Genie Energy: Small Cap Value Stock With Upside 'Call Option' Attached [View article]
Thanks for that reminder... I had owned this from spinoff and then taken chips of the table but remained involved with the grand total of 1 share.
Your article provided me with enough reasons to revisit. I recently read in a different article about Offshore Israel nat gas discoveries. this isn't 100% related to this but it appears that there are some hydrocarbons in the ground, although not sure if anyone is endeavoring to getting it out. Israel was described in same article as a huge net importer of oil and gas. IDT DNA always has been an intriguing one in spinoffs which is the reason I got involved but I sold out solely on the basis that I had not performed meaningful work and thus took small profits. Your article gives some insights.
The investments that were undertaken by said gentlemen are of sufficient recency that they have not yet shown up on subsidiary and consolidated balance sheets, correct? or is it part of the existing evolving cash balance you tally?
If I understand you correctly, the consolidated cash will increase, albeit a good portion of it will be locked up in certain subsidiaries, thus getting us ready for the next Jonas inspired spinoff down the road, this time with Murdoch/Rothschild as reference shareholders.
thanks again for this big, fat pointer. worth following up on this.
Sogecable is actually Prisa sub now known as Prisa TV. AVS is thus effectively a Prisa Sub.
I assumed that MediaPro was the Prisa sub.
This changes the immediate cash needs and motives.
If this lawsuit and Insolvency case shakes out in the way that Prisa does not want, they actually would be getting something like Euro 330 million out of the MediaPro insolvency estate. This raises a different question, whether MediaPro and its financial backers have the money. Insolvency administrators will be more appraised on that.
So rather than causing a funding need, the audiovisual rights situation has the pontential to be a cash windfall.. Although it may not be the outcome that PrisaTV/Sogecable/AVS want. They might believe that the assets are worth more which may be the reason why they would prefer to have the audiovisual rights revert back to them.
Now that I clarified who MediaPro and Sogecable are, this starts to make a lot more sense.
I still dont understand all the aspects of contractual relationships here and how it translates into revenues for PrisaTV, one way or the other.
I personally see the company in need of some net new cash raised, even as they have some operative cash flow of 44 MM in quarter.
They had a concurrent 75 million warrant exercise in Jan 2012 that raised 50 MM and retired 150 MM in debt credits (mostly warrant amortization).
Overall they had a net reduction of debt of 72 MM.
the near term cash exposures that need to be funded are the following in my view.
Prisa B dividends 182 million Euros recorded in "other financial liabilities" as per March 31, 2012. Prisa B holders have the option to get paid in cash. getting paid through Prisa A shares at a premium to current price is merely an option. Prisa B holders can elect the cash pay election in which case prisa has to come up with Euro 182 million (versus euro 77 millin cash on hand. there are financial investments but i dont know what is in them and how liquid they are).
Beyond that I see exposure of Euro 330 milliion from a pending insolvency court claim. Prisa sub MediaPro wants to get out of involvency while retaining audiovisual rights rather than losing them to AVS. What they proposed, to overturn a court verdict that went against them, is to cash pay AVS so as to cure a previous breach in contract that would have resulted in losing the rights. While Prisa wants the insolvency to be resolved through cash, AVS contests this and wants the court verdict to be upheld.
By just looking at these potential cash paying exposures I tally up total exposures of up to Euro 510 million. Even under the best of assumptions where all short and long term financial investments are converted to cash, the cash to settle such exposures is not on the balance sheet.
Hence the necessity for real upfront cash capital.
the press release hints at a conversion of partial credits with banks. That is what it is partial credits. I would be surprised if it was a complete Euro per Euro match.
The cash needs would be less, if Prisa B holders agree to the stock pay for their oustanding dividends.
I have erred so far on the side of conservatism. the 230 million in alluded accrued dividends are upon closer inspection recorded as other financial liabilities (part of net debt) to the tune of Euro 182 million. So this is already accounted for and I erred in double counting this exposure. If it is ultimately settled in stock there will be a real deduction.
The key funding gap revolves ultimately how the AVS exposure of 330 MM is accounted for and how it is ultimately settled and in my conservatism I am implying a net capital raise above the debt capital already on the books of Prisa. Since I have no ways of understanding how MediaPro insolvency and court judgement claims are accounted for I dont want to rush into any hasty conclusions here as to what the ultimate cash funding needs might be.
Apparently the audiovisual rights within the insolvent MediaPro are a major bone of contention that is bringing bank creditor and new funding sources to the table in search of some agreement that presumably would benefit Prisa shareholders as a whole.
on the family insiders. They surely created this company and then fell on hard times. Sure enough some credit goes to them even for managing the company during the downcycle. Beyond the fascination with media asset value there is also something in me that is looking for less adventurous volatility minimization. What happens for instance if the audiovisual licenses verdict in favor of AVS is upheld on appeal asking for specific performance. What Prisa/Mediapro is trying is nice and good to drag that decision into insolvency proceedings but we should not assume that the matters are resolved until AVS/Sogecable actually bury the hatchet. There are some legal questions here as of yet unresolved, unless this has since been resolved from Dec 23 till June 6 and that shareholders are not yet aware of.
Who is Sogecable by the way and are they likely to accept to be swept under the rug by the clever machinations of Prisa insiders looking to skirt an existing court order? I frankly also do not know what other creditors are involved in the MediaPro insolvency case.
This is an area where Carlos Slim et all migth be better appraised than others out there.. if you ask me. They probably get better answers of what is in for him by lending his name and capital.
Why We Like ConocoPhillips More Than Phillips 66 [View article]
I also think the leverage is tolerable. Don't get me wrong on that. It should not saddle the company, even with the capex plans they have, given their EBITDA base.
Hidden assets are a distinct possibility that I haven't thought about. Liquidation scenarios have not really been part of my considerations at this point. Any suggestions what the most sizable hidden assets would be?
O) this is more a question rather than a definite statement of fact.
The terms of the deal involving B shares and A shares are defined in Euro terms. Before we go on an undifferentiated rampage on how dillutive the terms here are consider that the Dividend Subscription happens at EURO 1.00 per share per A share versus the PRS SM trading market of 37 centimes in Spain. Whitney referenced the trading price of 29 centimes.. Looks like we are dealing here really with the prime shares issued in Spain and not ADRs which are packaged on the basis of 4 for 1.
You can choose to get the dividend in cash or in stock at a price that is above the current market price. what you are subscribing to is not the PRIS ADRs where 4 PRS SM = 1 ADR, but the way it looks to me you are subscribing to the underlying. This is as if you were Subscribing to new PRIS US shares at the effective price of Euro 4.00, when the PRIS US trading price is US 1.95. Furthermore and with reference to the converts, these guys subscribe to new A shares at the consideration of Euro 1.00 per PRS SM. versus the PRS SM trading price of 0.37.
In my narrowminded interpretation of deal terms as described, there is nothing dillutive to the features described by some as pre-packaged. In a worst case it brings capital to the table above what the shares were trading at heretofore. If you believe in the stock that badly and the future value to be created, you can buy the shares cheaper now than what outsiders subscribe to when converting their bonds. That is a playing with confidence in turnaround. As some observers describe a long shot.
If you agree with me that this is not so dillutive vis-a-vis current trading price of the securities, pls chime in.
It looks like a real capital infusion at a premium price to then trading markets and premium price to current trading markets, as opposed to a price that takes everyone under the rug.
There is some implied view here that things here could get better and I dont understand enough what the rationale could be based on. I have not looked at their recent EBITDA basis but it would appear that they cannot get back to a EBITDA level of Euro 600 million from pre-crisis levels due to many divestitures that happened including minority interests.
For the sake of completeness the PRS SM shares outstanding number 538.735 million carrying 1 voting right each the PRS/P SM B converts number 393.544 million.
Upon conversion of the new bonds to be issued there would be 421 million new PRS SM coming into the market.
Upon acceptance of dividends in kind, a total of 230 million PRS SM would come into the market..
All in all we are looking at a 2014 capital structure involving 1,189.7 million PRS SM and 393.544 PRS/P SM, and however many ADRs of each kind this translates.
The market cap giving effect to new share issurances at the prevailing prices observed in the markets would be Euro 675 million by 2014, ceteris paribus, or if you allow for a Euro 1 per share price to prevail in future for both classes of shares alike the market cap would go to Euro 1.58 billion. Assuming that the cash now raised Euro 434 million will be used for working capital and to pay interest expense on the Euro 3. 5 billion in bank debt till things improve there would be no actual net debt reduction but you would really be staring at an Enterprise value of in the range of Euro 4.2 billion in the case of no change in share price or in the most optimistic case an EV of Euro 5.1 billion... Anything beyond that would be really fantastic but not dreaming that far ahead.
The last full year EBITDA available showed Euro 388 million for FY 2011 which corresponded to calendar 2011.
So the upside prevails here only if turnaround value indeed happens. Its a long shot but can not be ruled out as creditors are for the time being held in check till 2014/15 and cash has been infused for additional working capital cushion at the cost of 40-50 MM in cumulative interest expense.
You can see how this buying of 2 years time could be viewed as a positive for the stock in the short term. It staves off a run on the assets and wholesale liquidation of the same at the wrong prices.
A)
mandatory convertible bonds with 2 year maturity is what it is.. a new junior debt instrument ranking above any and all A and B preference or otherwise labeled securities. This is not per se an immediate conversion into equity, although it allows for the possibility of it at Prisa's option. The coupon is the best proof thereof. So if anything goes wrong from here till say July 2014, this deal does in some way change the existing pecking order of claimants. as it shoves a new class of junior bonds above the B prefs, thus in a worst case disenfranchising their rights.
