Author Topic: LILA - Liberty Global Latin America tracker  (Read 141337 times)

alwaysinvert

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Re: LILA - Liberty Global Latin America tracker
« Reply #400 on: August 06, 2020, 03:44:26 AM »
I heard somewhere that upwards of 50% of subscription rights go unused sometimes in US rights offerings... Maybe it will not be that much in this case but with oversubscription it could be a very effective value transfer and I think already the basic proposition is attractive. This is the most simple explanation.

However, continuing with the Tigo angle, working towards equalizing their respective leverage ratios would make a theoretical all-stock deal an easier route.

edit: This recent Liberty rights offering was 97% subscribed https://www.businesswire.com/news/home/20200616005290/en/Liberty-Media-Corporation-Announces-Completion-Rights-Offering
« Last Edit: August 06, 2020, 03:49:03 AM by alwaysinvert »


ander

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Re: LILA - Liberty Global Latin America tracker
« Reply #401 on: August 06, 2020, 09:08:39 AM »
The S-3 isn't out yet and I have not participated in other liberty style rights issues so had questions on the mechanics. If I want to increase my investment in LILA what is the optimal way and considerations? As in is it better to buy more stock now and get the rights, or buy the rights by themselves, or just buy the proportion I want in stock?

Munger_Disciple

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Re: LILA - Liberty Global Latin America tracker
« Reply #402 on: August 06, 2020, 09:30:57 AM »
Can anyone share their estimates of proportionate debt and proportionate EBITDA attributable to LILA shareholders by taking out what is attributable to minority interests (not including the pending AT&T and Telefonica acquisitions)? TIA

NotSoWise

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Re: LILA - Liberty Global Latin America tracker
« Reply #403 on: August 06, 2020, 09:31:24 AM »
Also to add one question - is it possible to oversubscribe rights issues - i.e. not all shareholders might participate.
« Last Edit: August 06, 2020, 09:33:01 AM by NotSoWise »

WayWardCloud

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Re: LILA - Liberty Global Latin America tracker
« Reply #404 on: August 06, 2020, 12:21:28 PM »
It supposed to be an all cash deal, but recently they realized that things were worse (Q2 results) and will take longer to recover. Without additional money they could potentially breach covenants (OCF decline, acquisition costs, more debt) and were short cash to close. Buying a mobile at ~7x pre synergies and issuing stock at low bottom valuation would not make it a good return deal. Strategically makes sense, but return wise its not great.

So far they did possibly one good deal (AT&T) and rather two mediocre (C&W - Malone forced, Costa Rica).

"Funny" thing was announcing buybacks (not buying back anything) and then right after issuing stock.

All the above put some question marks on CEO competency. The sooner they merge with TIGO the better - so TIGO CEO could take over (subject to valuation).

The Costa Rica deal was finalized a week ago - I think they would have had a pretty good idea what Q2 results were by then. I suspect that insiders (who have committed to taking their pro rata shares) want to buy more stock at current prices and the deal structure makes sense for that reason even if the deal is value neutral to the company.

What would make further sense if Tigo-LILA is not happening soon would be for them to swap their Panama and Costa Rica assets.

Or maybe the extra money is meant to cover yet another unannounced deal? Telefonica said they wanted to exit LatAm, excepted Brazil, entirely and quickly. The two natural buyers were TIGO and LILA but TIGO just opportunistically walked back from the Costa Rica deal on some shady technical grounds, so I imagine Telefonica wants nothing to do with them anymore. That leaves the door wide open for LILA to grab some assets cheaply, hence the capital raise?
« Last Edit: August 06, 2020, 12:23:38 PM by WayWardCloud »

alwaysinvert

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Re: LILA - Liberty Global Latin America tracker
« Reply #405 on: August 06, 2020, 01:10:41 PM »
Or maybe the extra money is meant to cover yet another unannounced deal? Telefonica said they wanted to exit LatAm, excepted Brazil, entirely and quickly. The two natural buyers were TIGO and LILA but TIGO just opportunistically walked back from the Costa Rica deal on some shady technical grounds, so I imagine Telefonica wants nothing to do with them anymore. That leaves the door wide open for LILA to grab some assets cheaply, hence the capital raise?

It's possible since the raise is relatively large, but I don't know that there are any opportunities with within country synergies there. Telefonica's Chile business is too big probably ($2.2b revenue) and seems like the kind of merger which would face regulatory issues.  Maybe there are some smaller assets that they can get on the cheap from Digicel (which is in bankruptcy), but that would probably make those markets outright monopolies so that could also be an issue.

The most immediately logical to me is as I said that Tigo sells Costa Rica to LILA and LILA sells Panama to Tigo. If they aren't still aiming for a full-blown merger ofc.

The S-3 isn't out yet and I have not participated in other liberty style rights issues so had questions on the mechanics. If I want to increase my investment in LILA what is the optimal way and considerations? As in is it better to buy more stock now and get the rights, or buy the rights by themselves, or just buy the proportion I want in stock?

