Author Topic: Multibagger speculative ideas  (Read 90420 times)

sculpin

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Re: Multibagger speculative ideas
« Reply #10 on: November 25, 2014, 02:06:25 PM »
Marrett High Yield Strategies Closed End Fund trades on the TSX in Canada with the symbol of MHY.UN. Currently trading at $0.11 with last reported NAV of $0.98.

Almost 90% discount to NAV due to the net asset value being made up by 75% by the senior and convertible debt of Cline mining (has cash to continue for several years until a sale) and 25% being senior debt of Data and Audio Visual Holdings which is the holding company of Mobilicity - currently under bankruptcy but containing very valuable wireless spectrum that is being held hostage by the Canadian government.

Very interesting situation as the NAV of $0.983 is after the debt situations listed above have been already somewhat written down.

http://www.marret.ca/pdf/MHYSF-SIP-14Q3.pdf

Marret High to continue trading on TSX after May 30


2014-05-16 15:35 ET - News Release


An anonymous Marret Asset Management director reports

MARRET ASSET MANAGEMENT PROVIDES UPDATE ON MARRET HIGH YIELD STRATEGIES FUND

Marret Asset Management Inc. is providing an update on Marret High Yield Strategies Fund.

The majority of the net assets of the fund will be distributed to unitholders of record on June 12, 2014. The fund had been scheduled to terminate on May 30, 2014. Instead, the fund will continue in order to hold two private positions. The Toronto Stock Exchange has confirmed that the fund will continue to be listed after the distribution record date. Marret's intention is to distribute the net proceeds from the private portfolio when the holdings are sold and the proceeds are received by the fund.

As of April 30, 2014, the private portfolio accounted for $1.18 of the fund's net asset value per unit of $8.75 or 13.5 per cent. The remainder of the fund, which accounted for 86.5 per cent, or $7.57, of the net asset value per unit at April 30, 2014, is the liquid portion of the portfolio and will be distributed on June 16, 2014, to the fund's unitholders. The actual distribution per unit will be based on the net asset value of the fund and the value of the liquid portfolio on May 30, 2014, which will be announced on or about June 2, 2014.

As previously disclosed, the private portfolio consists of bonds issued by Cline Mining Inc. and Data & Audio-Visual Enterprises Holdings Inc. (Mobilicity). Cline holds various mineral assets, including the Elk coal mine in Colorado, which has almost 620 million tons of in-place coal. The Cline bonds are secured and represented 83 cents of the fund's net asset value per unit as at April 30, 2014.

Mobilicity owns a mobile communications network, including valuable wireless spectrum licences. The fund holds secured and unsecured bonds issued by Mobilicity accounting for 29 cents and six cents, respectively, of the fund's net asset value per unit as at April 30, 2014.

Marret intends to publish a net asset value for the units on a weekly basis on its website and will provide updates on the status of the private portfolio as warranted. No continuing management or other fees will be charged by Marret for overseeing the liquidation of the private portfolio and the winding up of the fund. Normal operating expenses of the fund payable to third parties (such as audit, custody and transfer agency services) will be payable by the fund from the proceeds of the private portfolio.

Given that the fund is maintaining its listing on the TSX, the trust units will be considered to be qualifying securities for registered plans. Unitholders who hold their units within a registered plan will not be subject to tax on the distribution. The fund anticipates that the majority of the distribution(s) received by unitholders who do not hold their units within a registered plan will be received as a return of capital. The exact treatment will depend on the unitholder's own circumstances. Unitholders are encouraged to consult with their own tax advisers.

We seek Safe Harbor.


sculpin

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Re: Multibagger speculative ideas
« Reply #11 on: November 25, 2014, 02:19:10 PM »
Most recent update (August 28th) on Marrett high yield's 2 bond positions i left out in prior post...

