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

[finetrader]

Fortress wants to buy the debentures in the open market

 

 

Fortress Paper Announces Normal Course Issuer Bid:

http://www.theglobeandmail.com/globe-investor/news-sources/?data-ipsquote-timestamp=+20160104&archive=ccnm&slug=201601041038344001

[SharperDingaan]

They would be far smarter to simply issue shares upon maturity, & use the opportunity as a back-door way of raising equity. 

 

On redemption or at maturity, the Company may, at its option, on not more than 60 days

and not less than 40 days prior notice and subject to regulatory approval, elect to satisfy its

obligation to pay the principal amount of the Debentures, in whole or in part, by issuing

and delivering that number of freely tradeable Common Shares obtained by dividing the

principal amount of the outstanding Debentures which are to be redeemed or which have

matured by 95% of the volume weighted average trading price of the Common Shares on

the TSX for the 20 consecutive trading days ending on the fifth trading day preceding the

date fixed for redemption or the Maturity Date, as the case may be. Any accrued and

unpaid interest thereon will be paid in cash. See "Details of the Offering – Payment upon

Redemption or Maturity".

 

SD

 

[finetrader]

They would be far smarter to simply issue shares upon maturity, & use the opportunity as a back-door way of raising equity.

 

And, or .. they buy as much as they can at discount price to limit dilution coming from repayment of deb in common shares.

 

 

 

 

[finetrader]

I have switched my FTP.B (that  I sold for a good profit)  to FTP.DB.A  lately as I think the return will be higher with the 2019 deb going forward.

 

 

[sculpin]

They would be far smarter to simply issue shares upon maturity, & use the opportunity as a back-door way of raising equity. 

 

On redemption or at maturity, the Company may, at its option, on not more than 60 days

and not less than 40 days prior notice and subject to regulatory approval, elect to satisfy its

obligation to pay the principal amount of the Debentures, in whole or in part, by issuing

and delivering that number of freely tradeable Common Shares obtained by dividing the

principal amount of the outstanding Debentures which are to be redeemed or which have

matured by 95% of the volume weighted average trading price of the Common Shares on

the TSX for the 20 consecutive trading days ending on the fifth trading day preceding the

date fixed for redemption or the Maturity Date, as the case may be. Any accrued and

unpaid interest thereon will be paid in cash. See "Details of the Offering – Payment upon

Redemption or Maturity".

 

SD

 

Given that they have $70MM in cash & restricted cash on the balance sheet and with rapidly improving fundamentals at both Thurso and Landquart it would be absolutely foolhardy to issue shares at the current price to repay $40MM in debentures.

[finetrader]

I think Fortress is about FCF(after capex, interest payment) break even right now.  Let's not be too optimistic here.. after all this is a company that has disapointed a lot in the past.

 

They have 40M$ deb to repay dec 2016

and

25M$ deb to repay in dec june 2017.

 

So I don't think it would be wise to repay all those deb with cash on hand and having no cash on hand afterward.

 

So either they issue equity, refinance, or sell some assets in 2016.

 

[sculpin]

I think Fortress is about FCF(after capex, interest payment) break even right now.  Let's not be too optimistic here.. after all this is a company that has disapointed a lot in the past.

 

They have 40M$ deb to repay dec 2016

and

25M$ deb to repay in dec 2017.

 

So I don't think it would be wise to repay all those deb with cash on hand and having no cash on hand afterward.

 

So either they issue equity, refinance, or sell some assets in 2016.

 

Agree that it would be good to have a certain cash cushion and less leverage. Don't think Chad will dilute his equity at anything under $10 unless it was absolutely necessary. With Cdn $ near $1.40 I believe Thurso EBITDA is approaching $50MM at the stated operating level and high $800 DP pricing. Landquart moving towards $15MM EBITDA this year with Durasafe ramping to higher percentage. And there is always the rumoured sale of Swiss RE that would be a game changer if it were to be > $40MM.

[SharperDingaan]

They have 70M in restricted cash, improving conditions (maybe), and ability to issue up to 65M in equity over the next 24 months; the only question is how many shares - if they choose to issue. It all adds up to 135M in the war chest - plus whatever arrives over the next 2 years, & incentive to boost the share price by year end. There are lots of ways to play.

 

SD

[lessthaniv]

They would be far smarter to simply issue shares upon maturity, & use the opportunity as a back-door way of raising equity. 

