FELP - Foresight Energy

[valcont]

Does anyone know how much ton of coal they exported in the last two qtrs? There Qs don't give that breakdown although the K does.

 

"During the years ended December 31, 2015, 2014 and 2013, export tons (inclusive of tons sold from mines under development) represented 24%, 30% and 33% of tons sold, respectively. Tons exported into Europe during the years ended December 31, 2015, 2014 and 2013 represented approximately 22%, 26% and 23%, respectively,"

[Green King]

Does anyone know how much ton of coal they exported in the last two qtrs? There Qs don't give that breakdown although the K does.

 

"During the years ended December 31, 2015, 2014 and 2013, export tons (inclusive of tons sold from mines under development) represented 24%, 30% and 33% of tons sold, respectively. Tons exported into Europe during the years ended December 31, 2015, 2014 and 2013 represented approximately 22%, 26% and 23%, respectively,"

 

I Just assume that they have excess capacity in terms of production and if the export contact allows it they will export as much as they can to maximize profit. The bottleneck is at exporting capacity and ramp up speed.

[valcont]

Looks like they have to do 5m minimum. This is from the last conf call :

 

Evan Kurtz

 

A couple questions on sales, what's the minimum level of export sales you can go to before you start to run into take or pay issues and maybe on the same line as if you were to export sales down to zero just try to place everything domestically. What sort of liquidated damages would you be looking at?

 

Rob Moore

 

We have 5 million tons of take or pay through convent marine terminal and around take or pay on a per ton basis in the mid-550. So as we as we look at the export obviously the netbacks are extremely challenging right now and we're going to be disciplined with respect to how we look at the bit of the hedges in 2016 and 2017. We do expect to be in the export market, the level at which we will participate in export market remains to be seen to the extent that we're not in the export market we're going to evaluate options domestically.

[awindenberger]

I'm having a hard time wrapping my head around some of the language regarding the redemption of the 2017 PIK Notes. See page 12 of the Q3 report:

 

The highlighted part seems poorly worded.

 

Terms of the New Notes

 

The Second Lien Notes were issued pursuant to an indenture and have a maturity date of August 15, 2021. The Second Lien Notes bear interest at a rate of: (i) 9.0% per annum until August 15, 2018 and 10.0% per annum thereafter, in each case, payable in cash on each interest payment date; and (ii) 1.0% per annum payable in kind. Interest will be payable semi-annually on February 15th and August 15th, commencing on February 15, 2017. The Issuers may redeem the Second Lien Notes in whole or in part subject to the redemption premiums and provisions in the indenture. 

 

The Exchangeable PIK Notes were issued pursuant to an indenture and have a maturity date of October 3, 2017 (the “Exchangeable PIK Notes Maturity Date”). The Exchangeable PIK Notes bear interest payable in kind at a rate of 15.0% per annum, payable on March 1, 2017 and October 3, 2017.

 

We may redeem, repurchase, refinance, defease or otherwise retire (any of the foregoing, a “redemption”) all of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at 100% of the principal amount thereof plus accrued interest (any such redemption, an “Exchangeable PIK Note Retirement”). In addition to the Exchangeable PIK Note Retirement, Murray Energy, an affiliate of Murray Energy or a group of persons which includes Murray Energy or any of its affiliates (collectively, the “Murray Group”) shall have the right to purchase all (but not less than all) of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at a price equal to 100% of the principal amount of the Exchangeable PIK Notes plus accrued interest (a “Murray Purchase,” and together with an Exchangeable PIK Note Retirement and any repayment of the Exchangeable PIK Notes in full in cash that occurs on the Exchangeable PIK Notes Maturity Date, a “Note Redemption”).