RECENT DEVELOPMENTS

As previously announced, the Fund had been scheduled to terminate on May 30, 2014. The bulk of the Fund’s assets were distributed to unit holders on June 16, 2014. Rather than terminate, the Fund will continue in order to hold two private positions; (Cline Mining and Mobilicity the “Private Portfolio”). The Fund will continue to be listed. Our intention is to distribute the net proceeds from the Private Portfolio when the holdings are sold and the proceeds are received by the Fund. No ongoing management fee or other fees will be charged by Marret for overseeing the liquidation of the Private Portfolio.

Cline Mining

The rationale for the Cline write-down is the recognition that met coal prices have declined recently and we have seen some large companies shut in higher cost mines in response. It is important to note that we consider this prudent and conservative, but it does not change our long-term view of the company’s assets nor does it imply that we are seeking a reduced price for Cline’s assets. In April, Cline received $9.8 million cash as a final settlement of claims that the company had outstanding against the Province of British Columbia, pursuant to which the company agreed to abandon certain coal licenses and applications. The company is seeking a buyer and the proceeds will be used to settle its debt obligations held by Marret.

During the second quarter, Cline completed its mine plan and began the fatal flaw analysis. The fatal flaw analysis is a second independent review of the major variables inherent in the mine plan to ensure validity. Once this is complete, a U.S. investment bank will implement a sales process for all the assets of Cline. Given the very weak state of met coal prices, it is likely that the sales process will not produce any acceptable interest.

Mobilicity

It has been reported that Telus has terminated the proposed going concern transaction to purchase Mobilicity. As a result, we have reduced the value of the bonds to reflect the uncertainty surrounding the potential sale or realization on the assets.

We originally made the investment in Mobilicity on the premise that the spectrum the company controlled was in limited supply, would appreciate over time and would support the value of the company in a workout situation. The terms of the spectrum auction included a clause that precluded a sale of the spectrum to Bell, Telus or Rogers for a period of five years. This moratorium expired in February 2014. Despite this, the government has refused to approve the sale of Mobilicity to Telus on the premise that it would hinder competition in the Canadian wireless industry. We are currently exploring legal options and alternative buyers/consolidation scenarios, but the government’s stance has been detrimental to all investors in new entrant wireless companies.

alertmeipp

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Re: Multibagger speculative ideas
« Reply #12 on: November 25, 2014, 03:15:01 PM »
My current favourite speculative potential multi-bagger is STP.DB (trading in Toronto). The company is an oil producer with a  2 producing assets. One that they bought at a bargain price a few years ago and have started starving of capital due to their extremely distressed balance sheet/cashflow position. The other is an oilsands project that has been continually having performance issues. The company is not likely to be able to repay the debt they took on to build the oilsands project without a material improvement in its productivity.

I think the company is almost certain to require CCAA/restructuring, but I think the debentures are a potential multi-bagger anyway at their current price of $2.50 per $100 of par value. The company recently sold a non-core asset for $19.5 million, which gives them enough liquidity to meet their December debt payments and operate for a few more months after that (probably 3-6, depending on various factors). The debentures are owed $3 per $100 of par value this december, so a speculation could return all its capital in a short time if they make the payment.

If they don't, they would convert the debentures to shares at Par, at a 5% discount to the recent share price. This would be my preferred option, as although that would immediately tank the stock even further, I'd probably be able to sell the shares for more than the current debenture prices indicate, and likely for a 3-5 bagger.

The hugely speculative upside option is that they make the payments in december, and their production turns around from ICD installations (inflow control devices have been installed at the oilsands project, and scuttlebutt is they're starting to work). If they do, the debt could be worth 30-40 cents on the dollar easily.

say they convert the debt to equity... how would their balance sheet look like?

sys

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Re: Multibagger speculative ideas
« Reply #13 on: November 26, 2014, 12:33:48 AM »
mbac.  it's either going bankrupt, going to be diluted to the near equivalent or going to be a multiple of current market cap.  i wish i better knew how to evaluate the probabilities.

here's what drew my attention to it.

http://www.valuewalk.com/2014/06/tim-mcelvaine-annual-meeting-full-transcript/

bizaro86

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Re: Multibagger speculative ideas
« Reply #14 on: November 26, 2014, 10:45:20 AM »

say they convert the debt to equity... how would their balance sheet look like?

