LILA - Liberty Global Latin America tracker

[alwaysinvert]

If you have signed up your LILAR for over-subscription you might want to double check your order just to be safe.

It took two hours over the phone today for Interactive Brokers to allow me to enter a value superior to zero under that box (nb.3).

I had signed up my shares already a couple weeks ago without a problem but the terms of the deal have been updated and somehow my order didn't transfer and I was "locked out" from entering it again.

 

It was probably just a glitch with the broker but my conspiracy theory brain says maybe Malone is trying to yet again stick it to other shareholders with some last minute small change in the terms trickery since the deadline is tomorrow  :-X

 

I'm pretty sure that at a minimum a lot of non-US owners are going to get royally screwed on this. I had a couple of weeks of back and forth with my broker (because I anticipated issues) and only got the rights allocated to me several days after they started trading. I'm 100% certain that I would have never seen the rights at all if I didn't keep pestering them about it. No doubt my broker is incompetent/lacks the infrastructure, but they also expressed to me that the info on the back-end was scant.

[NotSoWise]

Same here (non-US, in EU), I have decent broker but it took me some 14 emails and daily checking progress and following up. Got rights 4-5 working days after they started trading and got confirmation about rights execution with money blocked only this Wed.

 

I did not sign up for oversubscription as expect either small amount/ big reduction and just found some other idea to put extra money in. Nevertheless, almost doubled my share count 2 days ago. So we will see how it goes from now, like CHTR or like LBTYK...

[alwaysinvert]

Well, as expected they did raise all the money. For anyone who oversubscribed, how much extra did you get?

[WayWardCloud]

The new LILAK shares will be issued on October 2nd.

https://finance.yahoo.com/news/liberty-latin-america-ltd-announces-130000734.html

 

Right now I see some new LILAK.EX (subscription) and LILAK.OS (oversubscription) in my portfolio but I don't think anything is settled yet.

[jgyetzer]

Same.

[WayWardCloud]

Does anyone know if selling a class C from any of Malone's companies to buy a class A or vice versa counts as a wash sale?

Could the two securities be considered as "substantially identical" even though they hold different voting power and trade at a slight price discrepancy?

[jgyetzer]

I had the same thought recently. It appears that an options trade for the same security can trigger the wash-sale rule. Based on that I would guess that trading shares of equivalent economic value would also.

[NotSoWise]

For those who subscribed - do you have the newly issued shares on your brokers account?

[jgyetzer]

Yes.  Did you not receive them?

[NotSoWise]

I am in EU, so have always delays - this morning I sent the email with question to the broker and they said they will book new stocks today. It probably took so long because of the weekend between 2nd Oct and today.

[alwaysinvert]

Seems like a somewhat of a return to market pricing now, keeps closing that performance gap with Tigo. Still trades just about the March lows levels, though. Don't know why it moves so much today, Goldman buy recommendation?

[NotSoWise]

Goldman and Morgan Stanley have just issued buys. GS at usd 15 and MS at usd 11. If the results are ok in 3/4Q, they will rerate buys to higher targets. Nice to see it moving up after 4 years of permanent disappointment, but for me its a long term hold, 5-7 years  at least.

 

Now all eyes are on Scotiabank - their last one is sector perform at usd 6.6...

[alwaysinvert]

This could be huge: https://finance.yahoo.com/news/liberty-mull-purchase-telefonica-latin-185145921.html

[NotSoWise]

I wonder if they would have enough money left from previous capital raise + cash generated/ new debt, or there is another capital raise coming at lets say USD 6 or less...

[Spekulatius]

This could be huge: https://finance.yahoo.com/news/liberty-mull-purchase-telefonica-latin-185145921.html

 

Huge dilution most likely. It hasn’t been lack of deals that held back this stock.

[alwaysinvert]

They did raise extra cash with the idea that there were more deals out there. This is some of what would have been top of mind, as Telefonica wanting to divest all of Latam has been known for a year.

 

They could probably tap the bond market now too at acceptable terms, see Tigo's latest raise.

 

Ecuador should be a piece of cake to solve.

 

Colombia is the question mark as it is big and to be honest it may be thrown in there in this leak to shake up Tigo in some way. I don't quite know how but it seems too coincidental with the public partner recently expressing their wish to sell their half in Tigo UNE. Maybe they are *actually* vying to put in a bid there as being competitors in Colombia could turn up antitrust issues if the much awaited combination of the two should ever happen. On the other hand, there is no other possible strategic acquirer than LILA of Telefonica's business, and it too is a private/public JV, so the price there may be very advantageous.

[NotSoWise]

Huge dilution is not obvious. If you pay 5,5x at 4,5x debt, then you pay 1x EBITDA, which is manageable for LILAK (cash left from recent cap. raise plus USD 100-200m generated in 2020). So it all depends hugely on price paid, with good chance of it being reasonable, given distressed seller. One acquisition they can do, two probably not.

 

Then you have TIGO, with huge cash capacity, so the solution can be worked out re both deals.

 

On the other hand, Malone+Zinterhofer may be interested in adding more at USD 6... so the outcome is not obvious. Hard to take any view here, given limited public information.

 

 

[alwaysinvert]

https://www.eleconomista.es/empresas-finanzas/noticias/10974025/01/21/Telefonica-acelera-las-negociaciones-para-vender-su-filial-chilena.html

 

Should be a good fit for LILA in an already strong market for them - if they can get it past regulators.