 

Upon a Murray Purchase, the Murray Group will receive FELP units equal to the principal and interest settlement amount divided by the lesser of: (a) a number equal to one divided by 92.5% of the last thirty days weighted-average trading price or (b) 1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes. The Issuer and Murray Energy may each purchase less than all of the Exchangeable PIK Notes, so long as the combination results in redemption of all of the Exchangeable PIK Notes. The Exchangeable PIK Note Retirement may be funded with the proceeds from an investment by the Murray Group or any member thereof in FELP, from general working capital or from any other source permitted by the Exchangeable PIK Notes Indenture (and subject to compliance with the Partnership’s other debt agreements). If the Exchangeable PIK Notes have not been redeemed or purchased for cash at 100% of the principal amount thereof plus accrued interest by the Exchangeable PIK Note Maturity Date, then all outstanding Exchangeable PIK Notes (including accrued interest) shall be exchanged for common units representing 75% of FELP’s outstanding limited partner units on the Exchangeable PIK Notes Maturity Date, subject to adjustment on account of certain anti-dilution protections.

The obligations under the New Notes are unconditionally guaranteed on a senior secured basis by each of FELP’s wholly owned domestic subsidiaries that guarantee the Senior Secured Credit Facilities (other than Foresight Energy Finance Corporation) and on a senior unsecured basis by FELP and are or will be secured by second-priority perfected liens on substantially all of our and the subsidiary guarantors’ existing and future assets, subject to certain exceptions.

 

Based on my interpretation, assuming that none of the notes are retired early, it seems that Murray Group could do the following:

 

principal and interest settlement amount: $404.5M. If they buy all this back they would get new FELP units equal to either:

 

$404.5/1.12007= 361.1M units.

or

$404.5/(1/.925*5) = 1,870.6M units (I used $5/share as an example here)

 

What am I missing here? It seemed that the higher the unit price goes, the more units Murray Group would be in line to receive, which obviously makes no sense. I must be messing up some function or misreading the statement, but I've gone over it about 50 times and can't come to any other conclusion.

 

[awindenberger]

Just listened to the call, pretty worthless IMO. They didn't take any questions and didn't mention anything concrete about expanding exports to take advantage of API2 pricing.

[valcont]

Just listened to the call, pretty worthless IMO. They didn't take any questions and didn't mention anything concrete about expanding exports to take advantage of API2 pricing.

 

The only useful information was the reduction in the cash cost per ton sold from $22 to $20. Granted that includes $10m in insurance recoveries but they are really efficient.

[gadfly]

Few questions after looking at the earnings:

 

Anyone know why FELP's realized prices in 3Q (43.2) are $4 lower than the prices ARLP realized in 3Q (47.5) in the ILB?

 

When looking at the 3Q interest expense does that include PIK non cash interest?

 

What would tons sold be in 2017 in the bull case?

 

Lastly, does this back of the envelope valuation make sense...

 

units in 1 year = 170 (assuming 300m PIK done at around $7)

 

*Assuming nothing changes in 1 year*

 

Margin per ton  = 16

tons sold = 21 million

 

= 336 Million

 

Annual SG&A = 28

Annual Interest = 105 (something like that once 300mm PIK are gone)

Maintenance CAPEX = 60

 

2017 FCFE = 143

 

*assuming no growth in FCFE and 10% required return on equity*

 

143/.10 = 1,430

 

1430/170 = $8.41 value in 1 yr

 

8.41/1.1 = $7.6 today

[hswoon]

ARLP coal has higher heat content.

[hswoon]

Does anyone have a link to the transcript for the call? Thanks

[valcont]

Does anyone have a link to the transcript for the call? Thanks

 

No transcript but here is the audio

felp161109a.mp3

[Picasso]

Since there are a few questions from a few guys, thought I would bunch my responses on this thread. 

 

There's really two segments of earnings for FELP, domestic and export.  Domestic hasn't improved much aside from this Trump victory.  I think there's some EIA projection out there that show the ILB growth without the CPP.  There's a certain fixed cost associated with producing volumes going into the domestic market.  However export prices have gone nuts and that's done more on a variable cost basis.  There was an old presentation that showed margins at FELP from 2012/2013/2014 versus peers.  Margins were well above peers because of this operating leverage.  We basically had a call option on export pricing that we didn't pay for and probably aren't paying for at $6-7.  So if you're using $15-16 margins on their volumes next year, that's probably too low since margins on exports alone are looking around $30-40.  With spot at $90, net backs are around $55-60 with variable costs around $10-15.  2018 contracts are $71-72 where you'll see closer to $30 margins when adjusting for sulfur content etc.  Domestic margins are closer to $15.  So I'd look at FELP margins from 2014 or so to paint a picture for the upcoming years.  Don't use margins from the worst time in recent coal history.