 

On redemption or at maturity, the Company may, at its option, on not more than 60 days

and not less than 40 days prior notice and subject to regulatory approval, elect to satisfy its

obligation to pay the principal amount of the Debentures, in whole or in part, by issuing

and delivering that number of freely tradeable Common Shares obtained by dividing the

principal amount of the outstanding Debentures which are to be redeemed or which have

matured by 95% of the volume weighted average trading price of the Common Shares on

the TSX for the 20 consecutive trading days ending on the fifth trading day preceding the

date fixed for redemption or the Maturity Date, as the case may be. Any accrued and

unpaid interest thereon will be paid in cash. See "Details of the Offering – Payment upon

Redemption or Maturity".

 

SD

 

Given that they have $70MM in cash & restricted cash on the balance sheet and with rapidly improving fundamentals at both Thurso and Landquart it would be absolutely foolhardy to issue shares at the current price to repay $40MM in debentures.

 

X2

 

It's silly. Especially with the stock owned by CEO.

[SharperDingaan]

They would be far smarter to simply issue shares upon maturity, & use the opportunity as a back-door way of raising equity. 

 

On redemption or at maturity, the Company may, at its option, on not more than 60 days

and not less than 40 days prior notice and subject to regulatory approval, elect to satisfy its

obligation to pay the principal amount of the Debentures, in whole or in part, by issuing

and delivering that number of freely tradeable Common Shares obtained by dividing the

principal amount of the outstanding Debentures which are to be redeemed or which have

matured by 95% of the volume weighted average trading price of the Common Shares on

the TSX for the 20 consecutive trading days ending on the fifth trading day preceding the

date fixed for redemption or the Maturity Date, as the case may be. Any accrued and

unpaid interest thereon will be paid in cash. See "Details of the Offering – Payment upon

Redemption or Maturity".

 

SD

 

Given that they have $70MM in cash & restricted cash on the balance sheet and with rapidly improving fundamentals at both Thurso and Landquart it would be absolutely foolhardy to issue shares at the current price to repay $40MM in debentures.

 

X2

 

It's silly. Especially with the stock owned by CEO.

 

Not shares at todays price - shares at the Dec-31-2016 price, which should (hopefully) be quite a bit higher than todays price.

 

SD

 

 

[lessthaniv]

Their $70m in cash is not all restricted cash. $20m is but should reduce some over time. If they can accomplish the sale and leaseback that's been discussed and bring another $40m into the kitty, they'll have $110m in cash, $90m unrestricted vs. $65m in 2016, 2017 debt. The next maturity of $69m is Dec 2019. They have 4 years of operations in front of them that are significantly levered to the currently improving markets.

 

$850 CAD delivered cost at .75 CAD/US with DP at :

 

$800us implies EBITDA $37m

$1200us implies EBITDA $131m

 

$1200us seems to be the high end of the cost curve for the world supply.

 

VSF utilization in China is near capacity

Fibre inventory is very low

VSF began its recovery in spring 2015

DP prices have lagged giving some upside in 2016

RBC has the 2016 US/CAD exchange rate at 1.40

Thurso  utilization continues to ramp, costs in both businesses are coming down.

 

18% of the stock is owned by insiders.

 

This is not a recipe for near term dilution.

 

 

[lessthaniv]

http://www.cbc.ca/news/business/macquarie-loonie-forecast-1.3401644

 

;D

[finetrader]

We also have Viscose that seems to be heading lower lately. Part of it, due to Yuan devaluation against USD

 

http://www.ccfei.net/product/prod.aspx?sid=Z05&pid=P20

[lessthaniv]

http://www.ccfgroup.com/newscenter/newsview.php?Class_ID=600000&Info_ID=20160106037

 

Neucel still closed.

[finetrader]

Q4 is out.

 

nothing new here. About break even I as expected.

 

but I noticed this sentence that they've added in the Liquidity and Capital Resources notes:

 

"Convertible debt in principle amount of $40.3 million due December 31,

2016, can be repaid with common shares of the Company at the Company’s discretion, subject to receiving requisite

approvals."

 

Looks like they are preparing investor for this eventuality.

[misterkrusty]

finetrader - this is a boilerplate provision included in basically every Canadian debenture from the time of issuance.  I wouldn't read too much into it

[finetrader]

I know that, but just now are they mentioning it in their Q4 report.

 

And my prediction is they will exercice (repay principal with common shares) at least in part with this option.

[misterkrusty]

good catch.  I saw that too but forgot that they hadn't mentioned it in earlier quarterly results. 

 

I doubt it.  I figure they'll do ~22m ebitda at thurso even with flat DP prices and a 1Q16 as bad as 4Q15.  should be enough to keep cash north of $50m.

 

If there's just a tiny shortfall, and no LSQ deal or Landqart sale/leaseback, I guess there's a chance they'd pay partly with shares rather than firesale Landqart. 

