The next focusIR Investor Webinar takes places on 14th May with guest speakers from Blue Whale Growth Fund, Taseko Mines, Kavango Resources and CQS Natural Resources fund. Please register here.
IG
You seem to have forgotten that you were the idiot ramping up the equity when it was c.25p!!!
And you are too dumb to realise that debt holders now effectively own the business. A business that you were happily valuing at over $1bn EV only six weeks ago
Clearly there is risk over obtaining the PG’s but should be doable. Debtholders may have to take haircuts and/or convert all debt to equity worst case but this crisis is about too much debt so resolvable.
IG
‘That answer makes you pretty thick as well as wrong. Mindlessly ramping bonds and shares in Petrofac is definitely unintelligent at this time. The fact is that the company is today technically worthless and insolvent’
LOL!
PFC is only insolvent because it can’t pay its Debt holders but debt holders have now given them a period of grace to sort out the debt position. Hence PFC is not currently insolvent! The Debt holders are pulling the strings and the impending D4E led restructuring will remove this insolvency risk. Debt holders may be forced to take haircuts as well, the bond price is implying this. New restructured PFC could look very solid if most of the debt has gone, $300m of new cash, $200m of performance guarantees, the non core sale proceeds and possibly the Thai $130m or part of it
What don’t you understand about that!!!
IG
Can you please explain how you have gone from thinking PFC a great buy only six weeks ago, despite $850m of debt, to worthless now when all that debt can all be switched into equity?
It didn’t work out, equity got stuffed.
You do realise they immediately afterwards they did a 100 to 1 share consolidation so that current share price is c. 1p old money. From memory the shares were 10 times higher immediately before this restructuring
IG
You truly are completely clueless. Only six weeks ago you were claiming that PFC a raging buy, now you are idiotically claiming that the senior debt is worthless.
Are you incapable of understanding that the debt holders will simply take control of the existing business. They are the only debt. They will pump in $300m of cash so combined with D4E (and dramatically reduced finance costs) it could be a great business.
I’ve just posted this on ADVFN in reply to a bondholder friend who said
‘One third chance bondholders refuse to inject more cash and it's a zero.
One third chance, I double my money.
One third chance, I treble my money’
I said my take was
Low risk of wipe out because debt holders are in control. That’s $860m of debt that can be subjected to hair cuts/PIKs/extensions as required to obtain the $200m Performance Guarantees. I’m assuming that all parties believe that the $300m proposal is ballpark what’s required. Principle risk whether the BH’s and RCF/TL’s can work together?
The new $200m bond will be super senior and potentially highly attractive. Could be sugar coated with early redemption and high interest rate.
The $100m equity raise is unattractive since shares will immediately trade at large discount to the 4 - 5p D4E price. However could come with warrants.
Debt holders will have to really screw up if they can’t salvage something?
Most likely outcome?
Latest RNS says a significant portion of debt will be converted to equity. Implies BH’s keep maybe 25% to 40% of their bonds if lucky. No mention of haircuts but the bond price indicates that this is in the post.
Could double your money from 21 cents and, with patience, might easily quadruple once the massive overhang eventually cleared.
And post restructuring would be ‘now or never time’ for any potential bidders to snaffle up PFC up on the cheap.
What’s the right Enterprise Value for new financially solid PFC?
It’s been trading around $1bn despite the threat of restructuring, probably thanks to excessive PI enthusiasm. Going forward it will be cynical debt holders controlling the price and the sexy geared upside that’s so attractive to PI’s will have been heavily diluted.
Brokers seem relaxed with a > $1bn EV though.
In summary there will be $200m of new bond debt plus $100m of new equity but offset by $300m new cash so EV neutral. Hence lots of latitude for debt holders ($860m) to take haircuts to get this over the line.
I’d hope we get the terms announced well before the end of next month because PFC can’t risk losing business over the ‘going concern’ uncertainty. It appears that the principle hold up is sorting the Performance Guarantees and this has been WIP since December. They must know what hoops they need to jump through so I assume the $300m new cash plus D4E achieves that, hence we are just waiting for sigh off.
Fortissimo
‘So there has to be some fair deal for all involved or there is zero point in continuing’
The critical points are that all the debt is senior secured and it’s only the bondholders who are offering a route towards solvency.