The existing debt is Euro 3.5 billion with the addition of 434 million its actually increasing in the short term while there is no clear proof of how cash raised will be used. Working capital?
The debt relief of Euro 700 million by say mid 2014 will occur from a 4.2 billion accumulated debt base, as opposed to a 3.5 billion. So we are possibly at the same point where we started, under the worst case assumptions that cash raised is spent, as opposed to saved and used for real net deleveraging. Correct me here any time if my reasoning is wrong and you have evidence to the contrary that a net deleveraging is suggested in this transaction from the existing borrowing base of Euro 3.5 billion.
Notice in this respect that the new funds coming in do not accept the inferior voting class B papers but will be convertible into the A voting shares which is aligned with the family interests. This is better than getting more B papers issued as it puts some checks and balances into the dealings of family managers. it would be even nicer if the outsiders here got something like board representation so as to watch out in the future over what goes on and how money is spent. B Class holder also get the ability to participate in issuance of A class shares for dividends. So family voting interests will be further watered down.
This cash infusion will tide them over as opposed to resolve any substantial debt overhangs that are newly slated for 2014/15. if things get not resolved the Prisa equity will await the same fate as today, if not worse as there would be substantially more shares outstanding.
B) On the view of managers as capital allocators. Its been family owned and controlled for as long as I can remember as most companies in Spain. This could be part of the problem of why Spain is in such dire straits. Access to capital has been a key differentiator although it has not served all shareholders well.
One would have to analyze in very granular fashion the Economic Value Added through dealmakings at what prices and how it has benefited outside shareholders at the receiving end.
As far as I can tell Prisa A class shares were issued sometime in 2000 at a price of 20 Euros per share, versus their current price of 37 Euro centimes. This refutes at least some notions of capital allocations and how to benefit from it. If you were part of the insider family that is fine. As outsiders the love affair might be a different. Tough love in other words.The strong brands in their portfolio, not all of which they helped to create, has not proven to be an effective insurance against paying the wrong prices for assets. This is nothing new in the European media sector though. See Leo Kirch and Kirch Media for instance. He had enough deal-savvy but was of no benefit to Kirch Media investors.
Prisa also has to be viewed in the larger context and for this you need to go back to 2008/9 when company had 5.4 billion Euros in debt versus Euro 3.5 billion now. Some asset divestitures have happened since provided some needed liquidity to keep creditors at bay. How much substance has been let go is not known. Even so I am with you that this could have ongoing media asset value such as in the distressed media asset value of Primedia that played out over many many years before TPG saved shareholders. If you tracked all the divestitures and debt paydown at Primedia it was difficult to figure out the leftovers. But eventually this moved Primedia stock from $1 to 7.10 not so elusive takeover value. Real media value for those willing to believe in their real estate centric publications.
At this point I have to admit that I am not quite sure which assets are still within Prisa and which ones have been let go. A more complex case than Primedia for sure.
Furthermore, the Prisa B nonvoting shares were the product of a unique capital infusion thanks to a once in a life capital raising opportunity afforded by investment bankers who engineered a merger of Prisa into the SPAC LIBERTY ACQUISITION HOLDINGS CORP. This was one of the SPACS where shareholders did not sufficiently dissent to the transaction (because it provided some options) and ultimately Prisa ended up gobbling up a good part of the $1.3 billion in hard cash that the SPAC owned and this allowed bankers to earn incentive shares and everything was just fine in happy lahlah land.
Such successful SPAC deals are rare. I look for instance what happened with the merger of Talbot's into a SPAC and it was a complete operational disaster. So sometimes you have to question the wisdom of some of these rescue transactions to terminally ill companies. Lets assume that Prisa is not a terminally ill company.
In order to evaluate whether this SPAC deal was long term value additive to SPAC shareholders one needs to consider that holders of LIA US were issued 1.5 PRS SM and 3.0 PRS/P SM and $0.50 in cash per LIA.. 4 PRS SM eventually were bundled into one PRIS US and 4 PRS/P SM were bundled into one PRIS.B ADR paper.
So for anyone tracking this original LIA US deal from a strictly US perspective you got 50 cents in cash, 0.38 of PRIS US and 0.75 PRIS.B.. This package of securities could be bought before deal closing back in November 2010 at a price of $10.50, on some days even below $10.
There was no borrow on underlying securities available but if you wanted to play this unhedged this was OK as a strategy. Although there was price adjustment downward on receipt of merger securities that would have resulted in LOSS had you sold into the initial seasoning period in December/Early January of 2011 (so no quick flip bucks were to be earned - and the same could be said now - no quick flipping doable to arbitrage this), the deal found better acceptance with shareholders within 3-4 month of closing and the consideration at the maximum point was worth $15 if held into April 2011. So, there is thus proof that investors gradually warmed up to the prospects of this original Prisa SPAC that got PRISA listed in US.. Once closed, investors started to like it, even though operationally things were far from stable.
After that the descent into hell started. For any original LIA US shareholders hanging on to this jolly ride, the overall merger consideration package turns out to be worth $3.50 as of today. And this does not include the dividends that will soon be paid out.
So far judging from the capital raising prowess by the governing insiders, participating in their capital raising dealings has been bad for outsiders, while preserving insiders in the driving seat.
We can attribute this to the toughness of markets as suggested in article or to ongoing shrinking in size of business as result of divestitures that eat into the muscle.
In conclusion:
I can hear you on how this could be a temp opportunity for a bounce back in case of business recovery and or clarification of the underlying media properties and their value.
However, to at least some outsiders, this has been a rough investment since the year 2000, not just 2010. You have to assume that there is method in the madness here to the way that these Mediterranean guys operate.
Needless to say that the chosen deal structure allowed the Polanco Moreno family to remain always at the helm of the company and this time is no different.
The operating methods of US media companies are not very different. As value/spec sit investments it requires a granular understanding of underlying properties. Value creation will be in all likelihood catalyzed by private equity at terms hopefully favorable to Prisa. So far Prisa has proven to have 9 Lives.
I would not rule out the possibility of a knee jerk reaction in share price upwards such that even under the impact of maximum share issuance with no operational progress, this could temporarily climb back to a price above its current value, merely on the basis of something that people cannot touch and feel, but believe to be of value, even though the value is elusive like a slippery toad.
Until a deal actually happens as in Primedia / TPG Case.
For the Enterprise value to go to Euro 5 billion by 2014, EBITDA of at least Euro 400 if not 450 million would have to be produced.
This would put them on a 11-12x EBITDA multiple which could be considered rich but eventually deserving that Euro 1 per share price.
Most likely, and I have not checked the figures, EBITDA might come short of that target. This is where an actual review of 2011 annual report and Q1 2012 might reveal surprises as to what assets they still own.
Thanks for bringing this up. its probably a lot better than it sounds at first sight if you are willing to track the moving parts of a media sum of the parts.
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you know that something is a definite buy when it trades in the post spinoff markets at.. 2.8x EBITDA on unleveraged basis like MPC. That's where a lot of execution risk is off the table.
While I think there is strategic value in PSX, the bottom here could be tested and I have views of closer to 21-25 for the bottom at which the PSX price adequately reflects the reality of $7 billion assumed debt and an aggressive capex program near term.
lets not get headfaked by a near term 250 MM dividend or 40 cents in half year 2012. The stock has to shake further out.
I mean just answer for yourself. 250 MM dividends or even say 750 MM dividends if you include all of 2013 for shareholders and 7 billion exit payment for COP as former shareholder of this spinoff.
This is far from an arms length negotiated transaction and the truth behind intercompany agreements will only be revealed in due pro-forma course. How much pension plan deficit. How much enviro liabilities? the whole 9 yards.
Even so, the assets with which PSX was endowed with are unique tangible assets that will not go away. The $7 billion in debt can be stomached, even if it has the near term potential to climb to 8-9 billion in my view.
Now the additional $7 billion that COP managers got through this value enhancing spinoff will do much less for them in the ultra-competitive E&P business. They needed that exit payment for good processing assets that wall street is loath to value and would not be intent to build with fresh start capital. COP was lucky to to raise lots of debt capital to load onto this spinoff. Something that SUN did to SXC and wasnt tolerated too well by the post spinoff market.
There is no shortage of capital for any ludicrous E&P project though. I was reminded of this as my favorite poorly managed spinoff forestar (FOR) announced this week the purchase of an E&P property for $145 million. Not that these guys have known how to create shareholder value since they spun off. But there is no shortage of dollars to destroy in E&P.. Shareholders seem to love it. Its much easier to analyze a well managed refinery or chemicals business than a not so well managed drilling and exploration program in the middle of nowhere. it boils down to a management opinion whether the PPE is worth the paper its written on.
so if I look at what $7 billion in spinoff exit will do for COP's E&P programs, I am inclined to believe that almost nothing.
I certainly do not see the COP insiders buying shares in the open market on the strengths of their E&P asset allocations and insights. They should really know better. I personally would not be buying into that lack of displayed conviction. God knows through what lavish stock incentive program they got awarded these shares.
So, while PSX has hard assets in a cyclical industry, all that COP has to show for is PP&E subject to future write-down in a oil at $60 scenario. PSX downside is comparatively benign to COP downside. That's my fundamental view here.
That type of scenario analysis does not work with oil at $150 or a return of such top of the bubble calls made by Goldman et al. It all depends in what currency I guess. I am personally not a believer in the ever depreciating US dollar. This pendulum has the potential to swing back as well. People just generally have a hard time to envision such scenarios. Granted, its a lot more difficult to sell a newsletter on the basis of Oil at $60 than to posit outrageous claims of oil at $200..
