MHY.UN - Marret High Yield Strategies Fund

[bskptkl]

Thanks to Sculpin for pointing this out back when it was really cheap!

 

The 17th Report of the Monitor put to rest a lot of uncertainties and this looks to be a liquidation play with an ok IRR plus a coal mine kicker.

http://documentcentre.eycan.com/Pages/Main.aspx?SID=261

 

First Lien will get paid 163.9 on par of 125.3 for a 131% recovery

Second Lien will get 67.72 on 43.25 for a 157% recovery.

 

15th report says cash on 10/30/15 will be 346 million, less 231.6 for the secured debt and 2.45 for priority payments leaves 111.9 for the Unsecured Distribution Amount.

 

I used 158.2 and 90.0 for the Unsecured Senior Notes and Unsecured Pari Passu Notes Allowed Claims for a total of 248.2 in Allowed Claims.

 

Recovery therefore will be 45% of the Allowed Claim amount.

 

I'm not too worried about any additional Unsecured Allowed Claims. They wrote the Distribution Order such that the first 40 million of any additional Allowed Unsecured Claim will not effect the recovery on the Notes. See page 10-11 of the Distribution Order.

 

I also think/hope they overestimated Admin fees in the Cash Flow forecast in the 16th report.

 

Looks like this

MHY Par Value par payment percentage NAV per share

 

First Lien Notes $2,326,000 $125.3 $163.9 131% $3,042,508 $0.08

Second Lien Notes $8,529,857 $43.3 $67.7 157% $13,355,773 $0.36

Unsecured Senior Notes $20,987,222 $158.2 $71.0 45% $9,419,707 $0.26

$25,817,987

 

shares outstanding 36,729,002 NAV $0.70

 

So trading 94% of Moblicity bond recovery with a Cline mining kicker.

 

$(0.66) 8/14/2015

$0.45 10/15/2015

$0.26 1/30/2016

 

26% xirr

 

Thoughts? Other than 4 cents seems pretty skinny...

 

 

[bskptkl]

MMF looks like

First Lien Notes $625,000 131% $817,527 $0.23

Second Lien Notes $427,703 157% $669,683 $0.19

Unsecured Senior Notes $1,369,038 45% $614,466 $0.17

$2,101,676

dual share structure Class A, F

MMF = Class A, gets 90% of NAV 90% $1,899,644.99

shares outstanding 3,260,494 NAV $0.58

 

$(0.55) 8/14/2015

$0.41 10/15/2015

$0.17 1/30/2016

 

26% xirr

 

 

 

[sculpin]

Finally! Some cash coming back to the Marret holders...

 

Marret High to pay 44.61-cent distribution Sept. 25

 

 

2015-09-11 17:19 ET - News Release

 

 

An anonymous director reports

 

MARRET ASSET MANAGEMENT ANNOUNCES DISTRIBUTION FOR MARRET HIGH YIELD STRATEGIES FUND

 

Marret High Yield Strategies Fund will pay a distribution of 44.61 cents per unit to unitholders of record on Sept. 22, 2015, with a payment date on Sept. 25, 2015. Pursuant to the sale of Mobilicity to Rogers Communications, the fund received cash payment for certain bonds issued by Data & Audio-Visual Enterprises Wireless Inc., operating as Mobilicity. The distribution represents the net proceeds received by the fund and is being made in accordance with the ongoing termination of the fund.

 

In accordance with the applicable rules of the Toronto Stock Exchange ("TSX") the "due bill" trading procedures of the TSX will apply to the distribution. The units of the fund will trade on a "due bill" basis from two trading days prior to the Distribution Record Date (i.e., September 18, 2015) to the Payment Date, inclusively (the "due bill period"). Any trades that are executed on the TSX during the due bill period will be identified to ensure purchasers of the fund's units receive the entitlement to the distribution.

 

The units will commence trading on an ex-dividend basis on September 28, 2015, as of which date purchases of units will no longer have an attaching entitlement to the distribution. The due bill redemption date will be September 30, 2015.

 

Marret expects to receive additional proceeds for certain other Mobilicity bonds held by the fund; however, the final determination on payment has not yet been made.

