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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.
Janbo
‘@PC...you didn't say 'improves for the New shorters'. You said 'improves for the shorters'...that's fact.’
I said (copied from first post)
But the really big question is why aren’t new shorters jumping in with the shares at 32p? If a fund raise is so odds on?
Makes no sense. If there is to be a large asset sale, negating the need for a raise, why aren’t existing shorters now buying back but if there is to be a big fund raise at say 20p, why aren’t new shorters piling in, selling at 32p?
mary
‘ lse is a welcoming forum on the whole and the majority of posters are sincere. many are investing with funds that they do not want to lose (only invest with what you can afford to lose is my m.o) and to read mainly negative posts or dressed up posts from you’
a welcoming forum! lol. you **** me off, with no good reason, just for disagreeing with group think. i always try to explain my thinking but you lot come up with this crazy crap about me being a shorter rather than debating the facts.
it’s like lord of the flies! or lob ‘stone the blasphemer’
so forgive me if i respond aggressively to yet another barrage of mindless ‘shorter’ nonsense
BC
‘ Paul, shouldn't the bond trade up if the restructuring was going well?’
Yes, this is odd as well. The bond price has been flat since the last RNS despite the shares rising over 30% since. My guess is that potential buyers are worried that any restructuring will involve PIKs. And of course the risk that in order to get the restructuring across the line BH’s will have to give RCF’s seniority and/or use sale proceeds to pay off the RCF’s
I said those who said my post was negative are too dumb to have understood it!
So explain why it was negative? Show me why I’m wrong rather than all this brainless Short Paul crap! Address the facts.
I said as the share price rises, so the risk reward improves for NEW shorters? What do you disagree with? How is this negative.
However there have been no New shorters. I said this was a positive. Again, do you disagree?
And yes, everyone inside will have signed up to NDA’s but 99% of the time, if there are enough different parties, something leaks even if it’s just nudge nudge wink wink.
Those of you who think today’s post is negative are simply too dumb to have understood it!
It is beyond obvious that as the share price rises, so the risk:reward improves for the shorters. Does anyone disagree?
So no new shorters must be a positive?
As a couple of you have said, maybe no one knows. Maybe nothing has leaked. Imo this is verging on the impossible. For example there will be a consortium of bondholders and RCF holders who have to brought inside in order to sign off the restructuring. They will have a very good idea about how it’s going in terms of any concessions they may have to agree to.
Imo there are too many individual holders for this not to leak. Not the detailed terms but yes it’s going well versus we’re struggling to agree terms.
This current rally could be either PI’s chasing the price higher based on ‘trend is your friend’ or there really could be fire under the smoke.
If there is to be a highly dilutive equity raise, then why aren’t existing shorters increasing as the share price rises? Perhaps they are at the limit of their risk exposure in case of a shock takeover.
But the really big question is why aren’t new shorters jumping in with the shares at 32p? If a fund raise is so odds on?
Makes no sense. If there is to be a large asset sale, negating the need for a raise, why aren’t existing shorters now buying back but if there is to be a big fund raise at say 20p, why aren’t new shorters piling in, selling at 32p?
As we wait for news, the end of day short positions becomes more and more interesting as the share price rises. Tonight’s will be especially interesting
Thanks StockNor
‘ You guys can call me a shorter all you want lol, but if you think PC is a shorter, I think you are wrong. A lot of his comments make sense, but some of you seem like you don't want to hear it, even if it's true’
If I’m researching a new stock I’m always much more interested in well reasoned negative posts so the ‘shoot the messenger’ attitude here is odd. Most of the content I post is simply regurgitating broker comment.
However I must confess that I’ve been very wrong about the recent price spike which I’m very pleased about, even if I don’t understand why the shorters aren’t closing. I’ve said before that there are lots of different parties involved so very likely to be leaks. Hence this price rise is encouraging and hopefully based on something tangible.
Could the shorters be buying back via CFD’s so not disclosing? If current shorters don’t want to increase their exposure, new shorters could still jump on board as the share price rises. This is not happening. It’s weird!