 

[Spekulatius]

https://www.eleconomista.es/empresas-finanzas/noticias/10974025/01/21/Telefonica-acelera-las-negociaciones-para-vender-su-filial-chilena.html

 

Should be a good fit for LILA in an already strong market for them - if they can get it past regulators.

 

They have done many deals, why should this one make a difference? What could get this stock working is to make the current assets work better and rationalize the company,  produce organic growth and reduce debt. They should be selling assets, not buying more.

[alwaysinvert]

https://www.eleconomista.es/empresas-finanzas/noticias/10974025/01/21/Telefonica-acelera-las-negociaciones-para-vender-su-filial-chilena.html

 

Should be a good fit for LILA in an already strong market for them - if they can get it past regulators.

 

They have done many deals, why should this one make a difference? What could get this stock working is to make the current assets work better and rationalize the company,  produce organic growth and reduce debt. They should be selling assets, not buying more.

 

The logic of within-country synergies and/or buying from a motivated seller and/or with few other possible takers has been laid out numerous time already.

[NotSoWise]

What LILAK needs the most is the organic growth. It will allow for the multiple to re-rate up by 1-2 turns. The growth was just about to come before COVID (insiders bought a lot of stock in hope of good numbers coming soon), but then COVID hit and delayed organic growth by 1-1,5 years. However, they should be able to show some organic growth in 2H2021.

 

Selling assets would be foolish for them. Quite the opposite, they need to buy more to benefit from scale/ wider products offer/ stronger local market position, etc (but not overpay).

 

Its worth to do a simple model (about 50 lines is enough) - and then you will see the logic behind what they are doing. In short: organic growth at constant leverage with excess cash for new broadband lines, M&A and buybacks. As we know, for CHTR it worked but for LBTYK it didnt. I think the odds are good for LILAK and the price is low, so I still hold it until the situation clarifies. So far a pretty bad investment (4 years), but we will see how it develops. I wouldnt sell before Zinterhofer/ his PE fund exits, there might be some upside left.

 

 

[Jurgis]

What LILAK needs the most is the organic growth. It will allow for the multiple to re-rate up by 1-2 turns. The growth was just about to come before COVID (insiders bought a lot of stock in hope of good numbers coming soon), but then COVID hit and delayed organic growth by 1-1,5 years. However, they should be able to show some organic growth in 2H2021.

 

Why would COVID hurt the growth of a mobile operator or Internet provider? I'd think that COVID should have resulted in higher growth since everyone uses mobile/Internet more. Is this purely the issue of LatAm currencies tanking?

 

TBH, I stopped following LILA a while ago.  ::)

[NotSoWise]

What you wrote is true about e.g. CHTR, but for LILAK it worked a bit differently, due to the following:

 

1. Revenue mix - less cable than e.g. CHTR and much more mobile revenue. There were heavy losses in mobile prepaids, people were staying home so could use wifi for calling, they could cut mobile bills.

2. Tourism - Some LILAK countries have high exposure to tourism. Due to loss of visitors, several people temporarily lost jobs in tourism and had problems with paying bills, also SMEs had some issues.

3. Poorer customers - As LATAM countries are much poorer than e.g. US, LILAK introduced some cheap, basic internet packages so children could continue education online, even if their parents lost their jobs and couldnt pay normal internet bills as per contract. This was to show a goodwill to governments and regulators, but decreased revenue for some time.

4. Currency/ FX, as they report in USD

 

Taking aside Chile fuc... up (network collapse due to high traffic and broadband customer losses), overall broadband was doing reasonably ok given circumstances/ shutdowns (new builds, new connects).

 

Points 1-3 seem to be temporary losses and the reve should bounce back, but it takes time. I think Covid took away 1-1,5 years from the investment thesis. Overall my learning is that even "stable" business are much more risky in emerging markets. The additional risk in emerging markets (FX, politics) is not compensated by higher potential growth in my view.

[Jurgis]

Thanks. Makes sense.  8)

[Spekulatius]

What LILAK needs the most is the organic growth. It will allow for the multiple to re-rate up by 1-2 turns. The growth was just about to come before COVID (insiders bought a lot of stock in hope of good numbers coming soon), but then COVID hit and delayed organic growth by 1-1,5 years. However, they should be able to show some organic growth in 2H2021.

 

Selling assets would be foolish for them. Quite the opposite, they need to buy more to benefit from scale/ wider products offer/ stronger local market position, etc (but not overpay).

 

Its worth to do a simple model (about 50 lines is enough) - and then you will see the logic behind what they are doing. In short: organic growth at constant leverage with excess cash for new broadband lines, M&A and buybacks. As we know, for CHTR it worked but for LBTYK it didnt. I think the odds are good for LILAK and the price is low, so I still hold it until the situation clarifies. So far a pretty bad investment (4 years), but we will see how it develops. I wouldnt sell before Zinterhofer/ his PE fund exits, there might be some upside left.

I agree on the importance of organic growth. It makes or break the thesis for Lilak. the broadband/ cable business is a much better business in the Us compare to anywhere else. Thats why  Charter has worked and  LBTY and LILA didn’t. LiLA isn't really solely a broadband business as they have a lot lower quality mobile (prepaid) as you mentioned.

 

Currency risk hurts and cannot be fully hedged out.