FGE.to - Fortress Paper (formerly FTP.to)

[doc75]

Sorry to go off on a tangent but I am curious about IBI.

 

Looking at the company & history it seems that they already extended the payout on a series of debentures by 5 years.  If they don't make the payment then I am not sure if the YTM is relevant.  However, if fundamentals continue to improve and they are able to pay them off then yes would be a fantastic investment.  Which debenture do you like and do you expect them to be paid off in cash?  Is the situation that with improving fundamentals they would be able to obtain other financing to pay the debentures because I don't see them coming up with the cash.

 

Their original proposal regarding the 7% debs was somewhat laughable -- no change in interest rate OR conversion price, just a small kicker in terms of a promissory note (due 2018?) for 7% of the principal.  As I recall, deb holders pushed back and this led to a strange deal where only those who voted in favour got the conversion price lowered.  They were taken to court over the differential treatment of the yeas/nays but I believe the matter is still before the courts.

 

My point is simply that they haven't exactly acted in the most upstanding fashion toward their security holders.

 

Nonetheless I own a good chunk of both IBG.DB and IBG.DB.B. My biggest worry currently is that they have yet to disclose how they intend to convert $10mil of notes (due to the management partnership) into equity.  They announced ages ago that there would be some type of equity conversion, but they've twice missed their own deadlines for announcing the details... which is problematic given that it could amount to very substantial dilution.  My optimism that the deal won't be materially negative for current holders has been boosted by some healthy insider purchases (both the debs and common) over the past few months.

 

In any case, here we are again heading into a quarterly report with no disclosure on the matter.  They could certainly do a lot better as regards communication with shareholders.

 

FWIW, I didn't buy the debs with the expectation of being paid off in cash.  I had my eye on the $5 conversion of the IBG.DB, and bought the IBG.DB.B via a stink bid around $30.  In both cases I figured I'd do okay taking hefty interest payments while waiting for capital gains.  I still can't figure out why they traded down so much in December of last year.  It was really strange.  My best guess was disappointment that overly optimistic earnings scenarios didn't come true. 

 

Also:  I bought some more FTP.DB today. 

 

 

[no_free_lunch]

Fantastic, thanks for the info doc.

 

[obtuse_investor]

Aug 17, 2015 (ACCESSWIRE via COMTEX) -- VANCOUVER, BC / ACCESSWIRE / August 17, 2015 / Nanotech Security Corp. (NTS) (otcqx:NTSFF), announces that it has signed an amending agreement with Fortress Paper Ltd. ("Fortress Paper") which amends the terms of Nanotech's September, 2014 acquisition of Fortress Optical Features. Under the amending agreement, Nanotech and Fortress Paper have agreed that 1.5 million of the 3 million Nanotech shares which were issued to Fortress Paper in escrow pending achievement of certain sales milestones over 5 years will be released from escrow immediately. The remaining balance of 1.5 million escrowed Nanotech shares will be cancelled. The 1.5 million shares released to Fortress Paper and the other Nanotech shares held by it are subject to a pooling agreement which restricts the sale of the applicable shares for a period of 90 days.

 

Doug Blakeway, Nanotech CEO commented "Nanotech and Fortress Paper agreed that the evolution of Nanotech's product mix and how the Company now manufactures and sells products other than strictly through the Thurso facility would complicate the monitoring of the sales milestones. In order to simplify ongoing discussions with potential customers and suppliers, we decided that it would be in Nanotech's best interest to restructure the existing arrangement. The cancellation of half of the milestone related shares compensates us for our agreement to immediately release half from escrow. We are confident in the sales outlook and that shareholders will ultimately benefit from the reduction in outstanding shares."

[Gamecock-YT]

Was listening to NPR yesterday and this story came on, sounds like Fortress might be in line for a new contract:

 

California Rations Birth, Death Certificates Amid Security Paper Shortage

 

http://www.npr.org/2015/08/17/432619118/california-rations-birth-death-certificates-amid-security-paper-shortage

 

SIEGEL: What's California going to do? Can't they locate somebody else who'll do this printing for them?

