Author Topic: FGE.to - Fortress Paper (formerly FTP.to)  (Read 703024 times)

bizaro86

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Re: FGE.to - Fortress Paper (formerly FTP.to)
« Reply #2670 on: August 28, 2018, 07:52:32 PM »
Letting taxes make investment decisions is probably why I didn't sell at $96, which I'll file in the mistakes file. The debs are taking a lower ytm for a longer maturity even with the 2%. The press release talks about 7% vs 8%, but the ytm on the debs was mid teens before, and now it's low double digits, even assuming you consent early.

 If they didn't make the offer coercive, they'd have had to offer a better conversion price to get that done, which would have offset some of that ytm loss.

I get this is good for the common, but I have to say I'm not sure if it says much about the ethics of the people running the place. While this is a legal thing for them to do, it doesn't seem like a character trait I'd look for in someone taking care of my money, since maybe I'm the next one to get profit maximized by Chad and Co.


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Re: FGE.to - Fortress Paper (formerly FTP.to)
« Reply #2671 on: August 29, 2018, 04:19:52 AM »
I rarely disagree with you Bizaro86 but, on this one I do.

YTM on this one at current time is not real as they have no cash/financing to redeem at par. Other than extending/amending, the other options were to:

1- Find a different lender. Probably next to impossible with all other debts already in place: these guys also want their money back eventually and are senior to debs.
2- Redeem a portion of debs combined with extend/amend. Would have hurt cash position and weakened outlook on company's ability to eventually redeem the majority of debs or worst.
3- Convert into shares at market next year. Creates such dilution for common and a rush for the exits by debs holders who want nothing to do with common that you would have seen a 30-50% haircut from here.

So IMO, this was baked into current price of around $90 for the debs: get an effective 7.8% cash yield and pray for no forced conversion next year. Looking at other debs where current financials are really tight and where maturity is a few years out or was pushed out, I believe that you will not see much change in trading price.

Regarding terms, many holders will really like this 2% cash bonus, 1% additional interest and reduced uncertainty for 3 years or the income folks. I see additional demand come in. While a more achievable conversion price would have suited you better since you are comfortable with holding equity. So maybe some exit here. At $96 you were really pushing the envelope but, if you sell at $90 or a bit above that, it is about as good as it gets with these type of situations IMO.

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Cigarbutt

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Re: FGE.to - Fortress Paper (formerly FTP.to)
« Reply #2672 on: August 29, 2018, 05:48:09 AM »
I would say that limited options with maturity nearing meant that FGE needs to pay more in order to obtain the amend and extend refinancing option.

IMO the leading man has been unusually good at extracting value with financing options over time and the dynamics here are:
-the business itself which has had its share of distress with a potentially brighter future
-the mood of the financing market which I find quite complacent
and
-*the investor holder base, which I think has a retail profile

I agree that your voting decision has a lot to do with the confort level you have with the equity.

If I would hold debs now, since I could never reach an approriate level of confort with equity when the firm switched to dissolving pulp, I would vote no and hope for better terms (early consent fee and higher interest rate going forward) as I feel that the firm has room to maneuver in the event of unexpected resistance. I just don't think that it would be reasonable to expect better conditions for the conversion price.

Who I am to say but I would suggest to try to put away the emotions and to see this event as a firm trying to obtain the best financing deal under the circumstances. Distressed debt investing does not mean you need to become distressed. :)
« Last Edit: August 29, 2018, 06:03:25 AM by Cigarbutt »

bizaro86

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Re: FGE.to - Fortress Paper (formerly FTP.to)
« Reply #2673 on: August 29, 2018, 10:09:55 AM »
I completely agree that amend and extend is the right move here, I just think they would have had to offer better terms if it wasn't coercive. I would have liked a better conversion price, and would have voted no to a non-coercive offer on the current terms, which I would have expected to fail.

I could be wrong, and the price action today doesn't support my position that it's an unfavorable exchange, as its only down a bit. I still think that's true, so I sold today at $88.

The common might still make sense, I'm not sure. I see the common mainly as an option on dissolving pulp prices, and with this exchange that option just got some extra time value.