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Animal
I can’t remember the details but there was a 100:1 share consolation so current share price c. 1p old money.
Bottom line is that if a D4E where BH’s get ****** then existing equity gets valued at a market cap of c. £25m. The value of the listing. That’s circa 4-5p
Mary will rant that I’m a shorter but I have a long term posting history and I value my reputation as such! We only have a few days to wait…. There will be a major D4E and odds are at a low price
DK
It’s very expensive to short PFC. Shorters have to borrow stock from Institutions to short and according to JN on ADVFN current overnight rates are 350%. This is because Institutions are calling in their loans so that they can sell their equity, squeezing the shorters. I assume some have better locked in borrowing arrangements than others.
Those shorters with secure locked in borrowing positions are obviously still hoping for 5p.
PFC can publish results now but the going concern statement will spook the markets. I’m sure they will announce next week but clearly better to sort out the restructuring first if they can. Hopefully no news now means we are close
One thing we can all agree on is let’s get it over with!
The BoD will claim that current problems are all down to legacy issues and now hopefully fully provided for. They will cite the full order book as proof of their credibility. I’ll be surprised if new equity (ie predominantly debt holders) would change the BoD.
IG
Read page 225, Note 26 of PFC’s accounts
‘Both the Senior Loans and the Senior Secured Notes are secured obligations of the Company and rank equally in right of payment with each other.’
That is pari passu! Explain why it isn’t if you can!
Worst case BH’s and Debtholders take 99% of the equity less the c $150m new cash to be raised.
The big question is what haircut is forced on debtholders.
The bond price is indicating say a 60% D4E and 40% haircut.
That’s a $400m D4E plus say $150m of new equity.
It will be the new money that forces through any haircut in order to give new money a greater % of the EV.
If BH’s take a haircut then they will make sure that existing equity are ******. Rule One of capital hierarchy. Massively diluting existing equity means more of the cake for them
IG
You are spouting nonsense. Look at GKP. Something very similar likely to happen here. The business is good, it’s the excessive amount of debt that’s the problem.
A D4E eliminates this problem. PFC keep winning new orders because their clients know this
Ivor
This has been done many, many times before. Check out Gulf Keystone. The bondholders convert 100% and take 99% of the Company, leaving a small stub to maintain the listing. They get a Court Order SoA to ram it through. With no debt they will be able to raise fresh equity for working capital.
‘ Exactly, the lenders won't want equity’
Agreed, we don’t but equity is clearly being forced upon us. What does this tell you?
PFC are saying to bondholders ‘we are insolvent, we have too much debt. So much debt that we can’t raise fresh cash because new money not stupid enough to come in behind $860m of debt that’s due to be redeemed by end of 2026.’
So we are all ****** unless you agree to a major D4E.
Bondholders will obviously want the D4E price to be as low as they can get it.
The ONLY other factor is what price/terms does New money want. This is existing equities best hope to avoid horrendous dilution. As in will they demand haircuts
The bonds are senior debt for Gawds Sake. If they are forced to take a haircut then equity is toast.
This is really really simple! Frightening that you don’t understand
PFC said
‘The Company has engaged and remains in discussions with its lenders to restructure its debt which would result in a significant proportion of the debt being exchanged for equity in the business’
This is clearly top of the list insomuch as they are now trying to agree a deal with debt holders. It’s the first time they have spelt out a D4E
There are two simple facts
1. PFC have said that the most likely outcome is a significant D4E at an unknown price/level of dilution.
2. This means a large stock overhang as BH’s dump their equity for restructuring.
So potentially disastrous downside if a low exchange price but any upside will be severely stymied by BH ‘s selling.
Where’s the risk reward? Explain the Bull case.
Red
The RCF/TL are effectively senior to the Bonds because time advantage. Half the $260m is due for repayment by the end of this month. I assumed this would give them an edge in the restructuring but Kepler say that they understand that ALL debt is subject to the D4E.