I recently learnt that Walter Piecyk is still in business as Analyst. This was the guy with the famed Qualcomm $500 claim during the 1999-2000 internet bubble. So oil at $150-200 bucks a barrel are nice fantasies. The oil hoarded on floating storage barges sure enough is waiting to be unloaded at such fantasy prices. Nobody is willing to take losses I guess. But eventually they will have to. The JP Morgans et all, may not be able to corner that market in the end.
Oil and nat gas glut works very well for certain processors of which PSX is a part. MPC, CVI others as well.
That does not in and of itself make PSX a buy as of yet at these levels. I think the leverage and capex plans are too high for there not to be some type of near term hangover. The stock being 20% off from the artificial $37 when issued level is already a good start to finding a bottom. I am though waiting for the next leg. Its good to put this name though on my radar screen.
The seasoning period for the securities is definitely in progress. And it will continue until the leveraged reality is digested and all the gory details of intercompany arrangements revealed.
Somethign like MPC whipsawed from $45 all the way to $27 if I recall with very similar assets. There is no reason for overlaying companies one-on-one. It certainly helps though to keep in mind what can happen to shares in lackluster markets or when commodity prices do not support unquestioned enthusiasm.
in case of COP I would take advantage of well defined option strategies to protect the downside. My entry point on PSX is below the $25 level. Even with the fundamental bias I have for refiners and chemical manufacturers. If I owned PSX, which is not currently the case, I would probably hold onto it, rather than triggering a tax event. its much easier to mitigate risk and vol through option strategies. In case of COP one can write calls and together with dividends by some protection puts. Its the downside that I am most concerned with in assessing whether a spinoff is ready to be plucked.
ConocoPhillips And Phillips 66 Stand Apart From Peers [View article]
reduction in return on equity is the key here and this is just describing the steady state of high oil price environment. picture now the oil oil liquids glut scenario and the reduction in return on equity will even be magnified. this is no doubt captured in the bearish looking 4x EBITDA multiple. Unless their production is reasonably hedged this could expose COP shareholders to a lot more volatility.. Using the dividends and investing in the put options of appropriate Crude Oil ETF could be a way to hedge, keeping commodities upside while protecting capital in downside scenario. The next 18 months looks particularly treacherous...
People right now seem so focused on Crude at $90.. What about Crude at $60 or 50? For a game changer in the way E&Ps are valued? You hear a lot these days about independent E&Ps but something is telling me that you dont really want to be an independent E&P, not unless you have access to a good stream of reserve replacement deals...
the article mentions that nationalistic elements of the increasing rents.. very much so.. true in argentina (see repsol), brazil, some african nations. venezuela no doubt.. Even Iraq may be very difficult to get the desired profit targets.. did I mention Russia exit by BP? at what valuation? MRO exposure to Libya provided just the low return on equity that nobody hoped for.
The high enthusiasm for domestic alternate energy sources needs to be counterbalanced against the cost and the stranded energy resources this creates in certain locales.
IN a contrarian spirit, the seasonal spread to Northeast will be less relevant, if less people live in the Northeast in the future. Population growth in US should happen in midwest and places with energy abundance. This could take some time to take shape though.
PSX owns a piece of the REX transporting stuff to Northeast. That is pretty much a dog of an asset. The abundance of energy in certain places at depressed prices and lack of seasonal spread will create new and striving industries in certain places.. INdustries that can take advantage of stranded resources, such as Chemicals, Refineries. etc.
Phillips 66: An S&P 500 Addition With Growth Prospects [View article]
I totally agree with you on the exceptional quality of Mr. Pickens background work on this spin-off. Hi 5s..
My general thesis of companies in this universe is that one or the other MLP will make a pounce and find a way to use certain of the hard assets owned by the likes of MPC SUN or PSX to be used in dropdowns.
IN the case of SUN, EPD has already pounced for thsose assets. So what looked like a meager 1.4% pre-deal dividend is now a 1.7% post-deal announcement yield and SUN stock is up 20-25% on takeover premium. Once converted into EPD stock, SUN holders will hold a 5% yielding stock.
Granted, PSX has richer and more diversified asset backing that may not be used in cookie cutter method for dropdowns. I am sure the investment bankers will figure out the follow-on work if its gets too cheap. The yield difference of 1.7% or 2.7% as in case on PSX and 5% plus with MLPs is staggering and will possibly lead to more stock based M&A. Got to give it some time though for market to accept such visionary prospects to come to fruition. if there are good synergies between EPD and SUN, I would expect more MLPs to follow in their steps. Refinery assets could be in demand by those pipeline and storage MLPs dealing in refined and unrefined petroleum products anyway.
Why We Like ConocoPhillips More Than Phillips 66 [View article]
This is definitely a technical spinoff related sell-off in the shares of PSX... thanks for bringing this to my attention.
I recently wrote about the technical price adjustments of spun-off securities 12 months after issuance. Case studies on MPC and SUN are provided at bottom. PSX is just another nice mid-cap in this arena and the 20% discount at which you can get this name post spinoff and post technical selloff seems worth investigating.
Need to know how PSX is capitalized though. Dividend yield alone is just one metric. However the fact that PSX is very much considered the less desirable entity of the the COP PSX constellation may not be a good indicator of short-term mark to market value.
Am I the only one out there who continues to see a glut in both oil and natural gas for a number of years to come. Generally this is positive for refiners. While companies like COP have reserve assets and what not, that could be deemed valuable long term, in the short term their earnings will head down, unless they are properly hedged. This could make refiners on a relative basis more valuable, vis-a-vis their commodities rich corporate parents. Commodities arent worth much in an oversupplied market and with production shut it.
Personally I would not be adding commodities at this point in the cycle, even energy commidities but a good processor can be OK, if it comes with an adequate balance sheet. If PSX is the inferior business that everyone wants to believe it is, it sure cannot have been loaded up with too much debt. I am not on top of this yet, but its a good target to catch shareholders in rotation. The yahoo chart with volume overlay looks like a near perfect spin-off related technical selloff.
I am generally with Icahn on his purchase of related oil refiner CVR Energy (CVI).. This is a small refiner, with fertilizer assets but operating in a strategic location where oil and gas are cheap and coke is a reject byproduct of refining. I personally do not think that Icahn bought 80% control of this entity with a genuine intention to flip it around but he has a certain view of energy resources glut that makes him want to own the refiner, rather than a controlling interest in an oil and gas company at the wrong price.. Notice the comparatively quick flirtations with El Paso or Chesapeake over the years. He is very much involved in what goes on in the energy markets and his desire to own all of CVI at a certain price, irrespective whether he is able to flip that asset fast or not tells us where the current value is. If I follow the logic of Icahn, the value is in refining and not E&P.
However nearly any spinoff investor I met who was involved in MRO or COP actually thought the opposite, and both MRO COP traded on a lot of excitement on the basis of the event driven news of the spinoff. Personally I think oil can go back to $50, while gas can easily remain in the 2-3 range without anyone having to cry foul play. Whatever happened to the oil glut held off the market in storage barges? Its an artificially supply constrained market but the supply is there and currently its looking like the real economy is double dipping. At least as far as the instustrial/producing, non-government sectors that I am tracking are concerned.
Foor for thought. I was last week suprised of how cheap MPC had gotten 1 year after spinoff. Literally with $3 billion in cash on balance sheet, close to book value and nowhere to go with the cash. The stock has been a languisher but the way oil and gas are going near and medium term cash flow production should continue to be good, even as petroleum products consumption in US is down overall in a decade old trend. Hence more refineries will close, but those operating should have very strong cash flows with cheap oil and gas feestocks.
There is always a time to be an energy contrarian. How low could commodities go in broad macro slowdown, choke-on-debt scenario where certain parts of industrial demand vanish?
The Icahn purchase of CVR Energy is just an in the face contrarian manifesto. 2 small midwestern refineries plus a nitrogen fertilizer with arcane feedstock of coke. Anyone looking at the raw numbers of a 3x EBITDA purchase has to concur that this is a cheap asset, but if Icahn isnt in the game for flipping this asset, what else is he in the game for? the CVI 80% control stake taken came with a provision to shop the company around till about the end of July. After that nothing will be shopped around further. Mr. Icahn has also not professed interest to do a short form merger with respect of the other 20% of CVI still in the public float. If you look very carefully at what is going on, this fellow just deployed about $2 billion of his cash assets into an entity and if nobody willing to see the opportunity he is seeing, he is perfectly content in keeping things as they are. I would also be perfectly content at it given the strong position of CVI in certain midwestern markets. CVI is a small fry with 200,000 barrels refining capacity per day. MPC is much larger, even n the midwest. I believe that there is a lot of value in these portfolio allocations to regional refiners and fertilizer. this is where certain parts of the US economy are going. I think Icahn will do very well on this over the next 2-5 years.
Other than my pricing trend indications for oil I have no views on COP. They play here has been time and again the same. Buy the E&P and shed the refiner just spun-off. This is what the technical sell off was based on. The question now is which way will the fundamental movement go. Will the E&P parentcos that spun-off their spincos outperform over 1 3, 5 years?
As a basket, I am willing to bet against E&P and in favor of refiners. I own MPC sold CVI into Icahns offer and PSX at the right leverage could be a decent addition. if what you say about P/E and what I infer from yahoo about P/E is corrrect this should be a very decent story given just my basic understanding of what goes on in refining markets. I have owned Texas Petrochemicals out of bankruptcy. Refiners are fun to watch and own at the right point in the cycle.