 

If you listen to various earnings commentary at the coal stocks (ARLP, CNXC), supply is falling a lot faster than demand is coming back.  I haven't heard anything that says we're going to see some big supply/demand imbalances that causes domestic prices to plummet.  Nat gas might roll over (winter isn't that cold) but API 2 pricing is giving a big cushion to potential weakness in domestic pricing.  And look at the cost curve for ARLP even adjusting for btu content.  Plus based on this FELP earnings call, they placed another 4mt of volume even as the market looks soft.  And it sounds like they're making headway into displacing PRB coal.  Not to mention SXCP now has capacity to export an extra 50% for FELP and Murray.

 

All that said, I think $150 million of DCF is way too low for 2017 and beyond.  It's ignoring a lot of the operating leverage at work and the fact that the CPP is likely out the window.  If CPP is out the window, then volume and pricing will improve (versus just volumes) for domestic.  And given the supply cost curve it's hard to imagine how FELP can't turn a lot of free cash flow. 

 

So now for the PIK.  I no longer think dilution will happen at $7.  Not with how much cash flow they're producing and this Trump victory.  The math wouldn't work for Bob Murray.  Plus Bob Murray probably feels like a million bucks now, and he probably doesn't want to sell this stock to anyone else at $7.  He paid $20 when the fundamentals were a lot worse.  I have free cash flow for next year at over $250 million, so if he chooses to dilute at $7 you're talking about 121 million common units + 65 million subs earning $1.35+.  Commons will get the first $2-3 of arrears which is a 28% return from that alone.  And the whole equity structure including subs will be at 5x FCF.  Why would Cline turn that down since he has the right to take 60% of whatever the equity issuance is?  Murray would be handing a lot of value back to Cline.  It makes much more sense to issue equity at a price where Cline isn't going to take a big chunk of the free cash flow coming out of FELP.  So it comes down to figuring out what price Cline says, "it's okay I don't want a 10% return, you take all the commons with so-and-so," or whatever.

 

Which brings me to my next thought.  Bob Murray has over a billion in debt tied to this purchase of FELP and he's not getting any credit for the $450 million or whatever EBITDA this entity is shooting off.  It would be an incredibly accretive transaction to roll the rest of the FELP equity structure into Murray.  By paying another $1 billion for the remaining equity, he'd get access to $450 million of EBITDA.  It's a no brainer.  Murray debt still trades under 80 with a ridiculous yield.  But he can't run FELP into the ground and drive down the stock to make a low ball offer because Cline can take up 60% of any equity issuance to redeem the PIK's to trigger Murray control for the remainder of the purchase option.  He has to first get FELP up before he can make an offer.  In theory he could do it around current prices and have Cline participate, but the yield looks really high and I don't see how anyone would advise him to do that.  Cline would be taking Murray's money to take more of Murray's money.

 

And since they didn't take questions on this earnings call, I'm thinking they want to refi the PIK at an attractive price, refi the revolver at FELP, and then roll up the rest of the equity structure.  Either that or they're going to keep this a public entity (my preferred outcome) and make this a growing yieldco which now looks much more feasible.  But based on Murray's comments before (and this earnings call), I think they want to take it private.

 

Add all that up and I think the downside on the equity is small here.  Maybe it goes back to $5 or $6.  I'd consider that a great entry point to buy more because of this fundamental change.  Not even thinking about selling yet.  If Trump lost, and this was at $8-9 in a retirement account, then I'd consider it a possible exit point.  But for tax reasons, the Trump win, the likelihood of a take private, export margins, etc, I think it's foolish to sell now.

 

Reminds me a bit of 2009.  I remember investors buying these cyclical stocks in February and then selling in May/June because they made 50-80%.  Then the stocks went on to go up 10x or 20x.  People get so anchored on how bad the recent past was that they don't realize the cycle has turned and to just stay long.  It won't ever get as bad at 2008 again (it might, but very low odds and not for a long time), and a few months isn't long enough to kill the cycle.  So just stay long...

