Author Topic: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?  (Read 137911 times)

bizaro86

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #400 on: September 18, 2018, 01:59:38 PM »
The risk with Parq is ironically that they succumb to gamblers ruin and keep putting in a little more money to try and salvage the investment, and end up losing everything on it.


Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #401 on: September 19, 2018, 02:00:30 PM »
The risk with Parq is ironically that they succumb to gamblers ruin and keep putting in a little more money to try and salvage the investment, and end up losing everything on it.

I also wonder how exactly they are going to refinance when the project is badly losing money on operations. Would you lend them money? I think the project needs to demonstrate it can earn money before a lender would be willing to lend. Otherwise the rate would probably be no better than what they are already paying on the construction loan.

I think that the next step is likely a sale of the hotels. That could bring in enough cash to at least pay down a chunk of the debt and buy them time. But then, as you say, it may just give them more time to throw more money down the drain.
« Last Edit: September 19, 2018, 02:04:56 PM by Rod »

sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #402 on: September 19, 2018, 02:09:50 PM »
The risk with Parq is ironically that they succumb to gamblers ruin and keep putting in a little more money to try and salvage the investment, and end up losing everything on it.

I also wonder how exactly they are going to refinance when the project is badly losing money on operations. Would you lend them money? I think the project needs to demonstrate it can earn money before a lender would be willing to lend. Otherwise the rate would probably be no better than what they are already paying on the construction loan.

I think that the next step is likely a sale of the hotels. That could bring in enough cash to at least pay down a chunk of the debt and buy them time. But then, as you say, it may just give them more time to throw more money down the drain.

Or they could attempt to sell the entire Parq entertainment complex to someone large enough (global entertainment group/hotel conglomerate) with a cost of debt in the lower single digits.

gokou3

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #403 on: September 19, 2018, 09:42:59 PM »
Brookfield? They have:

Hotel operation experience
Casino operation experience
Vancouver commercial property experience
Low cost of capital


Of course they won't pay high prices for it...

Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #404 on: September 20, 2018, 11:32:09 AM »
Brookfield? They have:

Hotel operation experience
Casino operation experience
Vancouver commercial property experience
Low cost of capital


Of course they won't pay high prices for it...

I think Brookfield makes a point of buying below replacement value. If they did that with Parq I suspect that there wouldn't be anything left for anyone but the banks. Brookfield would probably buy the project out of bankruptcy not before.

Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #405 on: September 20, 2018, 12:39:08 PM »
The common shares have had a nice run up into the $1.70 range which ironically makes it harder for Dundee to exert pressure on the E prefs to renegotiate the terms. Being converted into common at $2 is a lot less scary than when the stock was much lower.

SafetyinNumbers

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #406 on: September 20, 2018, 01:33:33 PM »
The common shares have had a nice run up into the $1.70 range which ironically makes it harder for Dundee to exert pressure on the E prefs to renegotiate the terms. Being converted into common at $2 is a lot less scary than when the stock was much lower.

If they issue 40m shares, the stock will definitely go a lot lower so that negotiating leverage still exists.
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Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #407 on: September 20, 2018, 03:02:37 PM »
The common shares have had a nice run up into the $1.70 range which ironically makes it harder for Dundee to exert pressure on the E prefs to renegotiate the terms. Being converted into common at $2 is a lot less scary than when the stock was much lower.

If they issue 40m shares, the stock will definitely go a lot lower so that negotiating leverage still exists.

Yes, that is a good point. It's interesting to try to put yourself inside the head of an E holder. It currently trades at $18.85. Given the uncertainty around this stock, for someone to hold rather than sell they would have to believe something positive is going to happen. What could that be? Being able to cash out at $25 next year would be a big positive, but it seems very unlikely to be allowed by Dundee. Getting the face value cut to say $20 with an extension would not help because the stock would likely trade at a sizeable discount to that afterwards which would place it below the current value of $18.85. The only thing that I can think of is a conversion to common shares. At $18.85 the conversion value is about $1.50, which is a better deal than buying the common in the market. The E is currently pricing in a conversion benefit, but as you say that may be ephemeral given the probability of a large decline in the common if a conversion is announced. An option for the E holder is to short the common to take out the risk of a drop, but that is hardly an option for many people. So the question remains--who is holding the E and why aren't they selling now? For myself, I would be inclined to own it as a cheaper proxy for the common that also pays a dividend. Probably I'm overthinking it and the likely answer is that the E owners are income oriented investors that are afraid to sell at a loss and are just hoping to get their money back somehow and aren't yet sure how that will happen.

sculpin

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #408 on: September 20, 2018, 03:16:46 PM »
The common shares have had a nice run up into the $1.70 range which ironically makes it harder for Dundee to exert pressure on the E prefs to renegotiate the terms. Being converted into common at $2 is a lot less scary than when the stock was much lower.

If they issue 40m shares, the stock will definitely go a lot lower so that negotiating leverage still exists.

Yes, that is a good point. It's interesting to try to put yourself inside the head of an E holder. It currently trades at $18.85. Given the uncertainty around this stock, for someone to hold rather than sell they would have to believe something positive is going to happen. What could that be? Being able to cash out at $25 next year would be a big positive, but it seems very unlikely to be allowed by Dundee. Getting the face value cut to say $20 with an extension would not help because the stock would likely trade at a sizeable discount to that afterwards which would place it below the current value of $18.85. The only thing that I can think of is a conversion to common shares. At $18.85 the conversion value is about $1.50, which is a better deal than buying the common in the market. The E is currently pricing in a conversion benefit, but as you say that may be ephemeral given the probability of a large decline in the common if a conversion is announced. An option for the E holder is to short the common to take out the risk of a drop, but that is hardly an option for many people. So the question remains--who is holding the E and why aren't they selling now? For myself, I would be inclined to own it as a cheaper proxy for the common that also pays a dividend. Probably I'm overthinking it and the likely answer is that the E owners are income oriented investors that are afraid to sell at a loss and are just hoping to get their money back somehow and aren't yet sure how that will happen.

Or they could use the proceeds of a sale of ICC & a few other investments to make an offer of $20 cash per pref share to all the E preferred share holders in the next few months. Would cost around $66mm. No dilution and the E prefs get all cash above the current trading price.

gokou3

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #409 on: September 20, 2018, 05:08:08 PM »
The common shares have had a nice run up into the $1.70 range which ironically makes it harder for Dundee to exert pressure on the E prefs to renegotiate the terms. Being converted into common at $2 is a lot less scary than when the stock was much lower.

I guess when Dundee reports Q3 the common price may turn south again... more losses at Parq, no update on asset disposals, something catches fire, etc.  ::)