I will still have to overlay some of the recently spun-off refiners with the Valeros Tesoros, Western Refinings, HollyFrontier et al. A basket approach here could be the way to go. I am sure the industry as a whole doesnt get a lot more of credit than the 4-6x earnings multiple that everyone so far reviewed seems to be getting.
additional contrarian point to highlight. EPD purchasing SUN. Here you have someone very knowledgable about gas liquids, oil products and transport thereof. They figured out for themselves with their existing tax advantaged MLP structure that SUN is a good way of allocating strategic capital. I have no way to refute that logic. on the contrary, If I want to overlay an additional data point from the just concluded KMI El Paso deal, KMI actually sold E&P assets and stuck with the hard infrastructure, pipeline assets. I give these pipeline and infrastructure owners a lot of credit for knowing which way the markets tick on a year to year basis.
There are all contrarian signals in favor of the type of assets that MPC and PSX own. Realistically something like SUN languished quite a bit in the markets. Still the cash flow of these companies is very good with capex being fairly limited. This should get a lot more of the MLPs interested in these types of assets down the road. So if you like small PSX dividends now, how about stock with takeover premium and future MLP dividends. IN the SUN deal there is EPD stock involved and it pays nice dividend 5.3% dividend. What SUN pays in excessive taxes, EPD passes on to shareholders in form of dividend. SUN has now a 1.7% dividend yield. the Takeover premium paid by EPD for SUN was 25% in a mostly stock funded deal.
I give it a high likelihood that any of the MPC PSX could await a very similar fate than SUN, unglamorous as the MPC PSX dividend yields sound..
With that said, I think the refiners are an excellent way to participated in the petroleum industry while preserving the upside that comes from takeover premiums and conversion into high dividend paying MLP plays via mostly stock-funded takeovers.
Some industry observers glossing on the EP / KMI deal concluded that this large sized deal would set into motion lots of dealmaking by the well funded MLPs in search of growth opportunities. EDP / SUN tie up is another major deal along these lines. Consolidation in this sector is just starting. And given a predilection to use stock consideration, its pretty clear how any of the large deals will be funded.
According to Wikipedia synopsis on the topic, Sony Music Entertainment (formerly Sony BMG JV) is now 100% owned by Sony Corp of America. FYI.. just to identify any evolving asset exposures that provide sum of the parts salvage value..
First Published Study on Masimo Acoustic Respiration Rate Demonstrates Significantly Higher Patient Tolerance and Similar Accuracy Compared to Capnometry in Post-Surgical Patients [View article]
The problem with "similar" efficacy tested in 52 post surgical patients is that there are no claims of superiority of procedure and given that the hospitals have the capnography equipment already on hand for the intubated C02 monitoring, what will make the hospital buy a new equipment, just to get a similar performance, when they can just buy a consumable (mask) and add it to their existing capnography/capnometry device. You ideally would want to see superior clinical outcomes on more than 52 patients to cause a shift in post surgical treatment and monitoring.
Masimo is a good company though. innovating for quite a while in their field. I find it kind of strange though that the company would want to commission a study that in essence is meant at bypassing their technology partner since 2009. Are they that desperate in need of the added sales that the joint market approach as captured in a technology connectivity and distribution agreement is not good enough for shared participation in this market? I guess the is always that element in executives mind that calls for more. Greed is good. A strange view at partnering though as far as I can tell. Partnering with a certain hybris in mind, that after all, "we" (Masimo) are better than our partner organization and here is the proof. Well, the proof so far only proves similarity, which is not generally the standard by which you displace an existing gold-standard treatment option.
I was tempted to invest a couple of years ago and glad I didn't. Even as a happy user of their premium products (notebooks in my case). Your article sums up nicely the risks here with the margin picture as dire as it appears. I am cautious these days about any turnaround investments. To be honests I prefer good companies going in technical default because of an M&A deal or adverse temporary issues in their business cycle. The history of tech turnarounds is littered with lots of failures.. But every once in a while there is an Apple that makes people believe that this type of stuff is easy to juggle.. There has been quite some private equity money pouring into tech turnarounds and I am not sure anyone is tracking the real world success rates.
I am glad you provide some practical advice on what these guys should be doing. Is there anything of value such as the music publishing biz left that is not deeply cyclical at this point. They might have sold that a long time ago.. That might have been a JV with Bertelsmann.
incidentally, sony has been rumored a number of times about spinoffs but there is no real background on japanese spinoffs per se, other than the successful Gen-Probe/Chugai spinoff that happened 8-9 years ago but as a result of regulatory diverstiture mandate, as opposed to spinoff amid turnaround pressures. The history of japanese spinoffs might be worth considering of how easy these corporate parents let go of subsidiaries that may carry the corporate parent brand.. judging of what goes on at such firms as Hitachi, the opposite trend would appear to be the case where sprawling carve-out stakes are being flipped back into the parentco. I cannot really pinpoint to spinoff success stories, since Gen-Probe was so unusual and triggered by Roche's control stake in Chugai. If Gen_probe had not been already a San Diego based company with a very different corporate culture from Japanese mothership, it may not have been the success on US capital markets that it turned out to be... this just as a caveat on japanese style spinoffs as a tool for turnaround value creation..
Post-Deal Seasoning Periods And Share Imbalances: The Case Of Kinder Morgan, El Paso [View article]
I personally have not formed yet an opinion on KMR/KMP. KMR does have the appeal of the discount and tax efficiency. I will though not make any rotation out of existing KMI into KMR.
As to which entity will do better, I dont want to pre-judge here anything by using analogies from other sectors that would possibly not be relevant because its not the same management. Other than the warrant issuances at KMI you kind of would expect not much new share issuances happening unless it is in M&A. but not for now. KMP/KMR though will have some issurances and shelf registrations are out there already. Given where the capital raising happens I would expect the LP interests to be cultivated so market participants dont get the expectations that they become in any way orphaned or estranged to KMI.
now wiht the ratings downgrade, i think it is important to bring it all back in line via deleveraging.. el paso always had the wild bronco high borrow costs, while kinder didnt. a good interest rate is what adds value here and with future advantageous refinancings the most value will be added to shareholders, ceteris paribus.. this is in no small part a deleveraging story when you realize that some of EP's debt was financed with 12% coupon. all other things equal I prefer KMI to pay the bondholders a lower interest rate going forward. This will though required some net reduction of debt. A net reduction of some debt tranches from 12 to 7% clearly has a beneficial impact that offsets any tax slippage.
i am sure they have a plan to become a more palatable organization from leverage perspective...all thigns equal, it would be very beneficial to KMI holders if the interest rates on all the bonds to be refinanced over time converged to something closer to the 6ish that I see on most KMI bonds. I see quite some potential here over time to reduce interest expense by $500 million but they will have to do something to earn the trust of creditors without reservations.
Post-Deal Seasoning Periods And Share Imbalances: The Case Of Kinder Morgan, El Paso [View article]
Hi MJ,
I think I had provided a comment on the election results in my previous article. Highlighting what I expect the cash and stock issuance to be on the assumption of maximum pro-ration and 1% cash election.
You did get the correct consideration as per the company's pro-rationing formula. The consideration you got is slightly different from the default option. The default option was 14.65 in cash and 0.4187 in stock.
I personally had estimated that the maximum pro-rationing numbers would be 14.50 cash and 0.43 stock. it came pretty close to it.
the definite results were published by KMI on May 30 in a separate 8K with SEC. Since there was no meaningful deviation from my previous assumptions I didnt update.
Things are just the way they should be. FYI.
I am not at this point thinking about the share influx of KMI shares as being "dillution" or in any way negative. its just part of the existing fair consideration paid for our El Paso shares.
The number of shares added is relatively benign at 330 million plus 506 million warrants. Versus the 707 million KMI shares that were oustanding and the 140 million in the public float. At this point you are looking at a market capitalization of around $33 billion for KMI.
The total cash consideration disbursed was a bit more than $11 billion and with the sale of El Paso E&P assets the net cash cost of the transaction was reduced to $4 billion.This is net transaction debt added to the exit balance sheets of EP & KMI combined. Inclusive all transaction costs I estimated that the total debt position of the combined company is now around $35 billion and this does not include debt at KMP/KMR or EPB.
So overall the Enterprise value of consolidated KMI is around 68 billion.
The shareholders equity combined is $15 billion.
With eventual divestitures as per FTC and drop downs the leverage at KMI will be reduced. The outlook that the ratings agencies give it is stable. Over time, with divestitures, dropdowns and warrants adding some amount of dillution the leverage could be greatly diminished.
Like I have indicated before, the 506 million warrants at $40 exercise price could in the best of cases, where the shareholders are supporting of KMI result in a very clean and almost unleveraged KMI. At that point KMI would no longer be rated with a BB rating as per DBRS.
The EBITDA of the two ops combined before divestiture of E&P assets was about $5 billion on a back of the envelope basis. This was just based on the reported 2011 EBITDA numbers from bloomberg. Given the recent pipeline additions here and assets coming on stream, the 2012 EBITDA expectations were put down at $7 billion during the deal announcement and roadshow presentations. The cost savings the parties were looking to achieve were put down at around 400 MM.
I would give it right now a bit time till these numbers exactly fall into place especially with the greenfield assets being fully brought in operation. I don't really know what the economics there are and how fast. So personally, looking at 2011 numbers and doing back of the envelope assumptions, I would be more than happy if they came in 2012 with 6.5 billion in EBITDA and lowered the EV to around 65 billion as a result of deleveraging from divestitures.
I have not considered with all of this the cash with which both parties came into the marriage. on the surface of things this looks to me right now like a 10x prospective EBITDA play. If they hit their 7 billion EBITDA target for 2012, implement dropdowns, delever more at KMI the story will become better by the multiples.