 

Same thing is happening here.  We bought a company that got forced near bankruptcy on a technicality at the worst possible time.  Energy downturn, junk bond revolt, coal bankruptcies, coal pricing falling off a cliff, etc.  It's only been a few months and the cycle is now going the other way and a big climate skeptic just took control over every branch of government and has climate change deniers on his economic team.  Probably going to get volatile, but I view drops as potential buying opportunities versus being nervous about giving back profits...  If they do only earn $150 million next year for some crazy reason, well big whoop about owning a stock at 8x earnings with $2 of distributions owed to us.  I don't see any other stocks like that out there to sell FELP and buy into.  Much less add in the massive tax bill.

 

Some of you guys owe me a Christmas card for getting your finger off the sell button.  It's okay to make money you know.  ;)

[heth247]

Yes, based on the wording your interpretation seems correct to me. However, my understanding is that a "Murray Purchase" is defined as "Murray purchasing all (but not less than all) of PIKs".  That should be an event which has very little chance to happen.  E.g. if FELP + Murray redeem PIK together, then Murray's part should not be considered as a "Murray Purchase" event, and therefore such conversion formula does not apply.  Is my understanding correct?

 

A separate question -- in addition to cash on hand, would FELP be allowed to use their revolver that has just been restored for redeeming PIK?

 

I'm having a hard time wrapping my head around some of the language regarding the redemption of the 2017 PIK Notes. See page 12 of the Q3 report:

 

The highlighted part seems poorly worded.

 

Terms of the New Notes

 

The Second Lien Notes were issued pursuant to an indenture and have a maturity date of August 15, 2021. The Second Lien Notes bear interest at a rate of: (i) 9.0% per annum until August 15, 2018 and 10.0% per annum thereafter, in each case, payable in cash on each interest payment date; and (ii) 1.0% per annum payable in kind. Interest will be payable semi-annually on February 15th and August 15th, commencing on February 15, 2017. The Issuers may redeem the Second Lien Notes in whole or in part subject to the redemption premiums and provisions in the indenture. 

 

The Exchangeable PIK Notes were issued pursuant to an indenture and have a maturity date of October 3, 2017 (the “Exchangeable PIK Notes Maturity Date”). The Exchangeable PIK Notes bear interest payable in kind at a rate of 15.0% per annum, payable on March 1, 2017 and October 3, 2017.

 

We may redeem, repurchase, refinance, defease or otherwise retire (any of the foregoing, a “redemption”) all of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at 100% of the principal amount thereof plus accrued interest (any such redemption, an “Exchangeable PIK Note Retirement”). In addition to the Exchangeable PIK Note Retirement, Murray Energy, an affiliate of Murray Energy or a group of persons which includes Murray Energy or any of its affiliates (collectively, the “Murray Group”) shall have the right to purchase all (but not less than all) of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at a price equal to 100% of the principal amount of the Exchangeable PIK Notes plus accrued interest (a “Murray Purchase,” and together with an Exchangeable PIK Note Retirement and any repayment of the Exchangeable PIK Notes in full in cash that occurs on the Exchangeable PIK Notes Maturity Date, a “Note Redemption”).

 

Upon a Murray Purchase, the Murray Group will receive FELP units equal to the principal and interest settlement amount divided by the lesser of: (a) a number equal to one divided by 92.5% of the last thirty days weighted-average trading price or (b) 1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes. The Issuer and Murray Energy may each purchase less than all of the Exchangeable PIK Notes, so long as the combination results in redemption of all of the Exchangeable PIK Notes. The Exchangeable PIK Note Retirement may be funded with the proceeds from an investment by the Murray Group or any member thereof in FELP, from general working capital or from any other source permitted by the Exchangeable PIK Notes Indenture (and subject to compliance with the Partnership’s other debt agreements). If the Exchangeable PIK Notes have not been redeemed or purchased for cash at 100% of the principal amount thereof plus accrued interest by the Exchangeable PIK Note Maturity Date, then all outstanding Exchangeable PIK Notes (including accrued interest) shall be exchanged for common units representing 75% of FELP’s outstanding limited partner units on the Exchangeable PIK Notes Maturity Date, subject to adjustment on account of certain anti-dilution protections.

