Member Info for Kando

Back up again.

"Big shareholders won't allow it."

GRaff, what big shareholders?

The biggest shareholder is about 6%. That's worth about £7.5m at the last traded share price. I'm not convinced they'll be too fussed given Wood has become such a negligible part of all their portfolios. Even if the share price quadrupled, it wouldn't mean all that much to them at the levels they currently hold.

Maybe, but it all comes down to refinancing, cash flow and the cash position. Incoming contracts and order book don't rank very highly in the pecking order compared to debt maturation and a cash crunch. You can't pay bills based on promises of future earnings alone. They need cash from somewhere, today. What they've forecasting this year, negative 150-200m FCF, is what they need to find at a minimum, pronto.

The internal comms suggest they've found an additional 25m in savings last quarter, the pension surplus may yet choose to release 50m back to them a year, they sold a business last month for 30m. I mean, maybe they're getting close. Maybe they can chase up some payments due. It's all perhaps possible they scrape enough together. But the communications through RNS and conference calls have not been that optimistic yet. As it stands the company are still minded to recommend the Sidara bid and financing as the best value option. So that's all we can really go on until we see the actual state of the accounts.

*35p is better than less than 35p. You've got some sunk cost fallacy going on.

"Kando, every shareholder above 35p will lose out, that will be the majority who owns shares in WG"

And you could lose out much more if the government took equity for financing. 35p is better than

That might be so, but I'm not so sure the government taking an equity share to shore up the finances would be good for shareholders here. Sure, it would keep the business British, but for the amount of debt the government would need to essentially backstop, they would demand signficant equity in return, and given the current mcap is tiny, it could be as bad as any other rights issue.

The state wouldn't be doing it to help shareholders realize value, but simply to keep it as a strategic British enterprize. Without an equity stake, there would be no political will to take on any additional liability in helping it refinance its debt, there would be no benefit to taxpayers, to whom they are accountable.

So it might end up like RBS or Uniper, partly or wholly nationalized by governments in exchange for financing, which might be better for other stakeholders, but the Sidara bid still seems better for shareholders in that scenario.

Except the current board has a strategy that's been ongoing for 3 years. It's been digesting the Amec Foster Wheeler fiasco at the root of all this. That acquisition was made by a previous executive team and board, and saddled the company with debt, bought significant ongoing liabilities, not least of which were some large fixed price lump sum turnkey projects that became loss making in the inflationary crisis we've just been through, that they then had to buy themselves out of.

The plan however, as I can see it, has been largely successful. They have completely purged the order book present and future of lump sum turnkey projects; they're about to restate accounts that fix a legacy of hiding of just how unprofitable those projects once were; the exceptionals dragging down cash flow are now rolling off the books and there's still a clear path, if delayed, back to healthy cash flow generation, and meanwhile ebitda has grown consistently at a very healthy pace beneath it all.

I would say they've done all they can for a turnaround, from a crisis that was not of their making. The old guard dipped out knowing what a mess they'd made and didn't want to stick around to clean it up.

The problem, as we're now experiencing it, is that they're just now running out of cash runway on the very final stretch before the business starts generating cash flow again. With the nature of the business it's like turning an oil tanker. It turns very slow, and it's mostly turned, but there's still a rocky shoreline approaching and it's still as yet unclear whether it'll clear it. But it doesn't mean they didn't start turning it long ago.

It doesn't work like that Icecool. Lenders work on financial realities, not cults of personalities. You can shuffle the deck at the top as many times as you like, but the fundamental accounts of the business are king. It's about cash flow and debt to ebitda.

"They have a $6.2 billion order book."

That they do, but order book and cash flow are two different things entirely. Carillion claimed it had an order book of 16bn when it ran out of cash and entered administration. This isn't Carillion, but it's dangerous to confuse the two.

"1.6bn debt pile 🤔🤔"

It's actually closer to 1.75bn in total, but about ~1.6bn due between now and Oct 2026.

"As of 30 June 2024, the Group’s principal debt facilities comprise a $1,200.0m revolving credit facility maturing in October 2026; a $200.0m term loan which matures in October 2026 and $352.5m of US private placement debt repayable in various tranches between July 2024 and July 2031, with around 75% due after the end of 2025."