I suppose because Bondholders can always force a default (and pari passu) by not agreeing to the deal unless other debt holders takes their share of haircuts.
Red
All debt is pari passu!!!
I’m just stating the obvious. PFC have said that the most likely outcome is a SIGNIFICANT D4E. There will clearly be an equity cash raise as well.
Do the maths!
And the stock overhang afterwards? Who’s going to buy the $100m’s of shares that debt holders don’t want?
Brimslness
It’s a lousy risk reward.
We know that a large D4E is odds on. Brokers Kepler reckon over 50% of the debt will be converted and this includes the $260m RCF/TL debt on top of the $600m bond debt. So that’s over $400m of new equity plus whatever new cash they raise. Probably ball park $150m? So that’s over $550m of new equity.
Obviously everything hinges on the D4E price. The Bears say could be as low as 4p, the max the Bulls can realistically hope for is 20p.
So downside risk is equity wipe out at say 5p.
Upside case at 20p is minimal short term upside because debt holders will be sitting on c. $550m of shares that they don’t want. They will dump these shares.
They say that they understand that a D4E option is gaining momentum and that more that 50% of the nominal value would be converted.
They think this includes the bank loans (RCF/TL) so would be $600m plus c. $260m.
And they reckon significant means over 50% D4E.
They are Reduce with 20p price target. A Buy case would be led by a takeover.
My words - no one can judge value until we know the D4E price
Ivor
This is nonsense. Bondholders will only take haircuts if existing equity is effectively wiped out. The senior bonds are vastly above equity in the capital hierarchy.
The current bond price is saying that equity is toast
Rock
From FCA website
When we make contact with issuers
If we see unconfirmed media speculation that could indicate a leak of inside information under UK MAR, market rumours and/or an unexplained significant share price movement, we may follow this up.
We do this by contacting the issuer or its advisors as soon as possible to discuss the issuer’s disclosure obligations. This could include asking whether the speculation is true, and if so whether it constitutes a leak of inside information.
We may also ask the issuer to provide its analysis of whether it's currently in possession of inside information (as defined under article 7 of UK MAR) and whether it's currently delaying disclosure of inside information under article 17 of UK MAR.
Our enquiries can occur before or after the market opens, or during its operation.
It’s under
‘How we monitor the market and contact issuers’
Google search
Talies
The reason for the update was that PFC obliged by FSA rules to prevent a false market. The trigger is an unexplained rise of over 10%, PFC traded up 13% on Thursday.
You ask what’s new! PFC made clear that the most likely outcome is a large D4E. They said a ‘significant’ conversion of the $600m bond debt into new equity. We don’t know whether this also includes the $260m RCF/TL but appears likely since pari passu.
They also made clear that there will be an equity raise.
Obviously how dilutive this will be depends on the conversion price. The Bears say 4p, the Bulls say maybe 22p.
4p is devastating, 22p might offer a little bit of upside but the shares will be dead money for six months whilst BH’s dump the equity they don’t want.
So imo a lousy risk reward.
The mystery is why the shares were only down 20% on 36m traded volume.
It’s probably shorters buying back as the carry cost increased earlier this week. If so, then an opportunity for holders to exit at a decent price.
It’s going to be an interesting week…..
Slift
My greatest concern is that PFC start losing back orders because they’ve been unable to secure the performance guarantees. The PG’s are absolutely critical and a virtuous circle. Success frees up another maybe $150m of upfront cash flow.
Next concern is that another legacy problem or a new problem. Last update early March was positive but nothing yesterday re current trading.
The bonds are equally secured in a wind up so equally senior. However PFC do appear able to sell some assets but only to repay debt. It’s messy and I think unlikely to happen without BH approval to avoid future disputes. I’ve discussed this before.
The point is that the Bonds are vastly senior to equity. If BH’s want to get nasty they simply go into Admin and take 99% D4E. As per GKP
If the bonds suffer badly there is ZERO hope for equity