The obligations under the New Notes are unconditionally guaranteed on a senior secured basis by each of FELP’s wholly owned domestic subsidiaries that guarantee the Senior Secured Credit Facilities (other than Foresight Energy Finance Corporation) and on a senior unsecured basis by FELP and are or will be secured by second-priority perfected liens on substantially all of our and the subsidiary guarantors’ existing and future assets, subject to certain exceptions.

 

Based on my interpretation, assuming that none of the notes are retired early, it seems that Murray Group could do the following:

 

principal and interest settlement amount: $404.5M. If they buy all this back they would get new FELP units equal to either:

 

$404.5/1.12007= 361.1M units.

or

$404.5/(1/.925*5) = 1,870.6M units (I used $5/share as an example here)

 

What am I missing here? It seemed that the higher the unit price goes, the more units Murray Group would be in line to receive, which obviously makes no sense. I must be messing up some function or misreading the statement, but I've gone over it about 50 times and can't come to any other conclusion.

[heth247]

Some of you guys owe me a Christmas card for getting your finger off the sell button.  It's okay to make money you know.  ;)

 

Yes, Picasso, I went very concentrated on this and may even owe you an early retirement if this turns out to be a 10X bagger!

 

So, by "another billion" were you thinking Murray might take this private at $20?

[awindenberger]

Picasso,

 

I completely agree with you, yet I still don't quite understand the language I highlighted in that mathematically it seems that Murray gets more units as the prices goes higher.

 

I was also disappointed that management didn't say anything about their plans regarding exporting.

[valcont]

I'm having a hard time wrapping my head around some of the language regarding the redemption of the 2017 PIK Notes. See page 12 of the Q3 report:

 

The highlighted part seems poorly worded.

 

Terms of the New Notes

 

The Second Lien Notes were issued pursuant to an indenture and have a maturity date of August 15, 2021. The Second Lien Notes bear interest at a rate of: (i) 9.0% per annum until August 15, 2018 and 10.0% per annum thereafter, in each case, payable in cash on each interest payment date; and (ii) 1.0% per annum payable in kind. Interest will be payable semi-annually on February 15th and August 15th, commencing on February 15, 2017. The Issuers may redeem the Second Lien Notes in whole or in part subject to the redemption premiums and provisions in the indenture. 

 

The Exchangeable PIK Notes were issued pursuant to an indenture and have a maturity date of October 3, 2017 (the “Exchangeable PIK Notes Maturity Date”). The Exchangeable PIK Notes bear interest payable in kind at a rate of 15.0% per annum, payable on March 1, 2017 and October 3, 2017.

 

We may redeem, repurchase, refinance, defease or otherwise retire (any of the foregoing, a “redemption”) all of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at 100% of the principal amount thereof plus accrued interest (any such redemption, an “Exchangeable PIK Note Retirement”). In addition to the Exchangeable PIK Note Retirement, Murray Energy, an affiliate of Murray Energy or a group of persons which includes Murray Energy or any of its affiliates (collectively, the “Murray Group”) shall have the right to purchase all (but not less than all) of the Exchangeable PIK Notes on or prior to October 2, 2017 for cash at a price equal to 100% of the principal amount of the Exchangeable PIK Notes plus accrued interest (a “Murray Purchase,” and together with an Exchangeable PIK Note Retirement and any repayment of the Exchangeable PIK Notes in full in cash that occurs on the Exchangeable PIK Notes Maturity Date, a “Note Redemption”).

 

Upon a Murray Purchase, the Murray Group will receive FELP units equal to the principal and interest settlement amount divided by the lesser of: (a) a number equal to one divided by 92.5% of the last thirty days weighted-average trading price or (b) 1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes. The Issuer and Murray Energy may each purchase less than all of the Exchangeable PIK Notes, so long as the combination results in redemption of all of the Exchangeable PIK Notes. The Exchangeable PIK Note Retirement may be funded with the proceeds from an investment by the Murray Group or any member thereof in FELP, from general working capital or from any other source permitted by the Exchangeable PIK Notes Indenture (and subject to compliance with the Partnership’s other debt agreements). If the Exchangeable PIK Notes have not been redeemed or purchased for cash at 100% of the principal amount thereof plus accrued interest by the Exchangeable PIK Note Maturity Date, then all outstanding Exchangeable PIK Notes (including accrued interest) shall be exchanged for common units representing 75% of FELP’s outstanding limited partner units on the Exchangeable PIK Notes Maturity Date, subject to adjustment on account of certain anti-dilution protections.