And i think this structure has been set up in part for part of the warrants to be exercised and bring in nice cash inflow and accomodate institutions. So this company as a whole should not be quite done yet with regards to fine-tuning leverage and using any real excess cash created in this process and dividends received for more asset additions.
These are just the numbers I see in a few bold back of the envelope strokes.Once divestitures happen, dropdowns get executed, the first consolidated quarterly balance sheet reported in Q2 and the first consolidated income statement reported for a full quarter in Q3 the company will start to take shape.
its probably good to put these loose reference numbers out there so we know towards what goal this will eventually evolve. and we can benchmark progress.
The share absorption since deal closed has been good with 40-42 million shares traded this week in 4 trading sessions. Today the sellers were pressing the buttons hard, and as already illustrated on May 24 when there was 60 million volume, the stock had a similar reaction. Even a bit more pronounced, because the market today wasnt very strong at all.
One aspect about all these hard pipeline and FERC regulated assets is that they have a nice way of repricing inflation.
Genie Energy: Small Cap Value Stock With Upside 'Call Option' Attached [View article]
Your article provided me with enough reasons to revisit. I recently read in a different article about Offshore Israel nat gas discoveries. this isn't 100% related to this but it appears that there are some hydrocarbons in the ground, although not sure if anyone is endeavoring to getting it out. Israel was described in same article as a huge net importer of oil and gas. IDT DNA always has been an intriguing one in spinoffs which is the reason I got involved but I sold out solely on the basis that I had not performed meaningful work and thus took small profits. Your article gives some insights.
The investments that were undertaken by said gentlemen are of sufficient recency that they have not yet shown up on subsidiary and consolidated balance sheets, correct? or is it part of the existing evolving cash balance you tally?
If I understand you correctly, the consolidated cash will increase, albeit a good portion of it will be locked up in certain subsidiaries, thus getting us ready for the next Jonas inspired spinoff down the road, this time with Murdoch/Rothschild as reference shareholders.
thanks again for this big, fat pointer. worth following up on this.
Grupo Prisa's Important Deal [View article]
Sogecable is actually Prisa sub now known as Prisa TV. AVS is thus effectively a Prisa Sub.
I assumed that MediaPro was the Prisa sub.
This changes the immediate cash needs and motives.
If this lawsuit and Insolvency case shakes out in the way that Prisa does not want, they actually would be getting something like Euro 330 million out of the MediaPro insolvency estate. This raises a different question, whether MediaPro and its financial backers have the money. Insolvency administrators will be more appraised on that.
So rather than causing a funding need, the audiovisual rights situation has the pontential to be a cash windfall.. Although it may not be the outcome that PrisaTV/Sogecable/AVS want. They might believe that the assets are worth more which may be the reason why they would prefer to have the audiovisual rights revert back to them.
Now that I clarified who MediaPro and Sogecable are, this starts to make a lot more sense.
I still dont understand all the aspects of contractual relationships here and how it translates into revenues for PrisaTV, one way or the other.
Grupo Prisa's Important Deal [View article]
They had a concurrent 75 million warrant exercise in Jan 2012 that raised 50 MM and retired 150 MM in debt credits (mostly warrant amortization).
Overall they had a net reduction of debt of 72 MM.
the near term cash exposures that need to be funded are the following in my view.
Prisa B dividends 182 million Euros recorded in "other financial liabilities" as per March 31, 2012. Prisa B holders have the option to get paid in cash. getting paid through Prisa A shares at a premium to current price is merely an option. Prisa B holders can elect the cash pay election in which case prisa has to come up with Euro 182 million (versus euro 77 millin cash on hand. there are financial investments but i dont know what is in them and how liquid they are).
Beyond that I see exposure of Euro 330 milliion from a pending insolvency court claim. Prisa sub MediaPro wants to get out of involvency while retaining audiovisual rights rather than losing them to AVS. What they proposed, to overturn a court verdict that went against them, is to cash pay AVS so as to cure a previous breach in contract that would have resulted in losing the rights. While Prisa wants the insolvency to be resolved through cash, AVS contests this and wants the court verdict to be upheld.
By just looking at these potential cash paying exposures I tally up total exposures of up to Euro 510 million. Even under the best of assumptions where all short and long term financial investments are converted to cash, the cash to settle such exposures is not on the balance sheet.
Hence the necessity for real upfront cash capital.
the press release hints at a conversion of partial credits with banks. That is what it is partial credits. I would be surprised if it was a complete Euro per Euro match.
The cash needs would be less, if Prisa B holders agree to the stock pay for their oustanding dividends.
I have erred so far on the side of conservatism. the 230 million in alluded accrued dividends are upon closer inspection recorded as other financial liabilities (part of net debt) to the tune of Euro 182 million. So this is already accounted for and I erred in double counting this exposure. If it is ultimately settled in stock there will be a real deduction.
The key funding gap revolves ultimately how the AVS exposure of 330 MM is accounted for and how it is ultimately settled and in my conservatism I am implying a net capital raise above the debt capital already on the books of Prisa. Since I have no ways of understanding how MediaPro insolvency and court judgement claims are accounted for I dont want to rush into any hasty conclusions here as to what the ultimate cash funding needs might be.
Apparently the audiovisual rights within the insolvent MediaPro are a major bone of contention that is bringing bank creditor and new funding sources to the table in search of some agreement that presumably would benefit Prisa shareholders as a whole.
on the family insiders. They surely created this company and then fell on hard times. Sure enough some credit goes to them even for managing the company during the downcycle. Beyond the fascination with media asset value there is also something in me that is looking for less adventurous volatility minimization. What happens for instance if the audiovisual licenses verdict in favor of AVS is upheld on appeal asking for specific performance. What Prisa/Mediapro is trying is nice and good to drag that decision into insolvency proceedings but we should not assume that the matters are resolved until AVS/Sogecable actually bury the hatchet. There are some legal questions here as of yet unresolved, unless this has since been resolved from Dec 23 till June 6 and that shareholders are not yet aware of.
Who is Sogecable by the way and are they likely to accept to be swept under the rug by the clever machinations of Prisa insiders looking to skirt an existing court order? I frankly also do not know what other creditors are involved in the MediaPro insolvency case.
This is an area where Carlos Slim et all migth be better appraised than others out there.. if you ask me. They probably get better answers of what is in for him by lending his name and capital.
Why We Like ConocoPhillips More Than Phillips 66 [View article]
Hidden assets are a distinct possibility that I haven't thought about.
Liquidation scenarios have not really been part of my considerations at this point. Any suggestions what the most sizable hidden assets would be?
Grupo Prisa's Important Deal [View article]
O) this is more a question rather than a definite statement of fact.
The terms of the deal involving B shares and A shares are
defined in Euro terms. Before we go on an undifferentiated rampage on how dillutive the terms here are consider that the Dividend Subscription happens at EURO 1.00 per share per A share versus the PRS SM trading market of 37 centimes in Spain. Whitney referenced the trading price of 29 centimes.. Looks like we are dealing here really with the prime shares issued in Spain
and not ADRs which are packaged on the basis of 4 for 1.
You can choose to get the dividend in cash or in stock at a price that is above the current market price. what you are subscribing to is not the PRIS ADRs where 4 PRS SM = 1 ADR, but the way it looks to me you are subscribing to the underlying. This is as if you were Subscribing to new PRIS US shares at the effective price of Euro 4.00, when the PRIS US trading price is US 1.95. Furthermore and with reference to the converts, these guys subscribe to new A shares at the consideration of Euro 1.00 per PRS SM. versus the PRS SM trading price of 0.37.
In my narrowminded interpretation of deal terms as described, there is nothing dillutive to the features described by some as pre-packaged. In a worst case it brings capital to the table above what the shares were trading at heretofore. If you believe in the stock that badly and the future value to be created, you can buy the shares cheaper now than what outsiders subscribe to when converting their bonds. That is a playing with confidence in turnaround. As some observers describe a long shot.
If you agree with me that this is not so dillutive vis-a-vis current trading price of the securities, pls chime in.
It looks like a real capital infusion at a premium price to then trading markets and premium price to current trading markets, as opposed to a price that takes everyone under the rug.
There is some implied view here that things here could get better and I dont understand enough what the rationale could be based on. I have not looked at their recent EBITDA basis but it would appear that they cannot get back to a EBITDA level of Euro 600 million from pre-crisis levels due to many divestitures that happened including minority interests.
For the sake of completeness the PRS SM shares outstanding number 538.735 million carrying 1 voting right each the PRS/P SM B converts number 393.544 million.
Upon conversion of the new bonds to be issued there would be 421 million new PRS SM coming into the market.
Upon acceptance of dividends in kind, a total of 230 million PRS SM would come into the market..
All in all we are looking at a 2014 capital structure involving 1,189.7 million PRS SM and 393.544 PRS/P SM, and however many ADRs of each kind this translates.
The market cap giving effect to new share issurances at the prevailing prices observed in the markets would be Euro 675 million by 2014, ceteris paribus, or if you allow for a Euro 1 per share price to prevail in future for both classes of shares alike the market cap would go to Euro 1.58 billion. Assuming that the cash now raised Euro 434 million will be used for working capital and to pay interest expense on the Euro 3. 5 billion in bank debt till things improve there would be no actual net debt reduction but you would really be staring at an Enterprise value of in the range of Euro 4.2 billion in the case of no change in share price or in the most optimistic case an EV of Euro 5.1 billion... Anything beyond that would be really fantastic but not dreaming that far ahead.
