triedtestedand

Giovanni & Ezra are dipping in to buy in December: https://www.canadianinsider.com/node/7?menu_tickersearch=FGE+%7C+Fortress+Global+Enterpris

Thx Sculpin. Help me with the math, will you. What does RJ infer 2019E EBITDA to be then? If I assume: Forecasted MarketCap ~ 60M (i.e. 15M shares @ $4/share) Total Debt ~ 209M Total Cash ~ 33M (25M + 8M restricted) Ratio = 6.5 6.5 = EV/EBITDA EBITDA = EV/6.5 = (60+209-33)/6.5 ~ 36 Right? So they forecast averaging $9M/qrtr overall then? (10.5 if factor out .5M/qrtr for the xylitol group, and $1M/qrtr for corporate) I guess RJ want a couple of consistent quarters (and with fifth digestor) to target a higher forecast?

COTTON pricing past 3 years: http://bigcharts.marketwatch.com/quickchart/quickchart.asp?symb=COTTON&insttype=Future&freq=2&show=&time=10 Note that the spring time run up in cotton pricing was short term ... and didn't correlate w any bump in DP pricing ... so "weakening" is a time relevant description that I don't think is adequately relevant in this particular scenario

Doc75: The market was not completely disinterested ... almost 100k shares traded today ... so some actual liquidity for once. My question would be “Why sell now / at this price?”. Rather than continued underperformance and/or the latest external issue, this looks like value now hiding in plain sight? Maybe issue is that it’s hard to believe given history?

Doc75: Didn't see that either. Chad definitely had not been hiding on previous calls. My take is that with operations (FINALLY) showcasing potential, with the 2019 debs refinanced, and with the Xylitol initiative underway, there was room to take a breath ... he's definitely been in the hot seat for a looong time on this. I personally would have hoped for him to stick around longer for further of negotiating w IQ, Mondelez, etc. ... but I'm guessing he felt confident enough (especially given his significant shareholdings) to pass the baton to Giovanni. Giovanni may not be the natural deal maker that Chad, or at least it's not something that he has focused on, and will not be a song and dance guy on an earnings conference call, but he's definitely proving himself to be the operator. And Chad being on the board, and with significant shareholdings, will be motivated to help complement Giovanni in whatever official or unofficial capacity is requested. Back in August, I had 3 big issues which worried me, issues are now complete: 1. refinance the debs 2. get the digester permit 3. prove out operational consistency/potential/cost-structure Item #3 is of course the long term most strategic item ... and parsing the Q3 results, I interpret (given current market conditions) the following: - potential for $12M/qrtr of EBITDA with 4 digesters when no downtime incurred -> AND potential for even more with 5th digestor operational -> AND reduced seasonal variability in operating results (which we have seen in the past owing to cold weather) - potential for MORE than >40K ADMT in a quarter with 4 digesters in place (not even counting the further 17K ADMT targeted with the 5t digester), noting that Thurso had ~1 week shutdown in July ... inferring potentially another 4K/ADMT per quarter? -> i.e. potential to exceed targeted expectations r.e. annual capacity of 167K ADMT to potentially 190K ADMT?

God forbid. Fortress exceeds expectations ... https://fortressge.com/wp-content/uploads/2018/11/Q3-2018-Financials.pdf

Amend and Extend is now approved, and go into effect by end of the week: https://www.newswire.ca/news-releases/fortress-global-enterprises-announces-approval-of-amendments-to-its-70-convertible-debentures-due-2019-694862901.html Now: a) need to get that fifth digester permit in advance of winter (when it truly makes a difference) b) need to keep working on consistent (lower-cost) operations (which "a" will be most helpful for) c) keep advancing on the xylitol project Most of these are in Giovanni's purview ... so will be interested to see where Chad focuses efforts next. I wonder if, once approved, they will turn around and institute a NCIB on the debs (up to 10% of the $62M outstanding/yr) and/or on the stock (up to 3.5%/yr of the ~15M shares outstanding, with the 3.5% restriction imposed within the amend and extend agreement) ... as of end of Q2 they had ~$32M (which includes $8M in restricted cash). I also wonder what effect will be of change of Quebec Govt to CAQ ... who've made lots of noises about Investissement Quebec (and it under-performing) during their campaign.

https://www.fortressge.com/wp-content/uploads/2018/10/Fortress-Global-Enterprises-Provides-Enhanced-Terms-to-Proposed-Debenture-Amendments-and-Extends-Consent-Fee-Deadline.pdf

bizaro86: Agree. Good on Chou et al. Agree. Debs hold a number of cards (but not all). Agree+DisAgree. Negative development for commons. - Negative in terms of any deal with current debs with the amendment as currently proposed. - Positive in terms of (if can come to agreement with Chou et al) securing certainty and (finally) getting this in the rear view mirror.

bizaro86 ... got it ... now I see your perspective ... you're one of those who have been smart and made out well buying it distressed, but extending the term without payout will lower your own average yield to maturity, despite the increased interest and the sweetener. I guess for you then it becomes what to do ... accept the lower yield to maturity or sell (now or sometime after the amendment) and find something else that is more attractive for your investment risk level. For us sufferers with the commons, I would like to have your unhappiness to deal with ;-)

Good points bizaro86. Agree that there's some game theory/incentivization aspects going on here, and yes, it will definitely be interesting to see where the debs trade the next couple of days. The debs have been trading at 90 cents on the dollar +/- for approaching 2 years now (i.e. 8% yield + 10% premium at maturity), so will be interested to see where this goes.

