Member Info for PaulCurtis

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

Ivor

The bonds are senior secured debt ($600m) and rank equally with the RCF/TL’s ($260m) of which half need to be repaid by end of April.

All debt is in the same boat, all pari passu. The RCF/TL’s have a time advantage in that they are first in line for repayment but not in a wind up. Then all equal.

Yes, I’d rather be in the RCF than the Bonds because likelihood is that PFC sell assets to pay off RCF, undermining BH security. But the bonds are still secured senior debt and if BH’s take a big hit then equity is completely ******!

Slift

The bonds would convert at par of 100 cents. However there could be a haircut as well but this would be separate. Ie say 30% haircut and then remaining 70% converted at 100 cents at the D4E price.

Yesterday’s RNS did not allude to haircuts which may not mean there aren’t any. Haircuts would mean it’s all dire and equity will be totally ******.

So I’m surprised the bonds are trading at c. 30 cents plus accrued when RNS implied only a significant D4E. ie I might get 50 cents of new bond and 50 cents of equity. Very attractive at 31 cents!

So makes me think something nasty is coming BH’s way which is ominous for equity.

‘The Company has engaged and remains in discussions with its lenders to restructure its debt ….

And the new bit

‘…which would result in a significant proportion of the debt being exchanged for equity in the business’

Today we were told there will likely be a significant D4E re the Bonds. The bonds are $600m so say half, $300m?

Plus an equity raise so say $150m? Sounds ball park reasonable.

So that could easily be $450m of new equity but at what price? None of us know but clearly this is potentially devastating for existing equity.

The likelihood of this happening has significantly increased after today’s update. That’s what has changed!

Only down 21% on a massive 26m shares traded so far? This despite the company spelling out that there is going to be a very significant D4E. D4E on big chunk of the bonds and new equity raise.

Only a lunatic would be buying when so much uncertainty!

So who is buying?

Probably shorters buying back because cost of borrowing now so high but if not, are there really so many stupid PI’s or is there smart insider money buying? The bond price(31 cents) screams that there’s no smart money buying

For once I’m hoping we don’t see any shorters closing over the next few days!

Appears little progress on none core sales and how long have they got before they start losing the order backlog because not got the guarantees in time?

I’m not so concerned about the $130m RCF due end of April as the banks are unlikely to declare a default since then pari passu with the bonds.

Bonds are due $30m end of May but again they are unlikely to kick up a fuss.

So the thing scaring me as a BH is losing business - maybe I’m be paranoid but the wording re Performance Guarantees was a bit odd?

I should be getting a load of updated broker notes over the next few days, I’m keen to see what they say.

Obviously from your pov, everything hinges on the D4E price. The more distressed PFC are, the lower the price.

Is not replacement cost a better metric for determining value rather than some arbitrary NPV driven valuation?

Ultimately it all boils done to supply demand. If roll out of new storage dries up because revenues too low then revenues must rises.

REITs appear easier/safer as new build costs generally trending up with inflation whereas battery storage looks most exposed to reducing battery prices and improving storage capacity.

Hanoil

The point of this post was to prove that equity can’t stop a BH D4E, even 57%!

And billions of barrels of oil versus billions of back orders. My point was both sets of shareholders thought ‘too big to fail’.

And personally I don’t see much difference between billions of barrels/orders. The oil was a tangible asset whereas Orders are subject to Guarantees and we don’t know the margins.

Anyway I’ll stop posting now until next RNS. I really hope that the restructuring is good for equity because it must then be even better for bondholders. I dream of a takeover. However my prediction is that the PFC share price will be significantly lower than now.

I’ll be back….!

Ivor

You are just a ramper, too lazy to do even basic research. You spout this nonsense because you want to persuade gullible muppets to pile in so that you can profit?

The GKP post is what actually happened. You can track back and check the BBs at that time. You will see how there were plenty like you. You may spot me as well (GHH on ADVFN) having the same argument's and abuse as I’m having now!

Incidentally there was a 100 for 1 share consolidation immediately post restructuring so current GKP is effectively c 1p old money. As in equity got wiped out.

13th October 2016

GKP shareholders felt exactly as you do but Court Order pushed restructuring through

‘ The Restructuring involves the implementation of a new capital structure to materially strengthen the Company's balance sheet with a significant debt reduction from over US$600 million to US$100 million through the conversion of over US$500 million of existing debt into equity of the Company by way of the Scheme.

In addition, Gulf Keystone has increased its liquidity by raising $25 million through an over-subscribed Open Offer. This improved liquidity allows the Company to implement the near-term investment plan of maintaining production at 40,000 barrels of oil per day ("bopd"), and with the potential to increase production to 55,000 bopd, subject to the Kurdistan Regional Government's Ministry of Natural Resources ("MNR") and MOL's approval.

Admission of and commencement of dealing in 21,910,523,553 new common shares pursuant to the Open Offer and Debt Equitisation are expected to occur on 14 October 2016 (the "Admission date"). Qualifying Shareholders will be notified of their allocation of new common shares within 14 days of the Admission date. Due to the Open Offer being oversubscribed, certain applications made by Shareholders under the Excess Entitlements Facility were scaled back in accordance with the terms of the Open Offer. Excess funds in respect of applications that were not met in full will be returned to the applicant within 14 days of Admission.’

Check out the BB comments at this time (early 2016) and you will see identical to here. GKP had billions of barrels of oil, PFC have billions of orders. PI’s ignored that insolvency trumps assets.

Paddi

Because BH/RCF can simply get a court order SoA and force their D4E rescue package on shareholders. Exactly this happened with GKP.

PaddiG

They are all a bunch of ruthless sharks! There will be no quarter given, they will only act in self interest.

Remember the bonds and RCF are equally senior but the RCF’s currently have the technical advantage of maturing before the bonds.

Hence the RCFs will not extend beyond the bond redemption date. This would mean a massive $850m cliff edge in c. 2026.

New equity would look at this and run a mile.

Hence this is all chicken and egg, the restructuring plan has to be transformational otherwise equity won’t be interested. New money will not invest in a company with $850m debt redeeming within a couple of years.

PFC are saying this with ‘materially strengthening’