 

GUTIERREZ: In the short term, the plan, according to the Counties Association, is to use a Canadian company that is able to produce these. So they're working to secure that contract now. But long term, they want to look at the - turn to the legislature and ask whether or not this intaglio type of printing is needed since there are so few companies, you know, worldwide that are able to produce it. So they are planning on going, in 2016, to bring this up in the legislature for them to actually review all of the different security measures and looking forward, what would be the best method.

 

SIEGEL: That still leaves a lot of births, deaths, weddings and Little League registrations between now and then.

 

GUTIERREZ: Right. And so that's why they're turning to the Canadian company for sort of a short-term supply. I think the hope is that it will take 12 weeks once they secure the contract to actually get the paper in hand and so that - you are starting to see different counties looking at rationing one per person for these different certificates. And as you know, with death certificates, that's just going to create a lot of issues.

[misterkrusty]

nice catch Gamecock

[obtuse_investor]

Chad got profiled in Business Vancouver

 

https://www.biv.com/article/2015/8/profile-chad-wasilenkoff-executive-chairman-fortre/

 

Some interesting bits:

He has a hard time sitting still – his staff think he may have attention deficit disorder – and on the rare occasion when he golfs, it’s not necessarily an exercise in relaxation.

 

Despite its name, Fortress Paper was never intended to be strictly a specialty paper company, but instead was meant to be more of a holding company for a diversified group of companies.

 

“We’d like to grow it into the next Fairfax or the next Berkshire Hathaway – obviously on a smaller scale,” Wasilenkoff said. “I think it will have multiple industries, whereas right now it’s fairly forestry-focused.”

 

 

[no_free_lunch]

His comments on diversifying don't really fit with past actions.  Why did he buy a bank-note company in switzerland and a wallpaper company in germany if he was all about diversifying out of forestry/paper related?  Even more so, why did he sell the wallpaper company to double-down on the canadian operations?

[sculpin]

His comments on diversifying don't really fit with past actions.  Why did he buy a bank-note company in switzerland and a wallpaper company in germany if he was all about diversifying out of forestry/paper related?  Even more so, why did he sell the wallpaper company to double-down on the canadian operations?

 

Ah the investments in Germany and Switzerland were made on the inception of the Company many years ago. Divesting Dresden was done to both exit at a high point and provide necessary capital for the survival of the entire Company. After his struggles with Thurso he is now saying he wants to be diversified. This will most likely be accomplished by the sale of both Thurso to an industry major and Lanquart, but at a time which he believes maximizes the potential value he can get out of both.

[gokou3]

Rand Decline `Lucrative' for World's No. 1 Dissolving Pulp Maker

http://www.bloomberg.com/news/articles/2015-09-18/rand-decline-lucrative-for-world-s-no-1-dissolving-pulp-maker

 

From Sappi:

There’s products selling for over $800 a ton in China, and we can manufacture it for $500 -- it’s really lucrative for us,” he said. “With the rand weakening it’s just strengthening our position.

[sculpin]

Comprehensive presentation and webcast from the Company's Investor Day held on the 1st of October.

 

http://fortresspaper.com/investor-relations#cp

 

 

[obtuse_investor]

Comprehensive presentation and webcast from the Company's Investor Day held on the 1st of October.

 

http://fortresspaper.com/investor-relations#cp

 

New set of polished slides.

Confident language.

 

Looks like they are on the offensive after spending a couple years on the defensive.