I can definitely see (some) grumbling from deb holders in terms of legacy conversion price being maintained, and maybe some consideration could have been included as a sweetener ... but counterpoint to that from a common shareholder standpoint is that deb holders have been getting cash at 7% the whole time, along with obvious preference over common shareholders by virtue of being such deb holders. Further, if shares are what was truly desired by deb holders, one strategy for deb holders would be / have been to re-invest interest payments to buy common shares on the open market. I look at the stock chart for the past 5 years, and can eyeball a $4/avg per share over that time (varying from <$2/share to over $8/share), or a roughly avg $60M valuation (assuming 15M shares outstanding). Take 7% per year of the $62M that is net outstanding of the 2019 debs (after FGE bought back ~10% of the debs a few years ago), multiply by five over 5 years, and you have 35% of the $62M, or ~$22M paid out in interest in aggregate... so assuming debs bought in at $4/share without moving the share price (which trades <10K shares per day ... i.e. effectively illiquid), then debs could be holding 1/3 of the company by now, while still maintaining their deb holdings and priority status. I know this is theoretical ... Thinking about this a bit further ... looking forward, a key from downside perspective in accepting/rejecting the amendment is likely whether debs think they will be able to get paid at end of 2022. I guess if they feel there is risk there then they can sell on open market (in which case any buyers would get the 8% until 2022, along with any premium as a discount to par if existing deb holders choose to sell at less than par) ... so the demographics of the deb holder may change with this amendment offer to those with greater risk appetite. All said and done, there's some tension from both sides here, which makes it feel like a fair deal. And Cardboard ... good reminder r.e. FFH offering a sweetener in the past to bond holders.

Very simply: a) Prove to market they can keep costs below $900/ADMT for two quarters in a row (Q2 and Q3) to prove they can achieve reliable operations, while also combining favourable summer seasonal conditions AND no planned shutdown. Midway thru Q2, they are 1/4 of the way through (although impacted by ice storm in Ottawa in mid-April). b) Figure out the 2019 debs ... which they have 19mo to achieve. The comment that cash balances would be neutral thru end of 2018 was a bit worrying, but I wonder if the ($5M of) cash/working capital commitments for S2G will offset cash creation thru the rest of this year, and what else there is. Further, their accounts payables are coming off of highs (from $50M to $46M quarter over quarter), so it may be better to look at working capital vs strictly cash+restricted cash for visibility into progress. c) Avoid any other new curses.

Q4/17 = kitchen sink quarter Q1/18 = mediocre, but finishing off well Tidbits from call and questions to mgmt: - producing now at "high 400's per day" ... if assume 480/day then that would be >40K/ADMT in a quarter - if so, then costs/ADMT will go below $900CDN/ADMT - MOFCOM is mostly mitigated (now <$20USD/ADMT mitigation), so almost a non-issue/dependency on Chinese/WTO elements - deferral of 2018 Investissement Quebec principal and interest helps a lot w cash - w CDN$ @ $.77USD and DP @ $930USD/ADMT and above and reliable ops and non-winter type impacts on costs ... dare we see two really solid quarters (Q2/18 & Q3/18) in a row ... and impact of 5th digester providing reinforcement?

OptsyEagle: Check out documents in the following: https://www.wto.org/english/tratop_e/dispu_e/cases_e/ds483_e.htm The latest document from June 7, 2017 notes very succinctly: "We wish to inform you that, pursuant to Article 21.3(b) of the Understanding on Rules and Procedures Governing the Settlement of Disputes, Canada and the People's Republic of China (China) have agreed that the reasonable period of time for China to implement the recommendations and rulings of the Dispute Settlement Body (DSB) in the China – Anti-Dumping Measures on Imports of Cellulose Pulp from Canada (DS483) dispute will be 11 months from 22 May 2017, i.e. the date of adoption of the DSB's recommendations and rulings. Accordingly, the reasonable period of time will expire on 22 April 2018." DP prices have remained firm now for several months at ~$920USD ... helped in no small part by the strength of BEK & NBSK markets (with swing mills switching to such vs DP to max profitability) If FTP's MOFCOM burden essentially comes off in ~3mo from now, it'll remove one more weight from their shoulders. Cardboard & roundball100: - LIBOR & 5.75% brings them to about 7.5% at current rates ... so not much different than their other long term debt ... and with it as a revolver vs a loan, then they only pay for it as they need to - the amount isn't big, but does allow them to leverage an unencumbered asset to add to their cash pool I think they want to get ahead of things as much as possible with the $62M of 2019 debs ... the more they can get those paid down/paid off ... the more proactive they can be elsewhere ... their other lenders all seem fairly friendly