As it stands Petrofac is a going concern with a strong order book, assets to realise and the net additional short term credit is $100 million of credit support. It does seem a given that it is a going concern with a future. The equity will drop more but once the company can focus on trading and profit there is no reason why it cannot return to a market cap of 1 billion in the medium term. Folks buying today are hoping for a takeover but the fact anyone is buying is remarkable. I bought in on a big dip and did so with the view it was a two year punt barring a takeover and expecting a 400% return. I still believe that will happen, barring a takeover of some sort.
PC
The debt has increased significantly. The security for this is the company. If it goes pop everything vests in the bankruptcy trustee other than debts secured on company assets. To swop this much larger debt for equity means the lenders value the assets of the business - which are securing the debt - at more than the debt. Obviously the majority of the bonds are junk status now. But the new money will not be secured by junk. The lenders will sell junior bondholders down the swanny as well as the shareholders. The new money would not have been made available unless the lenders were 100% certain they will get it all back with interest at no cost. This means they believe there is a future for the company. They will accept shares for debt but the idea these will be dumped is wrongheaded. The shares are not being suspended for nothing. It is not as black and white as you suggest. But high risk for sure. I disagree the price will drop to 3 or 4. The business is sound save for the debt which was caused by historic failures. It’s worth a pint as a long term high risk potentially high return share. You pay your money and take your choice.
Cuban_cigar
I agree. They would pull the plug on a default if they thought they would not get paid. This not a short term share though. Once the debt is resolved they will trade through and recover.
The creditors had no option other than to provide liquidity or Petrofac go pop. What they want and what they get are two very different things. The “secured” debt is secured on the company. The company is technically insolvent and so the debt is unsecured. Even if there is a D4E it does not mean that the creditors can dump them the next day. They may give them options, they may have to sit on the shares until they hit a given level, they may have to keep them for six months, a year whatever. It’s not as straightforward as you are suggesting. Short term - 6 to 18 months may see lower prices but not necessarily. The fact it is not a done deal is informative, they are talking about guarantees for contracts and the Algerian angle reported in meed is intriguing as well as the asset sale and chasing cash in Thailand. As you have previously suggested the underlying business is sound and the same business was once worth ten times what it is now. It will be again once the business is stabilised. I always looked on my investment as being longterm with the caveat a takeover may happen. I think anyone looking for a quick profit should look elsewhere. The BOD do not want there own shares to be worthless after all. And no one wants to wind the business ip so there is much to negotiate and it is not as black and white as you suggest. Of course DYOR.
It has to be said. There is a possibility that the BOD are so incompetent that the contracts they are sitting on are chasing turnover with zero profit. The lenders will have carried out die diligence but everyone with bonds or shares could lose the lot. Just saying. DYOR.
Cheshirelad
I agree a takeover is more and more likely. Also the Algerian contracts reported by Meed are huge but maybe not quite finalised. The non core asset sale is positive, the fact the lenders see no mileage in a liquidation is positive, a move towards profitability in the short term is positive. The massive new unannounced contracts in Algeria are game changers for Petrofac and the lenders appear to agree. All in all takeover, for what would be small change for a hedge fund, does seem more likely but DYOR as always. Looking ahead a month then sell, six months and bought in sub twenty hold. Looking ahead more than a year buy but DYOR.
When the shares are suspended the short positions cannot close. As there is a small risk that the shares are permanently suspended they are forced to close out over two days pushing up the equity value or at least maintaining it. The D4E is worthless to lenders if the shares are worthless. The company is not technically insolvent but could be wound up overnight if it became de facto and de jure insolvent and creditors made a move but that won’t happen. The D4E will be no where near as bad as is being suggested. A takeover is looking more and more likely but DYOR.
A 90% loss on the bonds is hard to bear I guess.
The lenders have no choice other than to help Petrofac trade through the cashflow crunch. During the share trading suspension a deal will be done. The business appears sound and once the debt is shaved a takeover does seem a no brainer for a hedge fund specialising in financially distressed no tech infrastructure businesses especially as Petrofac have a foot in legacy fossil fuel and energy as well as renewable energy. Petrofac have stared the banks down and the lenders blinked. I guess it depends on your average and as always DYOR but if like me you’re not in need of the cash for a few years just suck it and see. Many businesses are struggling after the pandemic and as the wars end and the world adjusts money will be made.
PC
Just accept it. Your bonds are junk and you are just trolling talking nonsense. You have no idea what pari passu really is or the fact that in many cases it definitely doesn’t mean what you think. If the company folds no one gets paid apart from mortgagees of real property and even then only if it is worth enough. RCF/TL will be renegotiated because the banks need Petrofac to keep trading to get paid, Petrofac needs liquidity to keep trading so the banks will give them it. But if the order book and new contracts are just chasing turnover they will pull the plug and no one gets paid. D4E? The shares are in the toilet dude. No one wants them or the junk bonds. Given the total lack of any takeover interest the lauded order book may well be pants and you could well be stuffed. That’s the game dude. If you can’t afford to lose don’t play and then cry like a baby girl. And stop trolling.
No one will get any court orders to cover bonds as everything beats in the trustees and junk bond holders are lucky to get next to nothing after employees, the receivers, accountants lawyers, valuers and all the other vultures. No one is going to court over this small change outfit. In a fire-sale it is worth nothing. Certainly not six or seven figures for lawyers to go chasing after worthless paper “security” that is pari passu with dish water.
The bonds are worthless as at the end of the day the security is the company. The company folds the bonds are toilet paper. To convert D4E the creditors own the company. The company is an order book, its personnel and reputation. The banks have to keep it going to get paid and they want fees for arranging facilities. The bond holders have no power in the present scenario. There is no default, the hedge funds are closing their short positions and everything will be fine for LTH of shares. The junk bonds will be shaved to the bone. Tough potatoes that’s business. The only other possibility is a takeover but there is no rumour of that. D4E ppffttt.
The bonds are now junk. If the company folds they are less than junk. The RCF/TL will be renegotiated. D4E is more of a threat to the lenders than shareholders, it’s take a huge stake in the business or renegotiate and give us some liquidity while you’re at it so we can guarantee all this extra business we have here. If Petrofac is a genuine going concern the lenders will agree something. There may be a symbolic D4E to save face but that will be it . The bonds will stay junk for a few more years until Petrofac is profitable and the share price hoes up. Hedge funds know what they are doing and if they are slowly closing shorts at 25 they know it’s not going to 5. More like 50. Pari passi is a catchall phrase and not all debt or security is created equal by any means.
Cuban_cigar
I thought you were talking about share dealing rather than tax returns and CGT.
Hugeprofitby2030
I agree with that. I bought in before the 20th December and was tempted to sell but bought in on the basis it was a three year turnaround with an upside of four or five times investment allowing for restructuring and so on. Recently I have begun to think a takeover is possible, not probable but possible. It is interesting to watch developments as you say but I am off on my jollies so I am going to ignore everything except RNS updates and clock off.
GLA DYOR