Debt holders are in total control and the BoD will have to accept their proposal/terms if they have no alternative rescue plan
As a golden rule, a restructuring normally values the existing equity at listing value which is £20m to £25m. So 4 - 5p.
This is what will be on offer. And worse, the D4E will be massive and highly dilutive. Maybe $600m ..
And even worse, there will be the mother of all stock overhangs. BH’s don’t want equity and if D4E at say 5p, will take down to maybe 3p to get out. I will
IG
It is b/w and the BoD have no choice but to accept debt holders terms if there is no alternative solution. This much is blindingly obvious. The debt holders will stuff equity. Why won’t they?
Is there an alternative solution? No reference to this today. No one is going to buy PFC today when they can buy an around half the EV post restructuring, when debt holders will be by far the largest shareholders and want out.
‘ Paul I get it what you are saying, but if some investors here are 70 to 80% down. What difference it would make losing another 10 to 15%, in the hope that company turn things around. I m lucky, as my avg is 22P.’
You are like the Black Knight in Monty Python’s Holly Grail ‘Tis only a flesh wound’ as his various limbs are hacked off!
Today’s update screams that a cheap incredibly dilutive D4E is now pretty much nailed down bar a miracle. The critical point you need to grasp is that it’s the debt holders who are providing the liquidity.
That means current equity is stuffed. Bondholders are being forced to accept new shares that they don’t want. They will obviously dump them which means that short term the shares will trade well below the D4E price.
Debt holders will want a D4E price of 4 to 5p so maybe will trade around 3p.
This is when any predators pounce….
Anyone, tell me where I’m wrong?
I bought more bonds at 20.75 cents with no accrued interest. I’m now sitting on a big loss fwiw.
Today’s RNS was pretty dire and I’m nervous despite holding senior debt. Equity is going to be horribly diluted and everyone here must realise that. The current share is being propped up by shorters who are closing ahead of tomorrow night but there will be plenty of shorters who have secure borrowing arrangements and will see it through.
Equity though, if it is to benefit from the short squeeze, has to sell by close tomorrow. Thereafter there is no short squeeze.
Realistic holders knows they have to sell pre suspension, hence the rampers are out with wild upside claims. I bet they all have their finger on the sell button!
My understanding is that the borrowing costs have recently rocketed up.. Shorters have to borrow stock from institutions and those institutions are demanding much higher interest payments to reflect the opportunity cost (or rather potential loss) of not being able to sell now.
Some lenders are calling in their shares so that they can sell now, squeezing some shorters.
I assume that different shorters have different borrowing arrangements and some are more solid than others.
IMO there is a game of chicken being played between shorters and equity with end of play tomorrow the deadline. Any sensible equity holder who has actually read today’s update has to be out pre suspension, it’s just a question of finessing the best price.
Today’s RNS clearly states that PFC is insolvent. It is being propped up by BH’s and the Banks. I assume no one disagrees?
So PFC are in a very weak negotiating position. Bondholders and Banks hold all the strings and are providing the only solution.
So ask yourselves, will they give current equity a good deal or will they offer the bare minimum that they can get away with?
Current market cap is £118m or $150m. My best guess is that current equity will end up with a % worth £25m/£30m to represent the value of the listing. Look at what happened with GKP, it’s the law of the jungle.
What else can PFC do other than accept whatever BH’s/Banks offer if it’s the only route to avoiding insolvency?
Deferring bond interest was always likely but I’m surprised no reference to fresh capital from existing equity. Looks like BH’s are providing the cash and will therefore dictate terms?
If significant means 50% that’s $300m min Bond D4E plus $200m new equity so min $500m new shares to be issued at a very low price?
The only hope for existing equity is any shorters wanting to close prior to suspension? Might give equity an escape route? However some may be BHs as well and intending to close via the $200m raise.
LWHL
Fair enough but I think anyone who claims I’m a shorter is ranting. My posting history, here and on ADVFN proves otherwise.
The share price is being propped up by shorter closing because the borrowing costs have shot up.
I’ve said before that the risk reward absolutely screams sell and wait for the restructuring RNS. A D4E is odds on and there will then be a massive stock overhang which will kill any/significant upside even if a decent swap price
But the downside if a low D4E price is potentially horrific. Why take the risk?
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