Member Info for PaulCurtis

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

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.