Member Info for PaulCurtis

Some good news insomuch as reducing the amount of PG’s required and current trading re new orders is going well.

We get results Monday but implication is that the legacy contracts are still a festering liability.

An equity raise is now part of the restructuring package so this will help reduce dilution for those of you who have the cash and inclination to price average down, assuming a RI.

However remember that the market cap will be massively higher so upside will be constrained eg going from £10m to £20m is an easy 100% but going up from say £500m is a harder.

‘ Deleveraging: the conversion of the majority of the Company's existing debt into equity, through a Court

approved restructuring process, resulting in the significant dilution of the existing shareholders, the extent of

which is still to be agreed.’

Alron

Because I think there will be a D4E. My best guess is that I will get c. 50 cents return but I’m nervous and I hold the bonds. I did well on GKP but got burnt on Afren

My Petrofac bonds are my second largest holding, Metro Bonds my third largest but my largest is LABS, Life Science REIT.

Announced H1 results this morning- Nav is 76p and share price is 33.5p. 2p pa dividend.

They invest in Lab space in the Golden Triangle. If you read the financial press you will see that this is the sector to be in. Imo the assets at good and in London, Oxford and Cambridge

In view of the massive discount to NAV the company has today hoisted the For Sale sign.

I’ve bought yet more, big long term seller holding price down at the moment

Cheap Boy

I explained this yesterday, borrowing costs are now very high as this drags on and the risk of insolvency increases which would take even longer to sort. Some of these shorters are under risk management pressure, see the article in the FT about shorters getting hit by takeovers.

But can you explain why the bonds are trading at 25 cents when par is 100 cents? Unless you can you are crazy to be an equity bull. By all means speculate re the short squeeze bubble but the bond price unequivocally screams disaster?

Explain how equity can be worth 20p if bonds worth let’s say 50 cents which appears to be what the market is predicting?

Thanks Maverick.

I agree that the higher the debt/gearing, then the greater to potential upside (and risk) for equity holders.

Re BT.A, they can carry high debt if they can service the interest and redemption payments. As long as they don’t default they have control.

PFC has lost control because it can’t service or redeem its debt. It’s now at the mercy of its Debtholders and they won’t be charitable.

This is exactly the same as GKP. Both insolvent and propped up by defaulting on their Debtholders.

You say they can trade out from cashflows! This is the opposite of what the Going Concern says. They are not paying about $90m pa on their debt let alone the capital repayments. And what about getting the all critical PG’s! Where are these coming from!

There seems to be a significant short squeeze and good luck to you. Who knows how much further it goes but the bond price unequivocally says it’s going to end badly

Yes.

I’m saying that in a restructuring where the debt is greater than the value of the assets, then the existing equity is valued at about £20m. This is the value of the listing.

There is $850m of debt. Assuming about 60% of this is converted to debt that’s about £380m.

So you would end up owning about 5% of NEW PFC which has 60% less debt than now.

Of course there could be Rights Issues as well to help re your dilution

Compare to GKP - just look at the share price graph for 2016.

Maverick

If you were in GKP were you on the various forums? If so we must have come across each other! I was arguing exactly the same as now. That there would be a D4E at an eye wateringly low price and I was right.

Can you please confirm that the D4E valued equity at circa £20m.

PFC was very similar to GKP - both good assets but insolvent with loads of debt. The debt took over….

Why are the shorters closing?

The bond price clearly indicates that it’s nothing sexy like a takeover.

Jacknife on ADVFN says the cost of holding a short position in PFC has rocketed over the last few months because lenders are increasingly worried about being locked into a protracted restructuring or worse, an insolvency process. And shorters must be even more worried as they are paying the bill!

And I assume that as the share price goes up, does the holding cost rise with it? If yes, then this really is a short squeeze as some of these funds may be under internal pressure re risk management.

So again, congrats to those of you who anticipated this but it really is a trading opportunity and not a long term investment.

The bond price screams that there will e a day of reckoning…

Amers

The bond price of 26 cents is clearly saying that if PFC were forced into insolvency and wound up, the assets being sold off, then bondholders would only get back maybe 40-50 cents on the dollar. ie the bond price is saying that equity is worthless.

No one here can disagree with this?