 

Here's to hoping China devalues the yuan!

[roundball100]

 

[...] If there's just a tiny shortfall, and no LSQ deal or Landqart sale/leaseback, I guess there's a chance they'd pay partly with shares rather than firesale Landqart.  [...]

 

On the call they said they hoped to report back within 2-3 months on progress regarding sales and/or sales/leaseback (although also saying of course that there are no guarantees).  A question came back suggesting that this sounded like what was said last quarter - the response was that progress had been made since last quarter.  And Chad said he himself was in Switzerland this week, talking with multiple parties.  So, nothing firm but hints of optimism. 

[finetrader]

If you know Chad, you know he is an optimistic person,and a little bit of a dream seller.

I suspect this Landqart sale/leaseback thing is partly Chad trying to inspire some hopes in investor's mind.

 

I might be wrong but i don't count on it.

 

Most probably investor gets diluted some to repay converts

[misterkrusty]

Chad is a salesman, no doubt.  but I don't see why a deal couldn't get done if he was willing to pay a high-enough rate.  can't think of another country more starved for yield than Switzerland, with its negative interest rates.

[lessthaniv]

With Chad personally having shares at stake, I think he will be doing everything he can wrt to the sale/leaseback.  I think it's likely it gets done as the value proposition for the counterparties is good.

[roundball100]

Any explanations for the incredibly low volume over the past few weeks/months?

[sculpin]

Chad getting paid a pretty penny to do nothing on the corporate development for months now. Where is the sale of the Landquart land?

 

Executive Chairman Compensation

 

In accordance with the terms of a services agreement dated July 20, 2015 (the "Services Agreement"), Mr.

Wasilenkoff, the Executive Chairman of the Corporation, is entitled to receive an annual salary of $750,000

from October 1, 2015 to September 30, 2016 and an annualized amount of $350,000, thereafter until September

30, 2020, for providing certain consulting services to the Corporation. The Board also has the discretion to

determine, in respect of each financial year or portion thereof, the amount, if any, of variable compensation to be

awarded to Mr. Wasilenkoff, whether in cash, securities, long-term incentive plan awards, if available, or any

combination thereof. In respect of the 2015 fiscal year, the Board did not award Mr. Wasilenkoff any incentive

compensation under the Services Agreement.

 

Additionally, pursuant to the terms of an employment agreement between Mr. Wasilenkoff and FTP Capital

LLC ("FTP Capital") dated July 20, 2015 (the "FTP Employment Agreement"), Mr. Wasilenkoff is employed

as FTP Capital's Chairman, President and Chief Executive Officer and is entitled to receive an annual salary of

US$100,000. Such expense is payable by FTP Ventures Limited Partnership (the "Partnership"), a newly

formed limited partnership owned 51% by the Corporation and 49% by Mr. Wasilenkoff, for services performed

by Mr. Wasilenkoff on FTP Capital’s behalf pursuant to a management services agreement. The Partnership

intends to pursue opportunities outside of the Corporation’s existing business segments that would diversify the

asset base. As incentive compensation under the FTP Employment Agreement, Mr. Wasilenkoff is entitled to

receive US$50,000 for every US$2,500,000 of cumulative after tax free cash flow generated by the Partnership

prior to September 30, 2019, subject to a maximum cumulative payment of US$1,000,000, and provided that (i)

the management services agreement between FTP Capital and the Partnership remains in full force and effect

and (ii) FTP Capital has actually received such funds from the Partnership. As the Partnership did not generate

the required cash flow, Mr. Wasilenkoff did not receive any incentive compensation under the FTP Employment

Agreement in respect of the 2015 fiscal year.

 

On September 30, 2015, Mr. Wasilenkoff received the First Tranche (defined below) of the FTP Obligation

(defined below) pursuant to the terms of a transition agreement dated July 20, 2015 between Mr. Wasilenkoff

and the Corporation (the "Transition Agreement"). The Transition Agreement was entered into as a result of

the termination of Mr. Wasilenkoff’s previous employment agreement, and was designed to defer 80% of the $5

million amount that would otherwise have been due to Mr. Wasilenkoff upon a change in title, pursuant to his

previous employment agreement. See "Termination and Change of Control Benefits and Employment

Contracts".

[sculpin]

Taken from the SH BB...

 

Swiss franc rolling out on Durasafe

Fortress paper Landqart mill is producing the Durasafe substrate used by the SNB. Based on the rollout schedule in this news release, this should keep the mill busy for a while.

 

http://www.snb.ch/en/mmr/reference/pre_20160406/source/pre_20160406.en.pdf