[triedtestedand]

Listened into the webcast, some tidbits as follows:

 

Thurso

-> near term project (w Q4 mtnc downtime) will target cogen to go from 90% to 95%

-> sounded like target of $725/ADMT cost structure was over next 18-24mo, and not involving more than the $10M-$15M/yr CAPEX previously noted

  -> main emphasis will not so much be on de-bottlenecking, but simply increasing uptime

          -> noted that chemical+energy costs aren't linear w production (i.e. better uptime will amortize such costs over increased production volumes)

  -> natural gas conversion still an option, but not the same impetus w low oil prices

-> noted that fiber supply is fairly secure (no other local demands)

  -> all FSC certified

  -> have started to use some local softwood (being nimble is important; and this wood also helps w quality and energy, longer fiber length)

  -> noted an untapped source locally/regionally of birch

          -> mentioned that this could be supplied into a 5th digester

-> seem to have done a lot on logistics optimization (reduces costs, but also ensures quality owing to less handling of pulp from factory to customer)

-> being nimble, moving up quality curve ... e.g. did an initial Lyocell fiber production last week

-> inventories are down to about 6-7 days (which would translate to about 3000 ADMT if I assume 500 ADMT/day production) ... can't really go any lower

 

Landqart

-> waste rates have gone from 20%ish to low teens

-> targeting for 1500tonnes/yr of Durasafe in 2-3 years

-> marketing some variant of Durasafe where don't have the see-thru windows (DuraFort?)

-> new Indian capacity coming onstream, but will be absorbed by increasing overall market volume growth

 

 

[triedtestedand]

Several recent tidbits:

 

a) LSQ still in play? (Can listen to audio in french and/or google translate the website into english)

 

  http://www.valdor.radioenergie.ca/InfoAbitibi/2015/10/20/fortress-ca-negocie-toujours

 

b) Verana Capital (who?) now a 10% owner

 

  http://www.stockwatch.com/News/Item.aspx?bid=Z-C:FTP-2317070&symbol=FTP&region=C

  http://quote.morningstar.ca/Quicktakes/owners/MajorShareholders.aspx?t=FTP&region=CAN&culture=en-CA

 

c) DP prices over $870USD/ADMT

 

  http://ccfei.net/product/prod.aspx?sid=Z05&pid=P19

 

[sculpin]

Raymond James has Fortress Paper at Outperform. Note from today...

 

DP improving prices to provide a lift for Fortress Paper – After languishing in the US$800/mt range for the better part of 9 months, DP prices began to trend upwards towards the end of Mar- 2015 hitting US$876/mt by the end of 3Q15. As such average 3Q15 DP prices of US$858/mt were up 5% sequentially from 2Q15’s US$813/mt and have continued to trend upward thus far in October creeping up to US$882/mt. We believe this trend, in addition to the weaker C$ has provided some relief for Canadian DP producer Fortress Paper which has been contending with a protracted period of depressed commodity prices. We believe these improved prices likely reflect an upward shift in the industry cost curve due to import duties imposed by Chinese authorities as well as improved demand from Chinese viscose staple fibre (rayon) producers.

[alertmeipp]

their debt is still trading 50 cents dollar  ;D

[sculpin]

their debt is still trading 50 cents dollar  ;D

 

Amazing isn't it? The Canadian exchange traded convertible market is very inefficient when it comes to certain issues. FTP and IBI Group debentures are two of the most mispriced out there right now.

[lessthaniv]

I've been on the buy adding to my already topped up position.

[lessthaniv]

Ahead of FTP earnings, some selected comments with respect to Sappi's report:

 

1) Dissolving wood pulp markets have improved considerably this year as a result of higher pricing and improved operating rates for viscose staple fibre in China.  Higher hardwood paper pulp prices are also impacting dissolving wood pulp supply as some swing producers continue to manufacture paper pulp rather than dissolving wood pulp.

 

2) Sappi Ltd. shares closed at the highest in more than seven years after the pulp and paper producer reported a 24 percent increase in full-year earnings and said it expects further gains in the new financial period.

 

3) Sappi is the world’s biggest producer of dissolving wood pulp, a cotton substitute used in textiles including lingerie and golf shirts.