 

Marret Multi-Strategy to pay 40.71-cent distribution

 

 

2015-09-11 17:18 ET - News Release

 

 

Mr. Barry Allan of Marret Asset Management reports

 

MARRET ASSET MANAGEMENT ANNOUNCES DISTRIBUTION FOR MARRET MULTI-STRATEGY INCOME FUND

 

Marret Multi-Strategy Income Fund will pay a distribution of 40.71 cents per unit to Class A unitholders of record on Sept. 22, 2015, with a payment date of Sept. 25, 2015. Pursuant to the sale of Mobilicity to Rogers Communications, the fund received cash payment for certain bonds issued by Data & Audio-Visual Enterprises Wireless Inc., operating as Mobilicity. The distribution represents the net proceeds received by the fund and is being made in accordance with the ongoing termination of the fund.

 

In accordance with the applicable rules of the Toronto Stock Exchange ("TSX") the "due bill" trading procedures of the TSX will apply to the distribution. The units of the fund will trade on a "due bill" basis from two trading days prior to the Distribution Record Date (i.e., September 18, 2015) to the Payment Date, inclusively (the "due bill period"). Any trades that are executed on the TSX during the due bill period will be identified to ensure purchasers of the fund's units receive the entitlement to the distribution.

 

The units will commence trading on an ex-dividend basis on September 28, 2015, as of which date purchases of units will no longer have an attaching entitlement to the distribution. The due bill redemption date will be September 30, 2015.

 

Marret expects to receive additional proceeds for certain other Mobilicity bonds held by the fund; however, the final determination on payment has not yet been made.

 

There is no guarantee the Toronto Stock Exchange will permit the fund to maintain its listing. Please consult with your tax advisor on the possible consequences if the fund is delisted.

[hillfronter83]

Does anybody know if the latest cash distribution was return of capital or dividend? IB withheld 15% on the cash distribution. I'm in US.

[bskptkl]

I'm selling the rest of my MHY.UN at 9 cents if anyone one wants it. I figure I have a bunch of MAR with the "free" Cline CVR so this is a hedge. Plus I'm bored...

[sculpin]

Incredible poor deal by Marret. Could take ten years to pay out amount to MHY amount of $0.70/share but at least MHY.un shareholders will not get zilch...

 

https://themarketherald.com.au/elk-projects-feasibility-study-exceeds-allegiances-expectations-2019-11/

 

Allegiance Coal (AHQ) has received its feasibility study for the New Elk coking coal project

The company is aiming to get production up and running by mid-2020

The new feasibility study shows the New Elk project is uniquely positioned for a U.S. coal producer

https://www.allegiancecoal.com.au/irm/PDF/1613_0/InvestorPresentation

 

Marret funds main asset Cline to sell New Elk Coal

 

2019-07-15 11:05 ET - News Release

 

Also News Release (C-MMF) Marret Multi-Strategy Income Fund

 

An anonymous director reports

 

MARRET ASSET MANAGEMENT ANNOUNCES PROPOSED SALE OF NEW ELK COAL COMPANY, LLC BY CLINE MINING INC., PART OF THE PRIVATE PORTFOLIO OF MARRET HIGH YIELD STRATEGIES FUND AND MARRET MULTI-STRATEGY INCOME FUND

 

The main asset of Marret High Yield Strategies Fund and Marret Multi-Strategy Income Fund is senior secured debt and equity issued by Cline Mining Inc., a company that has entered into a conditional term sheet for the proposed sale by Cline to Allegiance Coal Ltd. of all the shares in New Elk Coal Company LLC. New Elk owns the New Elk Coal hard coking coal mine, located in southeast Colorado.

 

The principal terms of the proposed sale are as follows:

 

The purchase price for the shares in New Elk will be $1 (U.S.), plus the assumption of certain obligations owed by New Elk to Cline, equal to the balance owed on the Cline senior secured indebtedness of $55-million (U.S.).

Completion of the purchase must take place before July 14, 2020. The parties hope to complete significantly earlier.

The term sheet provides that the debt will be repaid by New Elk to Cline as follows:

$3-million (U.S.) in cash on completion;

$3-million (U.S.) in Allegiance shares issued on completion, subject to a voluntary 12-month hold period;

$5-million (U.S.) on completion to replace the Colorado State mine reclamation bond;

The balance to be repaid from an agreed percentage of mine-operating cash flow but, in any event, within 10 years of completion.

The term sheet also provides that Allegiance will have exclusivity to acquire New Elk for 12 months in consideration for Allegiance contributing $150,000 (U.S.) per month to mine care and maintenance costs.

[bskptkl]

I missed this news since I sold out at 9 cents in 2018.

Shoulda kept it - 15 today is better!