There has to be a sale or an equity raise. And what’s more, a sale that equity has got wind of but not the shorters
Good article in The Times today re the dangers of group think
Logically an 11.4% short position is a concern but group think here thinks not!
Also that I’m a shorter when, if you can be bothered to check my posting history on ADVFN as GHH, it’s all property and infrastructure REITs. My portfolio is Petrofac bonds, Metro bonds and high yielding REITs. I’m currently buying SDCI (epic SEIT) at 56p, NAV 90.6p and dividend 6.25%.
Slift - to answer your post.
Do we agree that the larger the capital raise the better off the bonds will be? And that the higher the equity price, the easier this will be to achieve? So our interests are clearly aligned?
So why are bonds trading at 52 cents? Bondholders are worried that PFC will struggle to achieve a large enough capital raise and will therefore hit them with a D4E and/or PIKs.
And I think extending the RCF will be trickier than you think because at the moment the RCF is pari passu with the bonds in a wind up but effectively have partial seniority because they redeem before the bonds. They are likely to demand full seniority if they are to extend and bondholders will not want to accept this. Just as you say, bondholders won’t want to sanction the asset sales (to pay off the RCFs) since it’s part of their collateral. So messy?
You discuss the JDS vessel and make a good point about the contract extension. However capital values have been whacked by interest rate rises - look at Taylor Maritime (TMIP), another high yielding big NAV discount IT I’ve been buying. Trading at an all time low but I’d have thought Red Sea disruption would be improving rates/values.
But whatever, BV was $56m so let’s stick with that although selling a 10% interest a bit tricky?
IES assets - you say over $170m BV but BV was $69m and depreciating as you say?
It’s possible that they could sell the EPS assets but this is a core part of the business. Perhaps sell a minority part?
‘ For your future reference a dictionary definition of ominous is 'giving the worrying impression that something bad is going to happen; threateningly inauspicious.'
For ****’s Sake a 12.4% short position is because these funds are expecting a fund raising!!! That gives me a ‘worrying impression that something bad is going to happen! ie a fund raising!
What bit of this don’t you understand.
But of course these 7 professional funds are all idiots, they have completely misunderstood the situation and so nothing to worry about. Oh, and all the analysts are wrong as well when they say they are expecting a capital raise.
All I’ve said is shorters buying back is good news, shorters holding firm is bad.
Red
The Bonds are senior. PFC can’t legally issue new bonds that are more senior without the consent of the existing bonds and the RCF..
You say that you know more than the 7 professional funds who are shorting PFC. Do you really believe this?
It is blindingly obvious that PFC need to sell something or they need a capital raise. There’s no magic dust to sprinkle on the RCF to make it disappear or to free up the guarantees. Only a new cash injection via a raise or a sale will achieve this.
Red
‘The cash position has got worse, agreed, but marginally not dramatically - per the update.’
But this thread started with Tuan claiming the Company said they needed to find $450m. Perversely I was the one saying it’s not that bad!!!
It appears some of the muppets are upset my use of ominous in respect of the shorters not selling.
Just as it would be a big positive if the shorters started closing, it must follow that it’s a negative if they don’t, unless you have **** for brains!
Red
Thanks for a reasoned reply.
The cash position has got dramatically worse because no guarantees. How does PFC free up these guarantees and extend or pay off the RCF?
I think we can agree that the 7 shorters expect a capital raise?
So it’s your opinion versus their collective judgment? Are they really all wrong?
I was really hoping that at least one would have started closing by now if there was a good chance of a takeover
Mary
If you actually try to understand what I posted it is mostly positive. Someone posted that PFC needed $450m and I pointed out that this probably included RCF and guarantees. Hence equity raise limited to how much is required to free up this cash.
Does it not worry you that the shorters aren’t closing?
This can ONLY imply that they think they are going to be able to buy back via an equity raise?
Can all 7 of them be so wrong?
Please explain your thought process?