The last full year EBITDA available showed Euro 388 million for FY 2011 which corresponded to calendar 2011.
So the upside prevails here only if turnaround value indeed happens. Its a long shot but can not be ruled out as creditors are for the time being held in check till 2014/15 and cash has been infused for additional working capital cushion at the cost of 40-50 MM in cumulative interest expense.
You can see how this buying of 2 years time could be viewed as a positive for the stock in the short term. It staves off a run on the assets and wholesale liquidation of the same at the wrong prices.
A)
mandatory convertible bonds with 2 year maturity is what it is.. a new junior debt instrument ranking above any and all A and B preference or otherwise labeled securities. This is not per se an immediate conversion into equity, although it allows for the possibility of it at Prisa's option. The coupon is the best proof thereof. So if anything goes wrong from here till say July 2014, this deal does in some way change the existing pecking order of claimants. as it shoves a new class of junior bonds above the B prefs, thus in a worst case disenfranchising their rights.
The existing debt is Euro 3.5 billion with the addition of 434 million its actually increasing in the short term while there is no clear proof of how cash raised will be used. Working capital?
The debt relief of Euro 700 million by say mid 2014 will occur from a 4.2 billion accumulated debt base, as opposed to a 3.5 billion. So we are possibly at the same point where we started, under the worst case assumptions that cash raised is spent, as opposed to saved and used for real net deleveraging. Correct me here any time if my reasoning is wrong and you have evidence to the contrary that a net deleveraging is suggested in this transaction from the existing borrowing base of Euro 3.5 billion.
Notice in this respect that the new funds coming in do not accept the inferior voting class B papers but will be convertible into the A voting shares which is aligned with the family interests. This is better than getting more B papers issued as it puts some checks and balances into the dealings of family managers. it would be even nicer if the outsiders here got something like board representation so as to watch out in the future over what goes on and how money is spent. B Class holder also get the ability to participate in issuance of A class shares for dividends. So family voting interests will be further watered down.
This cash infusion will tide them over as opposed to resolve any substantial debt overhangs that are newly slated for 2014/15. if things get not resolved the Prisa equity will await the same fate as today, if not worse as there would be substantially more shares outstanding.
B)
On the view of managers as capital allocators. Its been family owned and controlled for as long as I can remember as most companies in Spain. This could be part of the problem of why Spain is in such dire straits. Access to capital has been a key differentiator although it has not served all shareholders well.
One would have to analyze in very granular fashion the Economic Value Added through dealmakings at what prices and how it has benefited outside shareholders at the receiving end.
As far as I can tell Prisa A class shares were issued sometime in 2000 at a price of 20 Euros per share, versus their current price of 37 Euro centimes. This refutes at least some notions of capital allocations and how to benefit from it. If you were part of the insider family that is fine. As outsiders the love affair might be a different. Tough love in other words.The strong brands in their portfolio, not all of which they helped to create, has not proven to be an effective insurance against paying the wrong prices for assets. This is nothing new in the European media sector though. See Leo Kirch and Kirch Media for instance. He had enough deal-savvy but was of no benefit to Kirch Media investors.
Prisa also has to be viewed in the larger context and for this you need to go back to 2008/9 when company had 5.4 billion Euros in debt versus Euro 3.5 billion now. Some asset divestitures have happened since provided some needed liquidity to keep creditors at bay. How much substance has been let go is not known. Even so I am with you that this could have ongoing media asset value such as in the distressed media asset value of Primedia that played out over many many years before TPG saved shareholders. If you tracked all the divestitures and debt paydown at Primedia it was difficult to figure out the leftovers. But eventually this moved Primedia stock from $1 to 7.10 not so elusive takeover value. Real media value for those willing to believe in their real estate centric publications.
At this point I have to admit that I am not quite sure which assets are still within Prisa and which ones have been let go. A more complex case than Primedia for sure.
Furthermore, the Prisa B nonvoting shares were the product of a unique capital infusion thanks to a once in a life capital raising opportunity afforded by investment bankers who engineered a merger of Prisa into the SPAC LIBERTY ACQUISITION HOLDINGS CORP. This was one of the SPACS where shareholders did not sufficiently dissent to the transaction (because it provided some options) and ultimately Prisa ended up gobbling up a good part of the $1.3 billion in hard cash that the SPAC owned and this allowed bankers to earn incentive shares and everything was just fine in happy lahlah land.
Such successful SPAC deals are rare. I look for instance what happened with the merger of Talbot's into a SPAC and it was a complete operational disaster. So sometimes you have to question the wisdom of some of these rescue transactions to terminally ill companies. Lets assume that Prisa is not a terminally ill company.
In order to evaluate whether this SPAC deal was long term value additive to SPAC shareholders one needs to consider that holders of LIA US were issued 1.5 PRS SM and 3.0 PRS/P SM and $0.50 in cash per LIA.. 4 PRS SM eventually were bundled into one PRIS US and 4 PRS/P SM were bundled into one PRIS.B ADR paper.
So for anyone tracking this original LIA US deal from a strictly US perspective you got 50 cents in cash, 0.38 of PRIS US and 0.75 PRIS.B.. This package of securities could be bought before deal closing back in November 2010 at a price of $10.50, on some days even below $10.
There was no borrow on underlying securities available but if you wanted to play this unhedged this was OK as a strategy. Although there was price adjustment downward on receipt of merger securities that would have resulted in LOSS had you sold into the initial seasoning period in December/Early January of 2011 (so no quick flip bucks were to be earned - and the same could be said now - no quick flipping doable to arbitrage this), the deal found better acceptance with shareholders within 3-4 month of closing and the consideration at the maximum point was worth $15 if held into April 2011. So, there is thus proof that investors gradually warmed up to the prospects of this original Prisa SPAC that got PRISA listed in US.. Once closed, investors started to like it, even though operationally things were far from stable.
After that the descent into hell started. For any original LIA US shareholders hanging on to this jolly ride, the overall merger consideration package turns out to be worth $3.50 as of today. And this does not include the dividends that will soon be paid out.
So far judging from the capital raising prowess by the governing insiders, participating in their capital raising dealings has been bad for outsiders, while preserving insiders in the driving seat.
We can attribute this to the toughness of markets as suggested in article or to ongoing shrinking in size of business as result of divestitures that eat into the muscle.
In conclusion:
I can hear you on how this could be a temp opportunity for a bounce back in case of business recovery and or clarification of the underlying media properties and their value.
However, to at least some outsiders, this has been a rough investment since the year 2000, not just 2010. You have to assume that there is method in the madness here to the way that these Mediterranean guys operate.
Needless to say that the chosen deal structure allowed the Polanco Moreno family to remain always at the helm of the company and this time is no different.
The operating methods of US media companies are not very different. As value/spec sit investments it requires a granular understanding of underlying properties. Value creation will be in all likelihood catalyzed by private equity at terms hopefully favorable to Prisa. So far Prisa has proven to have 9 Lives.
I would not rule out the possibility of a knee jerk reaction in share price upwards such that even under the impact of maximum share issuance with no operational progress, this could temporarily climb back to a price above its current value, merely on the basis of something that people cannot touch and feel, but believe to be of value, even though the value is elusive like a slippery toad.
Until a deal actually happens as in Primedia / TPG Case.
For the Enterprise value to go to Euro 5 billion by 2014, EBITDA of at least Euro 400 if not 450 million would have to be produced.
This would put them on a 11-12x EBITDA multiple which could be considered rich but eventually deserving that Euro 1 per share price.
Most likely, and I have not checked the figures, EBITDA might come short of that target. This is where an actual review of 2011 annual report and Q1 2012 might reveal surprises as to what assets they still own.
Thanks for bringing this up. its probably a lot better than it sounds at first sight if you are willing to track the moving parts of a media sum of the parts.
Why We Like ConocoPhillips More Than Phillips 66 [View article]
While I think there is strategic value in PSX, the bottom here could be tested and I have views of closer to 21-25 for the bottom at which the PSX price adequately reflects the reality of $7 billion assumed debt and an aggressive capex program near term.
lets not get headfaked by a near term 250 MM dividend or 40 cents in half year 2012. The stock has to shake further out.
I mean just answer for yourself. 250 MM dividends or even say 750 MM dividends if you include all of 2013 for shareholders and 7 billion exit payment for COP as former shareholder of this spinoff.
This is far from an arms length negotiated transaction and the truth behind intercompany agreements will only be revealed in due pro-forma course. How much pension plan deficit. How much enviro liabilities? the whole 9 yards.
Even so, the assets with which PSX was endowed with are unique tangible assets that will not go away. The $7 billion in debt can be stomached, even if it has the near term potential to climb to 8-9 billion in my view.
Now the additional $7 billion that COP managers got through this value enhancing spinoff will do much less for them in the ultra-competitive E&P business. They needed that exit payment for good processing assets that wall street is loath to value and would not be intent to build with fresh start capital. COP was lucky to to raise lots of debt capital to load onto this spinoff. Something that SUN did to SXC and wasnt tolerated too well by the post spinoff market.
There is no shortage of capital for any ludicrous E&P project though. I was reminded of this as my favorite poorly managed spinoff forestar (FOR) announced this week the purchase of an E&P property for $145 million. Not that these guys have known how to create shareholder value since they spun off. But there is no shortage of dollars to destroy in E&P.. Shareholders seem to love it. Its much easier to analyze a well managed refinery or chemicals business than a not so well managed drilling and exploration program in the middle of nowhere. it boils down to a management opinion whether the PPE is worth the paper its written on.
so if I look at what $7 billion in spinoff exit will do for COP's E&P programs, I am inclined to believe that almost nothing.