 

Yes - not a great deal in selling the asset. But this coal mine is cursed. Lots of people looked when coal was stronger. It's just a tough asset and any buyer needs lots of protection to take it on.

 

Sculpin - this was great idea. Looking back, I started buying at 10-12 cents back in late 2014 when you pointed it out, entirely on the Moblicity bond recovery potential. Moblicity bonds paid $0.70 per share by late 2015. The coal assets were an afterthought.  Thanks again.

 

 

[Sergio8]

It seems like Allegiance completed the acquisition at the end of July on even poorer terms: https://www.allegiancecoal.com.au/site/PDF/aef4322d-fb18-426b-a8de-6d52da414b50/AllegiancetoCloseAcquisitionofNewElkCokingCoalMine

 

Does anybody know how it works out for the CVR: are we supposed to receive the cash as it is paid out or wait years before Allegiance pays out their entire debt before we can receive cash from the deal?

[bizaro86]

It seems like Allegiance completed the acquisition at the end of July on even poorer terms: https://www.allegiancecoal.com.au/site/PDF/aef4322d-fb18-426b-a8de-6d52da414b50/AllegiancetoCloseAcquisitionofNewElkCokingCoalMine

 

Does anybody know how it works out for the CVR: are we supposed to receive the cash as it is paid out or wait years before Allegiance pays out their entire debt before we can receive cash from the deal?

 

Typically you would get the cash as it is earned in a CVR type deal. There isn't any reason for them to hold on to it until the end. Hopefully they pay this first $8 MM out right away - would be a nice win.

[sbalsam]

It seems like Allegiance completed the acquisition at the end of July on even poorer terms: https://www.allegiancecoal.com.au/site/PDF/aef4322d-fb18-426b-a8de-6d52da414b50/AllegiancetoCloseAcquisitionofNewElkCokingCoalMine

 

Does anybody know how it works out for the CVR: are we supposed to receive the cash as it is paid out or wait years before Allegiance pays out their entire debt before we can receive cash from the deal?

 

Typically you would get the cash as it is earned in a CVR type deal. There isn't any reason for them to hold on to it until the end. Hopefully they pay this first $8 MM out right away - would be a nice win.

Unfortunately, the initial payout is only $3M USD. The buyer also pays $3M USD in shares (valued at Aus .08 per share) but these will be subject to a voluntary 12-month hold period. The deal has not closed yet and it looks like Allegiance is having a very hard time raising funds.

Steve 

[bizaro86]

The way I read it, Allegiance was replacing the current $5 MM remediation bond on the property with an insurance contract. So the existing $5 MM cash bond would get refunded to Cline. Does that match your understanding or no?

 

I agree the 1 year hold on the shares probably means cvr holders don't see that money (or shares in kind) for a year.

[writser]

I saw this:

 

In repayment of the Cline Debt (which is interest free), procure NECC to pay to Cline:

§ On completion US$3M in cash;

§ On completion US$5M in cash whereupon Allegiance will have the benefit of the US$5M cash bond

held by the State of Colorado;

§ On completion US$3M in Allegiance ordinary shares at a deemed issue price equal to the higher of

A$0.08 per share or the 20-day VWAP and these shares will be subject to 12 months' voluntary

escrow; and

§ Post completion, 60% of NECC’s retained earnings after NECC makes provision for any preferred debt

payments (NECC is entitled to secure US$40M of preferred debt over the Cline Debt), and provision

for sustaining and working capital requirements.

 

Cline has agreed to waive the US$5M cash payment on completion in consideration for a cash payment of

US$6M on or prior to the commencement of the commercial production of coal (defined as the operation of

one production unit on at least a five day and night schedule), no later than 1 September 2021. If commercial

production of coal does not occur by 31 March 2021, Allegiance must pay US$1M to Cline. Allegiance may,

at its option, make this payment in cash, or shares in Allegiance. The US$6M cash payment and the US$1M

(whether paid in cash or shares) will be applied towards the repayment of the Cline Debt.

 

My ballpark understanding is this, the last time I made notes: MHY owns ~15% of the Cline debt (I'm not even sure about that). ~17m CVR's. The $3m payment might imply 3 * 15% / 17 = $.026 / CVR at some point. But I could very well be mistaken. CVR's are not tradable and the whole Allegiance Coal saga looks like such a trainwreck that I'm not going to put too much effort into any estimates.

 

That said, don't get me wrong, I'm still very happy with this position as it was literally free. And if the mine somehow works out it would imply a windfall.