Member Info for PaulCurtis

Ivor

If there was a realistic chance of a takeover PFC would have to notify the market. Look at EBOX, no actual approach but they had to issue a statement about a possible offer. The FCA are very strict on this.

You can’t square the circle re bond price implying minimal value for the equity versus equity implying that the bonds are worth 100 cents!!! The bonds and other debt is senior, hence gets paid out before equity.

We have

Shorts still over 10%

Bonds trading at 25% of par implying significant bondholder pain.

Bonds senior to equity, there is ZERO chance that equity can do well if bondholders do badly. Especially if BH’s are injecting the critical cash.

No update from PFC and therefore their last update still stands. Any material change MUST be notified to the market.

Add that lot together versus the only reason you are buying - the rising price implies someone knows something you don’t! Or it could just be blinkered group think on steroids.

Ivor

This is pure nonsense!!!

If anyone of substance offered the Debtholders a takeover they would bit their arm off!

The bonds are trading at 25 cents because a) a very real risk of insolvency and b) they don’t want the risk of haircuts and to hold equity

Most likely outcome is a D4E. Whoever puts up the cash has the company over a barrel. I’ve posted many times before, if equity can come up with the cash they can demand better terms (eg bond haircuts) as their price for saving the company.

But it’s the BH’s who are offering the only alternative to insolvency so equity are going to be ******. There will be a D4E at 4 or 5p imo.

All this talk of a takeover is nonsense. PFC would have to disclose this and obviously if there was a takeover at over 20p then the bonds would be fully covered at 100 cents. Hence they wouldn’t now be trading at 25 cents!

Ivor

‘The most telling passage of the going concern statement is that the creditors want a “single point of enforcement” and a stress test on the group’s break up. In other words the bonds are not considered easily enforceable and if they are only against a straw legal entity.’

The bonds are senior secured against the assets and pari passu with the RCF/TL. Hence if PFC really is a steal at £2 a share there is no way that bonds won’t be paid off in full.

Sadly it’s not! This is about how easy/viable it is to sell off the good bits since there will be overlaps. It implies no value for equity.

Ivor U Turn

Read the results from only last week.

Page 153, part of the Going Concern Statement . PFC are saying that selling off the assets leaves equity with nothing! The interesting question is whether Debtholders will prefer this option to a D4E. It’s unclear whether this is contingency planning or whether debtholders think it could be preferable?

And the BoD currently have minimal control of the restructuring, it’s all in the hands of the debtholders who are offering the only rescue option.

In light of these risks, as part of the negotiations of the Financial Restructure, the Company’s secured creditors have required the Board to work on various contingency plans including making preparations for alternative outcomes to a successful restructure. This includes changes to the Group structure to create a single point of enforcement.

In addition, work has been required to evaluate which parts of the Group, if any, could be separated and continue to trade independently. These assessments are ongoing and expected to be completed prior to the implementation of the Financial Restructure.

Such contingency plans, if enacted, in the absence of a successful implementation of the Financial Restructure, would likely result in the Company entering an insolvency process.

The future intentions of Lender Group stakeholders in this regard cannot be known with certainty by the Board. In the event of an unremedied default by the Company, the lending group could exercise their security rights which would likely result in the Company entering insolvency proceedings

Please read the Going Concern statement, the bit where PFC advise that they have been asked by BH’s to determine what value can be achieved via insolvency and selling off the best bits. I assume this is determining whether ring fenced from the undesirable assets. Obviously equity would get nothing because Group PFC will be bust.

There is clearly no bid for Group!

And if there was bid interest, there would definitely be an update from PFC. Otherwise it’s blatant insider trading and the FCA won’t allow that.

Last week virtually everyone here thought PFC were toast. PFC has just warned the choice was insolvency (equity wipe out) or a highly dilutive D4E (assuming the ad hoc BH’s can cough up $300m cash).

Results were worse than expected and perhaps, most worryingly, there appeared to have been no progress (since the restructuring since the 12th April update).

The Going Concern statement was nightmarish.

So aside from the share price rising, which could just be shorters closing, what has changed to give the Bulls new hope? Nothing material?

This looks like self fuelling PI group think.

The bonds are still stuck at 25 cents. Not a whiff of an impending takeover.

And most revealing of all, no update from PFC regarding the dramatic price rise. Only 7 days ago they clearly said equity was ******, now if they are talking to someone re say a 30p bid they would have to tell the market. The FCA will be involved after the near 150% rise to check there is no false market. ie blatant insider trading.

I can only think it’s shorters closing out because they are worried about PFC going into insolvency. I don’t know what shorters do if they can’t buy the shares back because company gone bust?

Assume it’s a long drawn out process and they are paying very high borrowing cost.

IMO 10p is a great exit price. D4E will be at a much lower price if it actually happens. There’s a chance that PFC becomes insolvent and the best bits sold off, leaving nothing for equity.

Risk reward screams sell with caveat being a possible short squeeze

Agree it all looks pretty dire but the bottom line is that the auditors and directors have signed off on the Going Concern statement so reasonable expectation that they can see through the restructuring. However I assume that the acid test will be whether the FCA let them re-list if a false market ie the GC is too flaky. So if they do re-list it will be a positive?

Bond price is 25 - 27 cents which is up on the day. I wouldn’t buy more at this price but too greedy to sell. The Going Concern statement makes for unpleasant reading.

No mention of bond haircuts which is odd/positive. I can’t believe BH’s will escape hair cuts.

I’m afraid equity is going to be horribly diluted and those of you who have sold, albeit at a loss, will be relieved that you did.

IMO those of you who still hold must hope the shares are relisted ahead of restructuring and the shorters squeeze up the share price.

I met the LABs team a few weeks ago, thought they were very impressive and the assets are well located in the Golden Triangle. They are in the midst of building out Oxford so there is a risk re letting this space. However supply demand looks good. I have a large holding and came away feeing very relaxed. Think there is a lot of potential upside and must be a takeover target.

I also bought more New River this morning at 74.3p. You will like the unsecured long dated debt at 3.5%.

Re PFC, the bonds are firmer. Someone bidding 20 cents for several million.

I’m mainly invested in REITs since I think they offer a sensational risk reward, trading at very large discounts to tangible assets and paying out 8-10% dividends. And linked to inflation so rental income is increasing plus there is limited new build so supply demand metrics are good.

My largest holding is EBOX (logistical warehouses) but this has now bounced on takeover rumours.

Two that haven’t yet bounced, and I’m buying, are LABS (well located life sciences laboratories) and CLS (secondary ell located offices).

LABS is 40p versus 80p NAV. Quality management and assets.

CLS is 87p versus 230p NAV. IMO a great contrarian play since restricted new supply and their offices are a notch below prime. Crap offices are dead in the water thanks to WFH but well located ESG compliant offices will find tenants who can’t afford the much more expensive and very limited number of new offices being built. CLS paying a covered 9% dividend, well managed and most of the assets are ‘ring fenced’ so not at the mercy of the banks re renegotiating terms.

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