I certainly do not see the COP insiders buying shares in the open market on the strengths of their E&P asset allocations and insights. They should really know better. I personally would not be buying into that lack of displayed conviction. God knows through what lavish stock incentive program they got awarded these shares.
So, while PSX has hard assets in a cyclical industry, all that COP has to show for is PP&E subject to future write-down in a oil at $60 scenario. PSX downside is comparatively benign to COP downside. That's my fundamental view here.
That type of scenario analysis does not work with oil at $150 or a return of such top of the bubble calls made by Goldman et al. It all depends in what currency I guess. I am personally not a believer in the ever depreciating US dollar. This pendulum has the potential to swing back as well. People just generally have a hard time to envision such scenarios. Granted, its a lot more difficult to sell a newsletter on the basis of Oil at $60 than to posit outrageous claims of oil at $200..
I recently learnt that Walter Piecyk is still in business as Analyst. This was the guy with the famed Qualcomm $500 claim during the 1999-2000 internet bubble. So oil at $150-200 bucks a barrel are nice fantasies. The oil hoarded on floating storage barges sure enough is waiting to be unloaded at such fantasy prices. Nobody is willing to take losses I guess. But eventually they will have to. The JP Morgans et all, may not be able to corner that market in the end.
Oil and nat gas glut works very well for certain processors of which PSX is a part. MPC, CVI others as well.
That does not in and of itself make PSX a buy as of yet at these levels. I think the leverage and capex plans are too high for there not to be some type of near term hangover. The stock being 20% off from the artificial $37 when issued level is already a good start to finding a bottom. I am though waiting for the next leg. Its good to put this name though on my radar screen.
The seasoning period for the securities is definitely in progress. And it will continue until the leveraged reality is digested and all the gory details of intercompany arrangements revealed.
Somethign like MPC whipsawed from $45 all the way to $27 if I recall with very similar assets. There is no reason for overlaying companies one-on-one. It certainly helps though to keep in mind what can happen to shares in lackluster markets or when commodity prices do not support unquestioned enthusiasm.
in case of COP I would take advantage of well defined option strategies to protect the downside. My entry point on PSX is below the $25 level. Even with the fundamental bias I have for refiners and chemical manufacturers. If I owned PSX, which is not currently the case, I would probably hold onto it, rather than triggering a tax event. its much easier to mitigate risk and vol through option strategies. In case of COP one can write calls and together with dividends by some protection puts. Its the downside that I am most concerned with in assessing whether a spinoff is ready to be plucked.
ConocoPhillips And Phillips 66 Stand Apart From Peers [View article]
People right now seem so focused on Crude at $90.. What about Crude at $60 or 50? For a game changer in the way E&Ps are valued? You hear a lot these days about independent E&Ps but something is telling me that you dont really want to be an independent E&P, not unless you have access to a good stream of reserve replacement deals...
the article mentions that nationalistic elements of the increasing rents.. very much so.. true in argentina (see repsol), brazil, some african nations. venezuela no doubt.. Even Iraq may be very difficult to get the desired profit targets.. did I mention Russia exit by BP? at what valuation? MRO exposure to Libya provided just the low return on equity that nobody hoped for.
The high enthusiasm for domestic alternate energy sources needs to be counterbalanced against the cost and the stranded energy resources this creates in certain locales.
IN a contrarian spirit, the seasonal spread to Northeast will be less relevant, if less people live in the Northeast in the future. Population growth in US should happen in midwest and places with energy abundance. This could take some time to take shape though.
PSX owns a piece of the REX transporting stuff to Northeast. That is pretty much a dog of an asset. The abundance of energy in certain places at depressed prices and lack of seasonal spread will create new and striving industries in certain places.. INdustries that can take advantage of stranded resources, such as Chemicals, Refineries. etc.
Phillips 66: An S&P 500 Addition With Growth Prospects [View article]
My general thesis of companies in this universe is that one or the other MLP will make a pounce and find a way to use certain of the hard assets owned by the likes of MPC SUN or PSX to be used in dropdowns.
IN the case of SUN, EPD has already pounced for thsose assets. So what looked like a meager 1.4% pre-deal dividend is now a 1.7% post-deal announcement yield and SUN stock is up 20-25% on takeover premium. Once converted into EPD stock, SUN holders will hold a 5% yielding stock.
Granted, PSX has richer and more diversified asset backing that may not be used in cookie cutter method for dropdowns. I am sure the investment bankers will figure out the follow-on work if its gets too cheap. The yield difference of 1.7% or 2.7% as in case on PSX and 5% plus with MLPs is staggering and will possibly lead to more stock based M&A. Got to give it some time though for market to accept such visionary prospects to come to fruition. if there are good synergies between EPD and SUN, I would expect more MLPs to follow in their steps. Refinery assets could be in demand by those pipeline and storage MLPs dealing in refined and unrefined petroleum products anyway.
Why We Like ConocoPhillips More Than Phillips 66 [View article]
I recently wrote about the technical price adjustments of spun-off securities 12 months after issuance. Case studies on MPC and SUN are provided at bottom. PSX is just another nice mid-cap in this arena and the 20% discount at which you can get this name post spinoff and post technical selloff seems worth investigating.
Need to know how PSX is capitalized though. Dividend yield alone is just one metric. However the fact that PSX is very much considered the less desirable entity of the the COP PSX constellation may not be a good indicator of short-term mark to market value.
Am I the only one out there who continues to see a glut in both oil and natural gas for a number of years to come. Generally this is positive for refiners. While companies like COP have reserve assets and what not, that could be deemed valuable long term, in the short term their earnings will head down, unless they are properly hedged. This could make refiners on a relative basis more valuable, vis-a-vis their commodities rich corporate parents. Commodities arent worth much in an oversupplied market and with production shut it.
Personally I would not be adding commodities at this point in the cycle, even energy commidities but a good processor can be OK, if it comes with an adequate balance sheet. If PSX is the inferior business that everyone wants to believe it is, it sure cannot have been loaded up with too much debt. I am not on top of this yet, but its a good target to catch shareholders in rotation. The yahoo chart with volume overlay looks like a near perfect spin-off related technical selloff.
I am generally with Icahn on his purchase of related oil refiner CVR Energy (CVI).. This is a small refiner, with fertilizer assets but operating in a strategic location where oil and gas are cheap and coke is a reject byproduct of refining. I personally do not think that Icahn bought 80% control of this entity with a genuine intention to flip it around but he has a certain view of energy resources glut that makes him want to own the refiner, rather than a controlling interest in an oil and gas company at the wrong price.. Notice the comparatively quick flirtations with El Paso or Chesapeake over the years. He is very much involved in what goes on in the energy markets and his desire to own all of CVI at a certain price, irrespective whether he is able to flip that asset fast or not tells us where the current value is. If I follow the logic of Icahn, the value is in refining and not E&P.
However nearly any spinoff investor I met who was involved in MRO or COP actually thought the opposite, and both MRO COP traded on a lot of excitement on the basis of the event driven news of the spinoff. Personally I think oil can go back to $50, while gas can easily remain in the 2-3 range without anyone having to cry foul play. Whatever happened to the oil glut held off the market in storage barges? Its an artificially supply constrained market but the supply is there and currently its looking like the real economy is double dipping. At least as far as the instustrial/producing, non-government sectors that I am tracking are concerned.
Foor for thought. I was last week suprised of how cheap MPC had gotten 1 year after spinoff. Literally with $3 billion in cash on balance sheet, close to book value and nowhere to go with the cash. The stock has been a languisher but the way oil and gas are going near and medium term cash flow production should continue to be good, even as petroleum products consumption in US is down overall in a decade old trend. Hence more refineries will close, but those operating should have very strong cash flows with cheap oil and gas feestocks.
There is always a time to be an energy contrarian. How low could commodities go in broad macro slowdown, choke-on-debt scenario where certain parts of industrial demand vanish?
The Icahn purchase of CVR Energy is just an in the face contrarian manifesto. 2 small midwestern refineries plus a nitrogen fertilizer with arcane feedstock of coke. Anyone looking at the raw numbers of a 3x EBITDA purchase has to concur that this is a cheap asset, but if Icahn isnt in the game for flipping this asset, what else is he in the game for? the CVI 80% control stake taken came with a provision to shop the company around till about the end of July. After that nothing will be shopped around further. Mr. Icahn has also not professed interest to do a short form merger with respect of the other 20% of CVI still in the public float. If you look very carefully at what is going on, this fellow just deployed about $2 billion of his cash assets into an entity and if nobody willing to see the opportunity he is seeing, he is perfectly content in keeping things as they are. I would also be perfectly content at it given the strong position of CVI in certain midwestern markets. CVI is a small fry with 200,000 barrels refining capacity per day. MPC is much larger, even n the midwest. I believe that there is a lot of value in these portfolio allocations to regional refiners and fertilizer. this is where certain parts of the US economy are going. I think Icahn will do very well on this over the next 2-5 years.
Other than my pricing trend indications for oil I have no views on COP. They play here has been time and again the same. Buy the E&P and shed the refiner just spun-off. This is what the technical sell off was based on. The question now is which way will the fundamental movement go. Will the E&P parentcos that spun-off their spincos outperform over 1 3, 5 years?
As a basket, I am willing to bet against E&P and in favor of refiners.
I own MPC sold CVI into Icahns offer and PSX at the right leverage could be a decent addition. if what you say about P/E and what I infer from yahoo about P/E is corrrect this should be a very decent story given just my basic understanding of what goes on in refining markets. I have owned Texas Petrochemicals out of bankruptcy. Refiners are fun to watch and own at the right point in the cycle.