If equity is effectively worthless, then in a restructuring (ie a D4E) it’s only value is as an existing listing vehicle for the D4E. This is usually circa £20m hence 4p.

Look at the GKP restructuring. Very similar to this and from memory the shares were trading around 5p and the D4E was at 1p, valuing equity at c. £20m. Please check it out

Maverick

‘@PC How can you assign a value like that - its the same as me saying this is worth X - until we get an official RNS this is speculation’

PFC’s $850m debt is senior and secured against various assets. It’s like a mortgage on your house.

If your bank expects to only get back 25% of the mortgage on your house then clearly your. Equity in your house is worthless? Agreed?

For you to get any return from the sale of your house, the bank must be paid off 100%. You get back what’s left over after the bank is paid off in full.

It’s similar here insomuch that it’s impossible for the bonds to take a big hit but for equity to retain significant value.

The bond price is the one to watch….

Mary

Bond price unchanged at 24 - 28 cents. This really is not rocket science - the bonds are senior secured debt just like a mortgage. For equity to have any significant values the bonds HAVE TO BE worth 100 cents.

This is not me deramping! This is a fact.

So congratulations to those of you who are riding this short squeeze but this is a gravy train that you need to jump off before the reality of the restructuring hits home. Until the bond price rockets up I’m still saying the D4E will be a 4p but good luck!

Oily

https://www.reorg.com/articles/petrofac-2026-senior-secured-notes-fall-10-points/

How do PFC pay back the debt? They currently can’t afford to pay the interest

How do PFC secure the critical Performance Guarantees? They have said that they will start losing the current order backlog without PG’s.

You say they can trade out of this. Please read the Going Concern statement. They say that by delaying paying creditors they can get to September without defaulting assuming Debtholders roll over current extensions.

If you have money tied up in PFC you really need to spend 20 mins reading the GC statement. Then please revert here.

I doubt there are any shorters on this board.

There are three groups

1. Shameless rampers who are invested for the short squeeze and trying to sucker in gullible investors to maximise their short term trading profits. They shout down anyone who disagrees with them with puerile abuse, accusing them of being ‘shorters’

2. Gullible investors who don’t understand that PFC need to repay over $850m of debt within two years. They don’t know where this money is coming from. And PFC have stated that they need Performance Guarantees to continue trading.

3. The rest of us who still reside on planet Earth and can see that this is too risky to invest in

Mary

Obviously you have to ask to be wall crossed/made inside. This involves a legal commitment not to trade or disclose inside information.

The Bonds are 24 - 28 cents and minimal volume. Brokers say no one has a clue what’s going on!

I’ll get any updated analyst reports in a couple of days, some must have a vague idea what’s going on.

A few thoughts fwiw

I’m a bit surprised that the bondholder group is stuck at 47% I know they have all agreed to wall cross so can’t trade but why haven’t others joined them? Maybe you have to participate in the $300m rescue to join the 47% but I’d have thought PFC would want to lock in as many as possible.

I wonder if there is a second debt holder group (incl RCF/TL holders) who want PFC to sell off the good bits and write off the losers. PFC referred to this in the GC but no analysts have mentioned it.

Also why didn’t they announce the extension on Friday? Hopefully they are very close to a deal and were hoping to wrap up by this morning. But this is probably clutching at straws, I’m just fed up with this never end saga

Mary

Are you nuts!

If you are not going to the AGM, don’t you want to hear from analysts who did attend and are likely to extract a better steer from PFC than PI’s?

There is OBVIOUSLY a hold up. The reason is critical to the investment case.

I’ve asked my broker to ask the bond traders this pm if they know what’s going on. Hopefully something will be said to the analysts at the AGM.

IMO the bond price is the one to watch today. If it sells off, God help us all!

Don’t be a muppet! I was searching ‘petrofac restructuring’ last night and came across this very informative article.

Your ‘hear no evil’ attitude to investing is madness. Investment is all about checking out the risks!!!

This article explains why shorters may be exiting as the mechanics of any restructuring appear to be very protracted. ie they will be on the hook paying high borrowing costs for a long time.

Also the shorters may know what the hold up is all about, why is this going on forever.

Hopefully there will be analysts at the AGM who will find out what the problem is