Author Topic: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?  (Read 176542 times)

bizaro86

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #520 on: March 28, 2019, 08:46:37 PM »
Nm
« Last Edit: March 28, 2019, 08:54:44 PM by bizaro86 »


gokou3

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #521 on: March 28, 2019, 09:10:30 PM »
They have various alternatives...

Cash bid for all of the E pref's at $17.50 would cost them $63mm cash. Use bank line & some cash from current holdings.
Put forward an extension of the E's by a year or more
Some combination of cash & common or other prefs to settle the E's

Seems ridiculous to redeem them for common when the potential dilution is so high - believe this is only a bargaining tactic. Especially when they have $160mm in value sitting in DPM shares.

My NAV calc right now ranges from $3.38/share to $5.00/share with the $3.38 valuing all prefs at par & the $5.00/share NAV taking current market prices for all prefs. This NAV assigns $0 value to the Parq development.

Cash at the end of Sep was $26mm and they received $14.5mm from Union, $24 from Dundee Securities and probably burnt about $20mm in G&A and the pref dividends. So current cash absent other asset sales should be around $40mm.

(Putting myself into Goodman's shoes)
"So let's see, should I screw the common shareholders (which my family owns 20% of) or the Series 5 holders?  Of course the Series 5 guys.  Why not give the patsies a stick and a carrot - they can either...

1) convert their series 5 shares for commons per prospectus and get a 32% immediate haircut (based on today's DC.A closing price, without assuming further price pressure from such event), or...

or

2) convert to the "Series 6" preferred with a 2022 maturity at 7.5% dividend rate, AND A PAR VALUE OF $20.  This would be a lesser 20% haircut, and will almost make the holder whole 3 years later after dividends.  Also, this offer would be a 10%+ premium to the current Series 5 prices to encourage the new-ish shareholders and arbitrageurs to bite.  This also eliminates $16M of liability in one stroke without any dilution."


---------

I think the "series 6 conversion" scenario is quite likely. Of course, I am biased as a Series 2 & 3 pref holder.

So the Goodmans decided to screw themselves up instead... maybe they are dumber than I thought.  Or perhaps they want to kill the common share price and then swoop up the shares on the cheap.

Sportgamma

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #522 on: March 29, 2019, 03:57:15 AM »
I think their options were very limited. Their need to preserve liquidity is way higher...

https://www.globenewswire.com/news-release/2019/03/28/1788027/0/en/Dundee-Corporation-Reports-Fourth-Quarter-and-Year-End-2018-Financial-Results.html

Quote
During 2018, the Corporation incurred a net loss attributable to owners of Dundee Corporation of $202.4 million, or a loss of $3.49 per share, compared to the prior year’s net loss attributable to owners of Dundee Corporation of $52.5 million or $1.01 per share.

bizaro86

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #523 on: March 29, 2019, 11:55:56 AM »
I took a pretty good short position this AM. The huge selling pressure from the prefs is likely to hurt the stock dramatically after the exchange takes place. Also, new buyers can buy the prefs at a discount which will lower demand for the shares.

I actually think the terminal value for minorities here is zero. Their strategic plan is to invest their incoming funds into merchant bank deals in the junior mining sector. I expect all incoming funds to go to crappy juniors and exec comp. They will probably do a tender after the deal closes, but I bet it's at <$1.

gokou3

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #524 on: March 29, 2019, 12:39:05 PM »
I took a pretty good short position this AM. The huge selling pressure from the prefs is likely to hurt the stock dramatically after the exchange takes place. Also, new buyers can buy the prefs at a discount which will lower demand for the shares.

I actually think the terminal value for minorities here is zero. Their strategic plan is to invest their incoming funds into merchant bank deals in the junior mining sector. I expect all incoming funds to go to crappy juniors and exec comp. They will probably do a tender after the deal closes, but I bet it's at <$1.

I share your sentiment.  I had only the Series 2 & 3 preferred but have now exited them all.  I wouldn't be surprised if management will screw the Series 2/3 holders next, e.g. suspending the dividends citing cash constraints.  Today's pop may be as good as it gets - I could be wrong and overly pessimistic though since with the Series 5 conversion, the 2 and 3 are indeed in a much better position in the capital structure.  OTOH the ice cube is melting very quickly (continuing Parq losses / cash infusion, selling assets below book value, throwing cash at junior miners, G&A, etc.)


doc75

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #525 on: March 29, 2019, 01:07:37 PM »
I took a pretty good short position this AM. The huge selling pressure from the prefs is likely to hurt the stock dramatically after the exchange takes place. Also, new buyers can buy the prefs at a discount which will lower demand for the shares.