I will still have to overlay some of the recently spun-off refiners with the Valeros Tesoros, Western Refinings, HollyFrontier et al. A basket approach here could be the way to go. I am sure the industry as a whole doesnt get a lot more of credit than the 4-6x earnings multiple that everyone so far reviewed seems to be getting.
additional contrarian point to highlight. EPD purchasing SUN. Here you have someone very knowledgable about gas liquids, oil products and transport thereof. They figured out for themselves with their existing tax advantaged MLP structure that SUN is a good way of allocating strategic capital. I have no way to refute that logic. on the contrary, If I want to overlay an additional data point from the just concluded KMI El Paso deal, KMI actually sold E&P assets and stuck with the hard infrastructure, pipeline assets. I give these pipeline and infrastructure owners a lot of credit for knowing which way the markets tick on a year to year basis.
There are all contrarian signals in favor of the type of assets that MPC and PSX own. Realistically something like SUN languished quite a bit in the markets. Still the cash flow of these companies is very good with capex being fairly limited. This should get a lot more of the MLPs interested in these types of assets down the road. So if you like small PSX dividends now, how about stock with takeover premium and future MLP dividends. IN the SUN deal there is EPD stock involved and it pays nice dividend 5.3% dividend. What SUN pays in excessive taxes, EPD passes on to shareholders in form of dividend. SUN has now a 1.7% dividend yield. the Takeover premium paid by EPD for SUN was 25% in a mostly stock funded deal.
I give it a high likelihood that any of the MPC PSX could await a very similar fate than SUN, unglamorous as the MPC PSX dividend yields sound..
With that said, I think the refiners are an excellent way to participated in the petroleum industry while preserving the upside that comes from takeover premiums and conversion into high dividend paying MLP plays via mostly stock-funded takeovers.
Some industry observers glossing on the EP / KMI deal concluded that this large sized deal would set into motion lots of dealmaking by the well funded MLPs in search of growth opportunities. EDP / SUN tie up is another major deal along these lines. Consolidation in this sector is just starting. And given a predilection to use stock consideration, its pretty clear how any of the large deals will be funded.
http://seekingalpha.co...
Could Sony Disappear? [View article]
http://bit.ly/LsZ7qH
First Published Study on Masimo Acoustic Respiration Rate Demonstrates Significantly Higher Patient Tolerance and Similar Accuracy Compared to Capnometry in Post-Surgical Patients [View article]
Masimo is a good company though. innovating for quite a while in their field. I find it kind of strange though that the company would want to commission a study that in essence is meant at bypassing their technology partner since 2009. Are they that desperate in need of the added sales that the joint market approach as captured in a technology connectivity and distribution agreement is not good enough for shared participation in this market? I guess the is always that element in executives mind that calls for more. Greed is good. A strange view at partnering though as far as I can tell. Partnering with a certain hybris in mind, that after all, "we" (Masimo) are better than our partner organization and here is the proof. Well, the proof so far only proves similarity, which is not generally the standard by which you displace an existing gold-standard treatment option.
Could Sony Disappear? [View article]
I am glad you provide some practical advice on what these guys should be doing. Is there anything of value such as the music publishing biz left that is not deeply cyclical at this point. They might have sold that a long time ago.. That might have been a JV with Bertelsmann.
incidentally, sony has been rumored a number of times about spinoffs but there is no real background on japanese spinoffs per se, other than the successful Gen-Probe/Chugai spinoff that happened 8-9 years ago but as a result of regulatory diverstiture mandate, as opposed to spinoff amid turnaround pressures. The history of japanese spinoffs might be worth considering of how easy these corporate parents let go of subsidiaries that may carry the corporate parent brand.. judging of what goes on at such firms as Hitachi, the opposite trend would appear to be the case where sprawling carve-out stakes are being flipped back into the parentco. I cannot really pinpoint to spinoff success stories, since Gen-Probe was so unusual and triggered by Roche's control stake in Chugai. If Gen_probe had not been already a San Diego based company with a very different corporate culture from Japanese mothership, it may not have been the success on US capital markets that it turned out to be... this just as a caveat on japanese style spinoffs as a tool for turnaround value creation..
Post-Deal Seasoning Periods And Share Imbalances: The Case Of Kinder Morgan, El Paso [View article]
As to which entity will do better, I dont want to pre-judge here anything by using analogies from other sectors that would possibly not be relevant because its not the same management. Other than the warrant issuances at KMI you kind of would expect not much new share issuances happening unless it is in M&A. but not for now. KMP/KMR though will have some issurances and shelf registrations are out there already. Given where the capital raising happens I would expect the LP interests to be cultivated so market participants dont get the expectations that they become in any way orphaned or estranged to KMI.
now wiht the ratings downgrade, i think it is important to bring it all back in line via deleveraging.. el paso always had the wild bronco high borrow costs, while kinder didnt. a good interest rate is what adds value here and with future advantageous refinancings the most value will be added to shareholders, ceteris paribus.. this is in no small part a deleveraging story when you realize that some of EP's debt was financed with 12% coupon. all other things equal I prefer KMI to pay the bondholders a lower interest rate going forward. This will though required some net reduction of debt. A net reduction of some debt tranches from 12 to 7% clearly has a beneficial impact that offsets any tax slippage.
i am sure they have a plan to become a more palatable organization from leverage perspective...all thigns equal, it would be very beneficial to KMI holders if the interest rates on all the bonds to be refinanced over time converged to something closer to the 6ish that I see on most KMI bonds. I see quite some potential here over time to reduce interest expense by $500 million but they will have to do something to earn the trust of creditors without reservations.
Post-Deal Seasoning Periods And Share Imbalances: The Case Of Kinder Morgan, El Paso [View article]
I think I had provided a comment on the election results in my previous article. Highlighting what I expect the cash and stock issuance to be on the assumption of maximum pro-ration and 1% cash election.
You did get the correct consideration as per the company's pro-rationing formula. The consideration you got is slightly different from the default option. The default option was 14.65 in cash and 0.4187 in stock.
I personally had estimated that the maximum pro-rationing numbers would be 14.50 cash and 0.43 stock. it came pretty close to it.
the definite results were published by KMI on May 30 in a separate 8K with SEC. Since there was no meaningful deviation from my previous assumptions I didnt update.
Things are just the way they should be. FYI.
I am not at this point thinking about the share influx of KMI shares as being "dillution" or in any way negative. its just part of the existing fair consideration paid for our El Paso shares.
The number of shares added is relatively benign at 330 million plus 506 million warrants. Versus the 707 million KMI shares that were oustanding and the 140 million in the public float. At this point you are looking at a market capitalization of around $33 billion for KMI.
The total cash consideration disbursed was a bit more than $11 billion and with the sale of El Paso E&P assets the net cash cost of the transaction was reduced to $4 billion.This is net transaction debt added to the exit balance sheets of EP & KMI combined. Inclusive all transaction costs I estimated that the total debt position of the combined company is now around $35 billion and this does not include debt at KMP/KMR or EPB.
So overall the Enterprise value of consolidated KMI is around 68 billion.
The shareholders equity combined is $15 billion.
With eventual divestitures as per FTC and drop downs the leverage at KMI will be reduced. The outlook that the ratings agencies give it is stable. Over time, with divestitures, dropdowns and warrants adding some amount of dillution the leverage could be greatly diminished.
Like I have indicated before, the 506 million warrants at $40 exercise price could in the best of cases, where the shareholders are supporting of KMI result in a very clean and almost unleveraged KMI. At that point KMI would no longer be rated with a BB rating as per DBRS.
The EBITDA of the two ops combined before divestiture of E&P assets was about $5 billion on a back of the envelope basis. This was just based on the reported 2011 EBITDA numbers from bloomberg. Given the recent pipeline additions here and assets coming on stream, the 2012 EBITDA expectations were put down at $7 billion during the deal announcement and roadshow presentations. The cost savings the parties were looking to achieve were put down at around 400 MM.
I would give it right now a bit time till these numbers exactly fall into place especially with the greenfield assets being fully brought in operation. I don't really know what the economics there are and how fast. So personally, looking at 2011 numbers and doing back of the envelope assumptions, I would be more than happy if they came in 2012 with 6.5 billion in EBITDA and lowered the EV to around 65 billion as a result of deleveraging from divestitures.
I have not considered with all of this the cash with which both parties came into the marriage. on the surface of things this looks to me right now like a 10x prospective EBITDA play. If they hit their 7 billion EBITDA target for 2012, implement dropdowns, delever more at KMI the story will become better by the multiples.
And i think this structure has been set up in part for part of the warrants to be exercised and bring in nice cash inflow and accomodate institutions. So this company as a whole should not be quite done yet with regards to fine-tuning leverage and using any real excess cash created in this process and dividends received for more asset additions.
These are just the numbers I see in a few bold back of the envelope strokes.Once divestitures happen, dropdowns get executed, the first consolidated quarterly balance sheet reported in Q2 and the first consolidated income statement reported for a full quarter in Q3 the company will start to take shape.
its probably good to put these loose reference numbers out there so we know towards what goal this will eventually evolve. and we can benchmark progress.
The share absorption since deal closed has been good with 40-42 million shares traded this week in 4 trading sessions. Today the sellers were pressing the buttons hard, and as already illustrated on May 24 when there was 60 million volume, the stock had a similar reaction. Even a bit more pronounced, because the market today wasnt very strong at all.
One aspect about all these hard pipeline and FERC regulated assets is that they have a nice way of repricing inflation.
Post-Deal Seasoning Periods And Share Imbalances: The Case Of Kinder Morgan, El Paso [View article]