Member Info for PaulCurtis

They are obviously talking to everyone! I’m not saying RCF won’t extend if other things happen but clearly they are not extending as is.

The important bit to focus on is ‘materially strengthening’ the balance sheet. This doesn’t mean extending loans, it means a new cash injection.

Redheaded

Obviously PFC already have tried this!

WG

Brokers value the non core assets at c. $120m. I’m afraid they are not sexy.

Sexy could be selling core assets such as UK but this would leave PFC very exposed to ME. And it would have to be a very sexy valuation to get BH’s and RCF to sign off on it since it’s their collateral. But this seems possible to me although brokers think could be too disruptive.

The other possibility is that they sell say 29% of the equity at a good price to a competitor who would pay top dollar as gives them a foot in the door for a future takeover. But no broker has mooted this as a possibility.

Bottom line is that it appears they need at least $250m (need to pay off $250m RCF by October 2024) cash influx but from where?

And even if they could go into down mode without defaulting what would happen to the share price!!! This really is suicidally nonsensical!

The best hope of a good outcome for equity is a takeover but again the $850m debt at near 10% interest rate is a poison pill.

Otherwise how do they materially strengthen the balance sheet? This is the £1m question. Materially strengthening means a big chunk of new cash from either a very sexy asset sale and/or a capital raise.

I assume you must all agree with this? There is no magic money tree.

Slift

So where do they get the $250m to repay the RCF in a few months time?

How do they hang onto recently awarded contracts without getting the guarantees?

How do they service the debt interest? About $80m pa?

Running down the business leaves shareholders with nothing. An absolute disaster for equity

Amers and Redhead.

PFC have no control over the terms of any D4E. They are currently trying to put enough lipstick on the PFC pig in order to raise the necessary equity cash (to supplement non core asset sales).

A big dollop of this lipstick will be amending the terms of the bonds, otherwise will be very tricky to raise the cash.

There is zero chance that old equity will come out of this smiling if the current bond price reflects the eventual outcome.

It’s like your mortgage provider losing 60% on your loan but you not being wiped out! These are SENIOR bonds for Gawds Sake!

I’ve just bought another tranche of bonds at 42.8 cents. Was amazed I got hit after today’s update which was clearly positive.

Remember the bonds are Senior Debt and pari passu with the RCF in a wind up. I’ve been buying because PFC will survive and the worst case is a massive D4E which transforms the balance sheet. This is not like most distressed bonds where there is a bank with senior debt to pay off before the bonds get a look in.

Hence 42.8 cents appears a crazy price. The restructuring is clearly not good for bonds and since they are massively senior to equity, it’s clearly not good for you lot.

I can only think that equity has said to bondholders ‘we will cough up a load of cash but only if you take haircuts and extend redemption for a few years’.

I’ve said before that cash is King and whoever puts in the money dictates the terms.

If bondholders play hardball and say no, we will do a 100% D4E, they will still need to find some cash down the back of the sofa.

PVC

‘I respect the BoD saying that they are not going to maintain a running commentary, but this weeks flaccid & poorly positioned RNS shows once again the disregard for market sentiment and poor timing shown by the company IR team.’

How would you have phrased this release assuming there is going to be a major equity raise, bond hair cuts and partial D4E? As the bond price (I bt more at 43.4 cents today) and 10% shorters strongly imply.

The RNS allowed for this but you are too rose tinted to see it.

I admire your optimism but when PFC say that they are going to materially improve the balance sheet for the long term they must be also trying to address the $600m bond maturing in 2026?

Otherwise this will be a major overhang post restructuring?

CL

The point is that say asset A is currently part of BH’s security. Sell it to pay off the RCF means BHs lose out. A chunk of their security has gone.

Cheapboy

The senior bondholders did well and equity did pretty well, bearing in mind that junior bondholders took a 40% haircut. It is very unusual for even junior bondholders to get hit without equity being highly diluted.

The reason was that equity and senior bonds coughed up a load of cash at decent prices. Cash is King.

Sanddancer

Good post and you hit upon the most critical point.

‘Materially strengthen’ the balance sheet.

This clearly rules out just fudge loan extensions although these will be important. It means they must raise significant fresh capital but how?

A combination of asset sales with an equity raise is the obvious answer but what will be the mix? Bondholders will not sanction asset sales (effectively to pay off the RCF) unless shareholders make a significant capital contribution to help compensate for reduced collateral.

The more equity can contribute to the pot the better the terms they will extract from BHs. This was perfectly illustrated by the recent Metro Bank restructuring. PFC need one investor with deep pockets and a significant existing equity holding to protect. But is there such a beast?

Bonds were about 49 cents at the open. I’ve just bought some at 43.75 cents.

Par is 100 cents so bondholders are anticipating bad news. Maybe they are all idiots, as are all the shorters. I hope so!

I thought very similar to last update. PFC say they are talking to ‘other capital providers’ in addition to BH and RCF lenders.

The bulls here will interpret this as a new source of lending, the bears will argue that it screams equity raise.