 

4) Markets for dissolving wood pulp have improved as a result of higher pricing and operating rates for viscose staple fiber in China.

 

5) Sappi is the world’s biggest producer of dissolving wood pulp, a cotton substitute used in textiles including lingerie and golf shirts, and exports the product from South African mills. The country is in its worst drought since 1992 and the fourth consecutive year of drier-than-average weather. The drought “may adversely impact our mill production and consequent profitability” should normal rainfall in the southern hemisphere’s summer months not be forthcoming, Johannesburg-based Sappi said in a statement on Thursday. The company needs water for its manufacturing process, and low rainfall also slows tree growth.

[Pick52]

Third Quarter results

 

http://www.marketwired.com/press-release/fortress-paper-announces-third-quarter-2015-results-tsx-ftp-2073724.htm

[triedtestedand]

Quarterly improvements incremental as expected, with no surprises, and with detailed financials available via:

 

http://sedar.com/DisplayCompanyDocuments.do?lang=EN&issuerNo=00025348

 

-> unrestricted cash up to $49M (from $31M)

-> restricted cash down to $20M (from $25M)

-> working capital up to $82M (from $80M)

-> DP cost of $818 per ADMT (from $816)

-> DP inventories down to 1.6K ADMT (from 7.6K ADMT)

-> Nanotech Security revision (and release from escrow)

-> successful mtnc shutdown in October (including kiln fix)

-> SG&A bumped by $2M in Q3 as result of payment/accrual in conjunction w Chad transition fm CEO

-> Landqart flat (some timing and product mix issues?)

-> various opportunities for further incremental gains on price/cost side:

    -> e.g. Sappi report shows good graph of ongoing DP price improvements, also shown here:

              http://ccfei.net/product/prod.aspx?sid=Z05&pid=P19

 

Am still keen to see if/when/to-what-degreee Chad's "special projects" (LSQ cogen?; Landqart real estate; other) materialize.

[sculpin]

RJ...

 

Fortress Paper | FTP-TSX | price C$5.14 | Outperform

 

Raising Estimates.  Target price changes from C$5.00 to C$7.50.

 

EPS:  2015E C$(2.00) to C$(2.29)                        2016E C$0.46 to C$0.83

 

Mkt Cap (mln): C$81                                            Net Debt (mln): C$190                        Yield: 0.0%

 

FTP: Improved 3Q15 Results; Equity Value Geared to DP Pricing

 

Daryl Swetlishoff, CFA | RJL | 604.659.8246 | daryl.swetlishoff@raymondjames.ca

David Quezada, CFA (Associate Analyst) | RJL | 604.659.8257 | david.quezada@raymondjames.ca

 

Summary:

 

♦        With high financial and operational leverage Fortress Paper's equity value is highly geared to even small changes in dissolving pulp (DP) pricing

♦        YTD DP pricing has rallied. This, plus operational improvements and FX tailwinds positions the company to produce materially improved results

♦        We have increased our 2016 DP price forecast by US$25 to US$900/mt boosting our 2016 EBITDA estimate with a corresponding increase in target price to $7.50 from $5.00 previously

♦        Fortress Paper reported 3Q15 EBITDA of $5.5 mln, as compared to RJL estimates of $5.7 mln (not enough observations for consensus)

 

Analysis

 

 Fortress Paper reported 3Q15 EBITDA of $5.5 mln, as compared to RJL estimates of

$5.7 mln (not enough observations for consensus) – Up sequentially from 2Q15’s $4.1 mln Fortress Paper’s results benefitted from improved dissolving pulp prices, the weaker C$, and increased energy generation. FTP’s dissolving pulp shipments also improved 14% q/q while results continued to be negatively impacted by the Chinese anti-dumping duty, representing a partial offset. However, Fortress expects to see DP shipments to China reduced by 20% in 2H15 vs. 1H15. Meanwhile the company’s security papers segment saw EBITDA decline sequentially due to reduced shipments (down 10% q/q) partly due to the timing of sales while unfavorable changes in product mix and FX also impacted results.