It's an impossible question to answer 100% but stocks that are under an ongoing rights offering tend to trade pretty weakly before and then trade down as highly motivated sellers empty their accounts of the rights, resulting in a negative feedback loop for the common price due to the arbitrage opportunity. But I have seen exceptions to this too and maybe there will be some committed buyers in this one who like it even if the rights don't trade down a lot. Take from that what you will, it's not like it is easy to predict stock price moves any which way.

NotSoWise

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Re: LILA - Liberty Global Latin America tracker
« Reply #406 on: August 06, 2020, 02:09:36 PM »
Given USD 350m raise and that CR deal needs some USD 100-200m from capital raise, it leaves remaining for other M&A. I think they are in the process already or expect something to come soon, thus larger capital increase. Since they are maxed out on debt (also given Covid decline in Q2), they needed capital raise to get strategic assets (quad play/ consolidation). There were willing sellers and they couldnt wait.

Despite being an unhappy shareholder so far, I think LILAK will get there at some point (5-10 years) - given economics of marginal customers (almost pure cash) and growing scale. Slowly the new customers will start to show up in FCF. They will try to replicate what CHTR did - but I am not saying the results will be the same.

Bad deal C&W plus 3 bad lucks (hurricane, Chile demonstrations, Covid), delayed things by some +/- 3 years.

ratiman

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Re: LILA - Liberty Global Latin America tracker
« Reply #407 on: August 06, 2020, 02:16:01 PM »
The Digicel B2B and cable/FTTH assets make sense. B2B has suffered due to Covid so I imagine the Digicell bondholders aren't keen on holding onto it and it doesn't fit with Digicel's consumer mobile focus.

alwaysinvert

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Re: LILA - Liberty Global Latin America tracker
« Reply #408 on: August 27, 2020, 09:43:05 AM »
Quote
Our goal is to create value. If we wanted to get bigger, we would have actually announced some other deals in the second quarter of this year.

This was a curious comment from Nair on the last conference call. I don't think that can be interpreted as anything other than some big talks going on, at least at an informal level, in Q2. I obviously have no idea what that refers to in reality, but I do have an elaborate theory.

However, continuing with the Tigo angle, working towards equalizing their respective leverage ratios would make a theoretical all-stock deal an easier route.

Mind you, I'm changing my mind here because I have been skeptical of the combination being imminent really ever since the last talks broke down in early 2019 because there always was a rather large difference both in market valuation and in leverage. And a deal with a big cash component was realistically never on the table.

So here's the puzzle I'm laying:

Tigo at this point would have had to have enough visibility to restart the share buyback program that they so conspicuously shifted to, and then later even cancelled the smaller dividend completely. So why are they not reinstating the dividend or restarting buybacks? It's not like going back in with share repurchases needs to be a big capital commitment - if the thesis is intact it would be extremely accretive even if they just used say 1/5 of the current cash on hand to buy back stock through the rest of the year.

It could be that they are just ultra cautious about working capital rewinding, but Q2 results were really benign compared to worst fears and all indications were that early Q3 kept on improving, so I don't know where all the new bad debt is gonna come from. There is no real reason to think that trend reversed as of now. And now Colombia is opening back up and so on. Will Latam lock down in a big way ever again? Most probably not, they can't afford it and, putting to the side its theoretical efficacy, the adherence is poor anyway.

With all of that said, Tigo's cash hoard is just way too big to be sensible at this point. And it would surprise me mightily if credit markets weren't open to them currently if they wanted to tap them at the holdco level. So what gives? Well, radio silence - Tigo said nothing about its cash position in the last cc despite bragging extensively about its size in the spring.

Multiples and leverage will probably be very similar between the companies when LILA's raise is finished.

The extra cash raised vs needs from the Costa Rica deal can with some imagination be construed as a premium paid in advance by LILA (or more correctly, by LILA's owners) in a later no to small premium deal structure, when the leverage ratios have converged.

Let's see what happens.

NotSoWise

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Re: LILA - Liberty Global Latin America tracker
« Reply #409 on: August 27, 2020, 11:57:58 AM »
Alwaysinvert - I thought about the points you raised many times - I have been in LILAK since four years already... and since recently in TIGO as well.

1. re buybacks - I think both Tigo and LILAK wont do any buybacks until they are done with consolidation/ adding pieces to their countries offer to have full scope - mobile/ internet/ cable. Given fixed/ mobile convergence, its strategic imperative to collect the various pieces first rather than to buyback stock even at low price. Stocks you can always buyback, but if you miss an asset put for sale, then you have missed it.

2. re Costa Rica - its USD 350m only if 100% shareholders would respond. If some 60% respond, then you have the equity portion needed (EV 500, implied EBITDA pre synergies of USD 70m (7x), of which 4x is debt and 3x is equity => so USD 210/220m equity portion). Given that nobody knows how many will respond, they asked for USD 350, to be on the safe side. If they raise more, then they could potentially spend it on something else.

3. re TIGO/ LILAK combination, I think its almost certain it will happen, just hard to say when - interesting Tigo backed off from CR so LILAK could buy (seller missing antimonopoly deadline is just a nice story for the press - still, I am no local so dont know for sure if it was true or not what they explained).