Okay, by popular demand my final post ahead of restructuring. I’ll be back then and I have posting history here and especially on ADVFN under GHH. I am an income investor and my posting history clearly shows this.

My predictions

Bonds/RCF are senior to equity. There is therefore zero chance that equity does better than bonds. This is a legal fact.

The current bond price clearly indicates that the market expects this deal to be bad for bonds. Again this is not me being negative, this is blindingly obvious! It’s called reality!

Selling assets is bad for bondholders so they will not allow this unless they get something in return.

99% of the time that something is a an equity cash raise which makes the bonds more secure. Bondholders may then agree to asset sales to top up the free cash pot. A lot hinges on the RCF’s. They have effective seniority since being paid off first.

Will they extend? This could be a deal breaker since RCF’S are likely to want seniority post restructuring and bondholders won’t want to be relegated $250m down the pecking order in a wind up.

So to sum up I think most likely outcome is an equity raise but impossible to guess the price/amount because hinges on RCF and asset sales.

A takeover would be my dream result but if equity is up on the restructuring I will be absolutely delighted because my bonds will be significantly higher!

Red

The clue is in the headline, wiping out ‘the riskiest bonds’.

The PFC bonds are senior and have parity with the RCF. Hence no comparison to CS where junior bonds suffered because too big to fail and time was of the essence.

Worst case with PFC is that BH/RCF take over with a D4E.

Some of you ask why I keep posting here. I’d like to say altruism but the truth is that 12 Angry Me is one of my favourite films However you lot remind me more of that scene in The man with two brains where Steve Martin asks the portrait of his deceased wife for consent to marry his new bimbo, asking for any sort of sign!

This board is governed by wishful thinking and group think. You are incapable of debating simple facts such as capital hierarchy.

Serious investors are more interested in reading well reasoned negatives rather than the brainless ramping that dominates this board. You should always be questioning your analysis

I’m not saying sell PFC (there might be a solution I’ve not thought of or a takeover) but for Gawds sake open your eyes to the very significant risks

Niceto

But if you say to your mortgage provider that you want to sell 25% of your house and hang onto the cash? You say nothing to worry about, you are now more financially secure and able to service the mortgage, despite bank now having negative equity.

What will the bank say? I suspect a two word response.

PFC

You say you have evaluated the risk reward. You clearly have not if you can’t answer this simple question.

It is beyond obvious that BHs will not sanction a deal (asset sales) that prejudices them without significant compensation.

What can this be? You say something that doesn’t damage equity. But what? Take the rose tints off!

PFC

‘Re the bonds, the hierarchy issue is not likely to be the relevant determining factor if there is no dilution or administration.’

But how do you square the circle? Selling assets upon which the bonds are secured will obviously be vetoed by the bondholders unless they get something significant in return.

So what can PFC give BHs that doesn’t damage/dilute equity? You really need to focus on this.

PVC

‘The bonds are perhaps more vulnerable to the likely financial restructure than equity in my opinion. A raise at this level will not raise enough to justify the dilution.’

Capital hierarchy always wins. If bonds suffer then equity suffers even more. The bonds are senior and pari passu with the RCF’s. They will only accept a hair cut if equity cough up a load of cash, thereby making their bonds much more secure. Otherwise they will demand a D4E. Find me an example where equity has done better than senior debt? There isn’t one.

Red

‘Conversely, why if PFCs finances are so parlous would any customer place work with them - they would fail even the most basic financial due diligence tests’

Because PFC isn’t going bust. It’s a valuable business and PCF should be able to easily refinance. Worst case would be a last resort D4E.

Please look at DGI9, it’s a salutary example of cash is King, regardless of value. If you become ‘distressed’ then new money wants a bargain. This is DGI’’s problem.

This forum is a perfect example of group think, if you all say it often enough it must be true. You aggressively attack anyone who tries to rationally disagree with you because you are incapable to debating the facts.

You claim that PFC will sell a few assets, renegotiate terms with the BH’s and RCF’s and equity will soar. No need for a dilutive fund raise.

But then why are the bonds, which are senior debt and guaranteed against the assets, trading at less than 50 cents on the dollar?

This is a fact which you are just brushing under the carpet.

Rather than the juvenile insults, please explain to me how this works. How does equity come out of this with big upside when the senior debt is expecting to suffer badly?

It’s a very simple question.

And if it makes you feel better, I’ve taken a bath on DGI9. An investment trust, last NAV was 95p, shares trading at 18p. Why?

Short term cash flow glitch. Lots of assets count for zilch if short of cash. This is not a market for rose tinted glasses.

PFC

I realise this is as welcome as a leaking bucket of cold sick but you are making the classic mistake of prioritising price averaging down. I consider myself an experienced and reasonably objective investor but I periodically fall into this trap as well. Currently DGI9!

None of us know how PFC plays out but the bonds, now below 50 cents again and the record high 11.6% short position, scream caution. By all means be long but please don’t risk more than you can afford to lose.

You should only bet the farm when you are 100% and the bonds/shorts are a clear red flag.

I honestly wish you all the best, good luck.