I actually think the terminal value for minorities here is zero. Their strategic plan is to invest their incoming funds into merchant bank deals in the junior mining sector. I expect all incoming funds to go to crappy juniors and exec comp. They will probably do a tender after the deal closes, but I bet it's at <$1.

Funny.  I have far more faith in their ability to invest in junior miners than I do in their ability to invest in regular operating businesses.  That says a lot.

I just finished listening to the call.  Apparently Delonex is doing a very "professional" job of the exploration in Chad, but it  appears we won't hear anything until at least summer (when they meet with Delonex for an overview).   The current TauRx trial (LUCIDITY) is now scheduled for completion in June 2020, and apparently it's now a core holding so it'll just sit there for at least another year.  There was some discussion during the Q&A today about the possibility of selling the TauRx shares in a secondary market.  If that's remotely possible then they'd be idiots not to sell, IMO.    They admit that both TauRx and UHIC are zeros or heroes.   I think TauRx is almost certainly a 0. 

They're still working on the Parq refinancing, hoping to announce something by end of April -- not that "hopes" correlate well with reality for this company.  They admit they were overly optimistic and they'll definitely take a bath but believe it's still worth more than current carrying value.

The series 5 conversion is expected  to close around May 15.  They were asked where they'd get the cash to do a tender and satisfy their G&A + dividend obligations.  The answer was that they have $100-150m of assets up for sale.   My guess is that sales will be underwhelming and any tender will be modest at best. 





doc75

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #526 on: March 29, 2019, 01:09:16 PM »
I share your sentiment.  I had only the Series 2 & 3 preferred but have now exited them all. I wouldn't be surprised if management will screw the Series 2/3 holders next, e.g. suspending the dividends citing cash constraints. Today's pop may be as good as it gets - I could be wrong and overly pessimistic though since with the Series 5 conversion, the 2 and 3 are indeed in a much better position in the capital structure.  OTOH the ice cube is melting very quickly (continuing Parq losses / cash infusion, selling assets below book value, throwing cash at junior miners, G&A, etc.)

A very valid concern, IMO, and I think it will keep a pretty tight lid on those pref prices. 

Cardboard

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #527 on: March 29, 2019, 01:29:20 PM »
I think that you guys are way too pessimistic.

The share count goes from 63 million to around 105 million with this conversion. It is significant but, it is far from debentures forced conversion or a restructuring a la Bellatrix today.

Balance sheet will see an $82 million reduction in preferred debt and dividend cost goes down by $6.2 million/year. So $130 million is then left in pref B and D or only recourse debt. So 38% of debt is gone without spending a dime of cash. Instead they used stock trading at $1.35 to redeem debt with stock valued at $2.

On the call they said that Parq should hopefully be restructured by the end of April with same group who loaned $20 million in September.

Also working on 3 sales: 360, CSE and Blue Goose. Apparently that land value at Blue Goose is less than it was but, it did not collapse by half. It was estimated at $100 million prior.

Per my notes, cash at holdco on Sept 30 was $26.3 million and public holdings worth $152.3 million. At Dec 31, and prior to completion of sale of Union Group for $14.5 million, cash at holdco was $38 million and public holdings worth $166 million. Since then DPM has gone up around 24%. That is another $31 million.

So liquidity is going up, not down. And with this conversion, there is no longer any forced sale which should help DPM being valued properly and their other negotiations.

The risk that I don't like is this CRA thing.

So no, I don't think it is a good short from now on as you are exposing yourself to potentially very positive news on Delonex which would be significant, the balance sheet got better and liquidity is also getting better.

If they had choosen instead to try to repay this preferred in full, then financial risk would have been much higher. I can see the argument about stock market mechanics or preferred holders unloading at any cost but, again people don't throw money away if they see that a return of capital is possible with a little more patience.