 

 Fortress poised to turn the corner in terms of profitability – 3Q15 DP segment results for Fortress represented the company’s best result since the Thurso mill’s conversion to dissolving pulp in 2011. Furthermore, while some scheduled downtime will likely impact 4Q15 results, FTP corrected issues with the lime kiln and chemical preparation area which first surfaced in 4Q14, and this section of the mill is now running well. With a cracked gear in the cogeneration facility turbine also repaired earlier in 2015 FTP is now also benefitting from increased power production. We believe the combination of improved DP pricing (detailed below), FX tailwinds, stabilized production, reduced cash costs, and increased electricity sales position FTP to see significantly improved performance in 2016.

 

 Hiking target on rising DP prices – DP prices have rallied $100/mt or 13% YTD to US$900/mt. Moreover, with the C$ now at US$0.76, FTP is realizing C$ denominated pricing of ~$1,185/mt, 19% higher than March levels. Thus, despite ongoing challenges posed by the Chinese anti-dumping duty we believe industry conditions are much improved for the company. What’s more, DP prices appear poised to continue to trend higher, in our view, leading to our increased US$925/mt 2016 DP price assumption. Given FTP’s high leverage to DP pricing, this results in our target price rising to $7.50 from $5.00 previously.

 

Valuation

 

Our $7.50 target price is based on a 6.0x 2016 EV/EBITDA, in-line with the 6.0x average of pulp producers in our coverage universe.

[finetrader]

The  6.5% debenture have gone up to 90$ lately, and there is more volume than normal. I would not be surprised to find out that Fortress is the buyer that's bidding up the price.

 

 

[misterkrusty]

Fortress continues to say they are in possession of material non-public info that precludes them from buybacks. 

 

They have ~70m cash and should generate about 17m more between now and YE16, assuming 82% utilization at Thurso and flat DP pricing and forex rates.  The 2016 debentures are only 40.25m of total principal.  Not shocking that the market should value them at 90

[finetrader]

Fortress continues to say they are in possession of material non-public info that precludes them from buybacks.

 

 

I don't remember them saying that.

What I do remember is that there were exploring different avenues, including buying the deb. in the open market, but were scared to bid up the price.

 

 

[sculpin]

Fortress continues to say they are in possession of material non-public info that precludes them from buybacks.

 

 

I don't remember them saying that.

What I do remember is that there were exploring different avenues, including buying the deb. in the open market, but were scared to bid up the price.

 

Appears that there are material events expected soon. A sale of Landquart real estate is imminent? Surprising that the shares have dipped back below $4 with dissolving pulp prices trending higher and with the devaluation of the Cdn $.

 

This is from M Partners….

 

Some highlights would be the company is currently sitting on ~$50M in cash, and expects near-term to complete a sale-and-leaseback of Switzerland security paper mill for $40M – $45M, with a buyback option, and pay rent of ~$2.5M – $3M/year. We asked what they would do with the cash and they immediately said they would look to tender at par for the 2016 debentures and 2017, which is a $25M private issue. The 2016’s are sitting in the low 80’s right now, but more likely the play is to pickup the 2019’s now, which is a $70M, 7% issue currently sitting sub $60 and I’m sure will respond favorably to the sale and tender. They do not expect to extend the 19’s as they have more than sufficient cash after paying back the 16’s and 17’s to re-build their cash position and payback them in whole come 2019 or likely earlier especially with the wind currently at their back.

 

The annualized EBITDA run rate is ~$20M right now, end of 16 with durasafe can get that much higher, expecting $35M run rate on the dissolving pulp at the current price, but it is increasing. They provided a sensitive in their deck which shows a >$100M EBITDA run rate assuming the dissolving pulp price normalizes back to historical levels of 1,200.