In that situation they would have $135MM USD of first lien debt and $260MM CAD of second lien debt remaining. Which is still an awful lot for a company that did ~4MM of EBITDA in their most recent quarter. They still would end up in CCAA unless operations improve.

They do have some low hanging fruit at their first project, but they need $18MM in capex to drill the next phase of wells. The company has huge operating leverage, so if they are able to make even small improvements they'll be able to make the payments on the 1st and 2nd lien debt, but I don't see the debentures getting paid in full under any scenario.

I don't mind the conversion before the december payment scenario, because I think the equity would still have some turnaround/option value, and the converts would own essentially 100% of the company in that situation.

This definitely fits the speculative criteria at the top of the thread, which is why I haven't written it up for the forum.

sculpin

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Re: Multibagger speculative ideas
« Reply #15 on: November 26, 2014, 01:02:48 PM »
With respect to MHY.UN's position in Mobility thru Data & Audio Visual, the holdings are listed below. The 2018 9.55 listed at small discount to face, the 15.5% at 50% of face value and the $21MM of the Payment in Kind are given no value in the lastest NAV calc.

Face Value                                                                                   Instrument

1,451,000         Data & Audio Visual Enterprises Wireless Inc., Callable, 9.500%, 2018/04/29        1,414,725      1,416,539
 875,000           Data & Audio Visual Enterprises Wireless Inc., Callable, 9.500%, 2018/04/29            853,125         854,219
 8,529,857        Data & Audio-Visual Enterprises Holdings Inc., 15.500%, 2014/06/30                    4,264,928     4,264,928
 20,987,222      Data & Audio-Visual Enterprises Holdings Inc., PIK, Callable, 15.000%, 2018/09/25              -              -

Below is today's Globe article on Mobilicity..

http://www.theglobeandmail.com/report-on-business/mobilicity-weighing-paths-out-of-limbo/article21782060/

Perhaps a catalyst...

Mobilicity says it is in ongoing, early-stage discussions with “a number” of interested parties over a possible transaction that could end the restructuring limbo the wireless startup has been in for more than a year.

Although Mobilicity is deep in debt – it had long-term debt of $415-million (Canadian) and total liabilities of $510-million as of March 31 – it is now operating on a “cash flow break-even basis,” according to this week’s court filings, which also note its customer base is stable and sat at 154,914 as of Oct. 31.

It will ask the court on Thursday to grant an eighth extension of the stay period shielding it from legal action by creditors to Jan. 30 from Dec. 1.


Another article about Catalyst Capital involvement...

http://www.androidheadlines.com/2014/11/catalyst-capital-group-willing-back-mobilicitys-bid-spectrum.html?utm_source=dlvr.it&utm_medium=twitter

« Last Edit: November 26, 2014, 01:17:22 PM by sculpin »

bizaro86

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Re: Multibagger speculative ideas
« Reply #16 on: November 26, 2014, 07:05:45 PM »
Thanks Sculpin, that's a very interesting idea. How are you valuing Cline? They look pretty distressed if you just look at the financials. Do you have an opinion on the quality of the mine and technical or price assumptions necessary for it to be worth enough to cover the debt?

sculpin

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Re: Multibagger speculative ideas
« Reply #17 on: November 27, 2014, 08:19:37 AM »
Marret has the first lien debt so the process to extract value is in their hands. That said, the potential value to be received is dependent on what someone else will pay. In the current environment they state they have not received reasonable bids but with the current cash position they can wait for coal markets to improve. Below is Marret discussion from last Fall where they state...