I also doubt very much that most of these "E" were held by funds mandated to invest in preferreds. These would have been considered too risky by most of these funds. The fact that you did not see a full exercise of that partial redemption for $25 in cash in Q1 2018 is also an indication of poor sophistication.

I still think that it is a pretty dumb move as I strongly believe that an extension of at least 60% of the preferred E should have been feasible. So the upside and gap to to value in the stock has certainly decreased but, so is the risk.

Cardboard


Rod

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #528 on: March 29, 2019, 01:51:12 PM »
I think that you guys are way too pessimistic.

The share count goes from 63 million to around 105 million with this conversion. It is significant but, it is far from debentures forced conversion or a restructuring a la Bellatrix today.

Balance sheet will see an $82 million reduction in preferred debt and dividend cost goes down by $6.2 million/year. So $130 million is then left in pref B and D or only recourse debt. So 38% of debt is gone without spending a dime of cash. Instead they used stock trading at $1.35 to redeem debt with stock valued at $2.

On the call they said that Parq should hopefully be restructured by the end of April with same group who loaned $20 million in September.

Also working on 3 sales: 360, CSE and Blue Goose. Apparently that land value at Blue Goose is less than it was but, it did not collapse by half. It was estimated at $100 million prior.

Per my notes, cash at holdco on Sept 30 was $26.3 million and public holdings worth $152.3 million. At Dec 31, and prior to completion of sale of Union Group for $14.5 million, cash at holdco was $38 million and public holdings worth $166 million. Since then DPM has gone up around 24%. That is another $31 million.

So liquidity is going up, not down. And with this conversion, there is no longer any forced sale which should help DPM being valued properly and their other negotiations.

The risk that I don't like is this CRA thing.

So no, I don't think it is a good short from now on as you are exposing yourself to potentially very positive news on Delonex which would be significant, the balance sheet got better and liquidity is also getting better.

If they had choosen instead to try to repay this preferred in full, then financial risk would have been much higher. I can see the argument about stock market mechanics or preferred holders unloading at any cost but, again people don't throw money away if they see that a return of capital is possible with a little more patience.

I also doubt very much that most of these "E" were held by funds mandated to invest in preferreds. These would have been considered too risky by most of these funds. The fact that you did not see a full exercise of that partial redemption for $25 in cash in Q1 2018 is also an indication of poor sophistication.

I still think that it is a pretty dumb move as I strongly believe that an extension of at least 60% of the preferred E should have been feasible. So the upside and gap to to value in the stock has certainly decreased but, so is the risk.

Cardboard

I think Cardboard's analysis here is pretty much spot on. One of the risks that concerned me was that they would keep putting money into Parq, but on the call they seemed to be saying that they haven't put money in in months and won't in the future. Blue Goose appears near a sale of the cattle assets and ongoing losses seem to be minor now. I'm optimistic that the company starts to improve from here and starts to build equity. Long term I see increasing equity giving more and more support to the B/D prefs and their prices moving up over time. Right now, just taking publicly traded assets, Android at $23M, loan to Eight Capital at $15M, cash of $38M less preferreds, you get about $1.50 per share of equity. Now add upside optionality to that, principally Chad and money salvaged from sales of smaller private assets, and the value of tax losses.

At this point you have to judge whether the new investments they make in the mining sector will be wise or not. I tend to think they will be decent because the sector is so bombed out and Jonathan Goodman has the mining background to do it well. They will be fishing where the fish are. The stock may well trade lower due to selling pressure from the converted stock, but I believe that will produce a very good buying opportunity. For now I'm heavily invested in the B/D prefs.
« Last Edit: March 29, 2019, 01:54:44 PM by Rod »

Cardboard

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Re: Dumbdee - The Goodmans, The Bad & The Ugly - 30% of NAV bargain?
« Reply #529 on: March 29, 2019, 07:38:02 PM »
Failed to mention that what is left in "debt" or preferreds B and D is $130 million of financing/capital with no repayment schedule, ever, costing around 5.7% or $7.4 million/year.

All they have to do is to pay that amount each year and they can keep that for as long as they want. It is not bad at all financing terms. No covenant, no bank review, etc.

And if they ever have a decent amount of excess cash I am about certain that they could still buy back a fair amount of these on the open market at a good discount to par based on how others are trading on the market with better credit rating.

Cardboard