The obligations under the New Notes are unconditionally guaranteed on a senior secured basis by each of FELP’s wholly owned domestic subsidiaries that guarantee the Senior Secured Credit Facilities (other than Foresight Energy Finance Corporation) and on a senior unsecured basis by FELP and are or will be secured by second-priority perfected liens on substantially all of our and the subsidiary guarantors’ existing and future assets, subject to certain exceptions.

 

Based on my interpretation, assuming that none of the notes are retired early, it seems that Murray Group could do the following:

 

principal and interest settlement amount: $404.5M. If they buy all this back they would get new FELP units equal to either:

 

$404.5/1.12007= 361.1M units.

or

$404.5/(1/.925*5) = 1,870.6M units (I used $5/share as an example here)

 

What am I missing here? It seemed that the higher the unit price goes, the more units Murray Group would be in line to receive, which obviously makes no sense. I must be messing up some function or misreading the statement, but I've gone over it about 50 times and can't come to any other conclusion.

 

Well it is poorly worded.You have to make both (1) and (2) comparable first. Here is how I interpret it going by your example of $404m amount with a $5 price.

 

1. "a number equal to one divided by 92.5% of the last thirty days weighted-average trading price"

  .925*5 =  $4.6 which when divided by 1 gives us unit per $1 (i.e. 1/4.6)

  SO

  $1 of principal amount will buy you 0.21 unit

 

2. "1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes."

    Here

  $1 of principal amount will buy you 1.12 unit

 

you take the lesser of these two which is 0.21 unit/$1 prinicipal and multiply it by total amount due $404m * 0.21 ~ 84m units

 

I think the clause is there to prevent extreme dilution in case the price goes below $1 at the time of refinance say at $0.50 after the 92% discount.

 

In case (1) you'll get 2 units per $1 and in (2) you get 1.12 so you will go with 1.12 unit.

 

 

 

 

[Picasso]

Some of you guys owe me a Christmas card for getting your finger off the sell button.  It's okay to make money you know.  ;)

 

Yes, Picasso, I went very concentrated on this and may even owe you an early retirement if this turns out to be a 10X bagger!

 

So, by "another billion" were you thinking Murray might take this private at $20?

 

No, just throwing out a number.  But I think FELP looks better now versus when they first bought it and paid $20 in the past.  Since it will be a couple years before distributions restart (unless they refi the revolver?), you can make the math work pretty well for Murray even if he paid $1 billion for the rest of the commons.  Cline can't be stupid enough not to know that. 

 

One other part to this is that you have Cline's colleagues who participated in the bond tender.  I hadn't realized that it wasn't just Cline's capital.  So I think he'd do what's in the best interest of his colleagues (like Meyers) since they helped save the company and are friends?  Plus Accipiter is still long.  I think they are all in a position to be treated fairly because of the option to participate in anything Murray does to raise funds needed to repay the PIK's.

[PullTheTrigger]

Who is Meyers?

[Picasso]

Sorry, meant Beyer.  He was the old CEO of FELP.

 

Unless otherwise indicated or the context otherwise requires, references in this Exhibit 99.2 to: (i) ”Reserves” refers to Foresight Reserves LP; (ii) ”Reserves Investor Group” refers to Reserves, Michael J. Beyer (“Beyer”), Christopher Cline, The Candice Cline 2004 Irrevocable Trust, The Alex T. Cline 2004 Irrevocable Trust, The Christopher L. Cline 2004 Irrevocable Trust, The Kameron N. Cline 2004 Irrevocable Trust, Munsen LLC, Filbert Holdings, LLC, and Forest Glen Investments, LLC; and (iii) “Cline Group” refers to the Reserves Investor Group and Cline Resources and Development Company.