But they obviously have some cash, thus net debt is lower than that. But given the Sidara bid has shown a rather urgent need to recapitalize the business and provide financing, it's not clear how much cash they have left until the accounts are out. But the debt facilities and loans are still maturing over the next 17 months, and it's a lot of debt that needs extending or modifying, about 1.6bn.

"Making an offer is what we're talking about. Nothing stopping them doing that."

I'm not sure what part you're not getting. Sidara are only interested in bidding at this point if the debt pile can be modified/extended. It doesn't want to buy a company with a huge 1.6bn debt pile maturing in 17 months that they can't renegotiate. So if lenders need to see audited accounts to modify the debt, then Sidara will wait until the accounts are out, wait until the lenders agree to the modifications, and then bid. It's not that complicated.

They do to get the lenders to modify their debt, which is a pre-condition of the bid. Lenders almost certainly won't do that without audited accounts and prior year accounting misstatements corrected.

Ask Icecool, that's his department.

You've got it backwards. Sidara will formalize the bid once the audited accounts are done. Lenders also will likely wait to agree the debt modifications until the accounts of done. So the bid necessarily has to come after the audited accounts are complete. And they are clearly still being worked on and not sat on. It takes time to restate and audit multiple years.

Careful Russa, you'll upset carrot13. He doesn't like knowing his leveraged short position is cooked.

Https://www.marketwatch.com/investing/stock/wdgjf

Trading up at 0.40 USD today, ~0.30 GBP.

Looks like the Sidara proposal is now being priced in. Given the internally leaked expectations of accounts being published end of the week/early next and the possibility/probability that the debt modifications have been made with lenders, the preconditions could all be met for the firm bid at the resumption of trading next week. Then we get to see if anyone else is interested. The trading in the US could be pricing in another rumoured potential bidder as well given how close we're now getting to the full Sidara offer price so soon.

Fair post Bob.

Let's trust there's a good outcome for everyone. 35p would be a bargain for Sidara, but then so too might 70p or more for someone else. It's a company with healthy underlying earnings that's been crippled with relentless exceptionals eating away cash. Exceptionals that, in theory, have begun to roll off now. Its debt is also large, but not necessarily crippling given the scale of underlying earnings. It's the cash position which is weak. If they can find the cash to weather another year or two of 100-150m cash flow burn, then they can probably carry on long enough to fix it. But so far they just seem to have been unfortunate with timing, with it suddenly becoming harder to get credit from lenders more generally, while having to clear decks with a review (most likely at the behest of those same lenders) that admits to legacy accounting misstatements and pursuant covenant breaches.

The dream is that the review and the restated accounts clear the water enough to rebuild trust with lenders, and its own pension fund re: the unused surplus, so that more liquidity can be injected without a sale, or an equity raise, to buy time for the ship to fully turn and resume FCF generation.

Board-wise, I realize I'm probably in the minority here in thinking that Gilmartin and Arvin Balan were actually quietly quite competent and had/have done much to turn around what was quite obviously a very poisoned chalice. The Amec Foster Wheeler purchase by the previous management was a grossly underresearched and misguided acquisition that's taken many years to fully digest (they basically bought a bunch of legacy liabilities while ladening the company down with significant debt) and much of that digestion has occurred latterly under their stewardship. Balan's accounting qualifications were essentially equivalent to the claimed accreditation and were more than enough to CFO successfully at both Rolls and Wood, but I understand they needed to feed a head to the markets, even if it was his predecessor's failings that he was falling on his sword for. Ken too, has navigated what is perhaps one of the more challenging hands to be dealt in business, with not much to obviously fault him for that wasn't set in motion long before his tenure, and he may yet engineer an outcome that saves the company and allows it to prosper.

In your case it's 100.

The amount Aim and Dogger are posting on here, they must be really sweating this one.

Https://markets.ft.com/data/equities/tearsheet/summary?s=WDGJF:PKC

The WG instrument on OTC in the US is traded up at 36 cents/~27.33p GBP today.