"Marret’s internal valuation of Cline’s assets in a distressed scenario, such as
a sale under CCAA, supports the current face value of the debt outstanding.

 An independent report from an advisor to Marret on the late 2012 proposed
restructuring provided a valuation range of par to considerably higher than par using
various valuation methods. It should be noted, we have not relied on this in a
material way, other than to provide support for our internal valuation. "


Whether this is true now in a much more depressed market is doubtful however the the current trading price of MHY.un is already factoring little recovery (<10% of face?). Here is the link to that quote from above....

http://marret.ca/pdf/MHYSF-PR-131031.pdf


dolce2think

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Re: Multibagger speculative ideas
« Reply #18 on: November 28, 2014, 12:09:08 PM »
ACRX.
There is a good writeup on VIC,
it depends on if they need to issue shares for finance,
but the product/approval looks good, it could go
easily into the 20ies

sculpin

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Re: Multibagger speculative ideas
« Reply #19 on: June 22, 2015, 08:11:12 AM »
For anyone who has put some casino money in the Marrett High Yield Fund (MHY.UN) (there is also another play on this too – MMF.UN) there are some encouraging signs that there may be some recovery from the Data & Audio Visual Enterprises debentures that MHY holds. Hopefully, an acquisition is allowed to take place by the Feds. I am not sure what the potential recovery could be at this stage but the Fund had $31,842,000 in DaVE bonds in its portfolio on Dec 31/2014 with 36.7 million shares outstanding – so the upside could be substantial. GLTA….

Canada’s Rogers, Telus Said to Compete to Acquire Mobilicity

Rogers Communications Inc. and Telus Corp. are vying to acquire Mobilicity, the Canadian wireless carrier currently in creditor protection, people familiar with the matter said.

The companies have made preliminary proposals to the federal government valuing Mobilicity at a minimum of C$300 million ($245 million), said the people, who asked not be identified because the information is confidential.

No formal deal has yet been submitted to the government and talks between Rogers, Telus and Mobilicity’s creditors could still fall apart, the people said. Any deal that is reached would need to be approved by the federal government and the bankruptcy courts.

Vancouver-based Telus is interested in Mobilicity, and is prepared to transfer some cellular airwaves to wireless operator Wind Mobile or to another new entrant, spokesman Shawn Hall said.

Allowing Rogers or Telus, two of Canada’s three biggest wireless carriers, to acquire Mobilicity would reverse previous government decisions to reject takeover attempts by Telus on the grounds that it would limit competition. Canada has been working for six years to encourage the creation of a fourth national carrier to bring down prices for wireless services.

Canada “will not approve any spectrum transfer request that decreases competition in the wireless sector,” Jake Enwright, a spokesman for Canadian Industry Minister James Moore, said Saturday in an e-mailed statement. Moore announced Friday he would not run in the next federal election in October due to family reasons.

Once firm bids have been received, the federal government could move quickly in approving or rejecting a transaction, the people said.

“We continue to be interested in acquiring Mobilicity,” Hall, the Telus spokesman, said Saturday in an e-mail.

Previous Attempts

Canada’s government has blocked multiple earlier attempts by Telus to buy Mobilicity’s assets. In April 2014, Mobilicity said it had reached an agreement to be acquired by Telus for about C$350 million.
Aaron Lazarus, a spokesman for Rogers, declined to comment on whether the carrier had submitted a proposal to buy Mobilicity or transfer spectrum after a potential acquisition.

Mobilicity continues to “pursue a going-concern transaction that is in the best interest of stakeholders and we continue to engage with a number of parties,” Joel Shaffer, a spokesman for the carrier, said in an e-mail Saturday. “We can’t comment on the specifics of any potential transaction or the actions of others.”

Mobilicity is the brand name of Data & Audio Visual Enterprises Wireless Inc., while Wind is the brand name of closely held Globalive Wireless Management Corp.
The Globe and Mail reported late Friday that Rogers and Telus were in the running to buy Mobilicity.