[valcont]

Some of you guys owe me a Christmas card for getting your finger off the sell button.  It's okay to make money you know.  ;)

 

How about lump of coal with the card? I definitely owe you one. I was ready to sell based on my original thesis of FELP surviving restructuring and reaching fair value of $4 :)

 

 

[wachtwoord]

Some of you guys owe me a Christmas card for getting your finger off the sell button.  It's okay to make money you know.  ;)

 

How about lump of coal with the card? I definitely owe you one. I was ready to sell based on my original thesis of FELP surviving restructuring and reaching fair value of $4 :)

 

I reduced my position 25% 2 weeks ago at 6.25 (my avg purchase price in 1.79) because the position is so large in my portfolio. It's still almost 25% of my portfolio but I am planning to wait with reducing further until price is significantly higher. Especially after the Trump win. Picasso's updates are helping tremendously and I would never have discovered this investment without him in the first place. I appreciate it a lot man! :)

 

I don't face taxes on disposition though so I should probably sell earlier than the rest of you.

[PullTheTrigger]

We all owe Picasso a debt of gratitude for his generosity of time spent educating us and bringing the idea to the board. I could say the same about SXC and I've probably missed some other threads.

 

Picasso should probably change his screen name to Babe Ruth.

 

If he would like to post an office address or P.O. Box, I'm sure the gifts would start rolling in.

 

Many thanks Picasso! Hopefully we can find some ideas to repay you someday.

[arcube]

We all owe Picasso a debt of gratitude for his generosity of time spent educating us and bringing the idea to the board. I could say the same about SXC and I've probably missed some other threads.

 

Picasso should probably change his screen name to Babe Ruth.

 

If he would like to post an office address or P.O. Box, I'm sure the gifts would start rolling in.

 

Many thanks Picasso! Hopefully we can find some ideas to repay you someday.

 

+1. Well said.

[heth247]

 

Well it is poorly worded.You have to make both (1) and (2) comparable first. Here is how I interpret it going by your example of $404m amount with a $5 price.

 

1. "a number equal to one divided by 92.5% of the last thirty days weighted-average trading price"

  .925*5 =  $4.6 which when divided by 1 gives us unit per $1 (i.e. 1/4.6)

  SO

  $1 of principal amount will buy you 0.21 unit

 

2. "1.12007 common units per $1.00 principal amount of Exchangeable PIK Notes."

    Here

  $1 of principal amount will buy you 1.12 unit

 

you take the lesser of these two which is 0.21 unit/$1 prinicipal and multiply it by total amount due $404m * 0.21 ~ 84m units

 

I think the clause is there to prevent extreme dilution in case the price goes below $1 at the time of refinance say at $0.50 after the 92% discount.

 

In case (1) you'll get 2 units per $1 and in (2) you get 1.12 so you will go with 1.12 unit.

 

 

Sounds like you are implying that those lawyers who drafted this do not understand the difference between division and multiplication....  ;)

 

Anyway, even at 1.12 units it is already extreme dilution to me. I think this is more of a protection for Murray, so that he will not be the only guy to come up with the funds to redeem all PIKs (the "Murray Purchase" event).

 

[heth247]

We all owe Picasso a debt of gratitude for his generosity of time spent educating us and bringing the idea to the board. I could say the same about SXC and I've probably missed some other threads.

 

Picasso should probably change his screen name to Babe Ruth.

 

If he would like to post an office address or P.O. Box, I'm sure the gifts would start rolling in.

 

Many thanks Picasso! Hopefully we can find some ideas to repay you someday.

 

+1. Well said.

 

+2!

[Patmo]

We all owe Picasso a debt of gratitude for his generosity of time spent educating us and bringing the idea to the board. I could say the same about SXC and I've probably missed some other threads.

 

Picasso should probably change his screen name to Babe Ruth.

 

If he would like to post an office address or P.O. Box, I'm sure the gifts would start rolling in.

 

Many thanks Picasso! Hopefully we can find some ideas to repay you someday.

 

Relax there, his ideas are great but at the end of the day it's your own balls on the line. If it had gone the other way, I'm not sure he'd want nor deserve the other side of those kinds of comments...