walt373 Posted January 15, 2016 Share Posted January 15, 2016 The unsecured debt is trading at 5.5 cents on the dollar. It's gotta be an 18-bagger to be made whole so that equity is in the money, theoretically. In practice, this will be a lower number. But that's your opportunity cost when you buy the stock, if you're doing it for fundamental value. You're saying the upside is much more than the bonds, as the bonds' upside playing out is a condition for the equity to have a shot. Link to comment Share on other sites More sharing options...
tinhb Posted January 15, 2016 Share Posted January 15, 2016 Anyone has reasons against going for the debt at 5.5 cents? Link to comment Share on other sites More sharing options...
RadMan24 Posted January 15, 2016 Share Posted January 15, 2016 Anyone has reasons against going for the debt at 5.5 cents? Yea. If you're long equity, mind as well wait for Ch.11 and buy senior bonds when they tank. Link to comment Share on other sites More sharing options...
morningstar Posted January 15, 2016 Share Posted January 15, 2016 Anyone has reasons against going for the debt at 5.5 cents? The pretty significant probability that the secured investors take the equity and wipe out the unsecured debt. The fact that the company failed to pay the unsecured coupon, which they clearly had the cash to make, pretty much tells you who they are negotiating with here - the first lien creditors. What are they negotiating? It's pretty likely that they are working on a pre-packaged bankruptcy and a DIP facility provided by the senior creditor group. Neither party has a strong interest in preserving much claim for the unsecured bonds or equity in that scenario... that would just dilute the new ZINC equity that secured holders and management would expect to receive. Link to comment Share on other sites More sharing options...
walt373 Posted January 15, 2016 Share Posted January 15, 2016 For some perspective, the value of the entire unsecured bond issue, originally at $100m and now trading at 5.5c on the dollar, is $5.5m. The interest payment of $1.8m would result in a 33% return on investment at current prices. Link to comment Share on other sites More sharing options...
500pages Posted January 15, 2016 Share Posted January 15, 2016 Anyone has reasons against going for the debt at 5.5 cents? The pretty significant probability that the secured investors take the equity and wipe out the unsecured debt. The fact that the company failed to pay the unsecured coupon, which they clearly had the cash to make, pretty much tells you who they are negotiating with here - the first lien creditors. What are they negotiating? It's pretty likely that they are working on a pre-packaged bankruptcy and a DIP facility provided by the senior creditor group. Neither party has a strong interest in preserving much claim for the unsecured bonds or equity in that scenario... that would just dilute the new ZINC equity that secured holders and management would expect to receive. sounds plausible. but does that make "intending to pay" the coupon is a straight up lie? also why not eg do a rights offering, and definitely raise all the equity through ATM to give more to the senior creditors? Link to comment Share on other sites More sharing options...
morningstar Posted January 15, 2016 Share Posted January 15, 2016 Anyone has reasons against going for the debt at 5.5 cents? The pretty significant probability that the secured investors take the equity and wipe out the unsecured debt. The fact that the company failed to pay the unsecured coupon, which they clearly had the cash to make, pretty much tells you who they are negotiating with here - the first lien creditors. What are they negotiating? It's pretty likely that they are working on a pre-packaged bankruptcy and a DIP facility provided by the senior creditor group. Neither party has a strong interest in preserving much claim for the unsecured bonds or equity in that scenario... that would just dilute the new ZINC equity that secured holders and management would expect to receive. sounds plausible. but does that make "intending to pay" the coupon is a straight up lie? also why not eg do a rights offering, and definitely raise all the equity through ATM to give more to the senior creditors? I don't think it is a lie - currently, they intend to pay the coupon. But that intention can change and I think it likely will. Note that for the company, intending or planning to pay is not the same as thinking it likely they will pay. I think it's probably too late for a rights offering to raise a useful amount of capital. I also imagine that with the scrutiny surrounding the plants performance and the creditor negotiations, the company might be having a hard time clearing itself of MNPI. Link to comment Share on other sites More sharing options...
Guest roark33 Posted January 15, 2016 Share Posted January 15, 2016 I don't mean to be rude, but..... The brain damage that has gone into thinking about this company on this board could much more easily spent contemplating a great business. And waiting.... Don't get me wrong, I find myself occasionally messing around with special situations, but they have never as been profitable as merely paying a fair price for a great business. I think that's one of the greatest lessons Munger taught Buffett.... Anyway, my two cents... Link to comment Share on other sites More sharing options...
str8shot Posted January 15, 2016 Share Posted January 15, 2016 I don't mean to be rude, but..... The brain damage that has gone into thinking about this company on this board could much more easily spent contemplating a great business. And waiting.... Don't get me wrong, I find myself occasionally messing around with special situations, but they have never been profitable as merely paying a fair price for a great business. I think that's one of the greatest lessons Munger taught Buffett.... Anyway, my two cents... agreed. and an investment in ZINC has reinforced that lesson. unfortunately some of us went long on ZINC and the company's fate is still of interest. Link to comment Share on other sites More sharing options...
Picasso Posted January 15, 2016 Share Posted January 15, 2016 There's probably some money to be made here. I think this will get cloners so upset with Pabrai that they will stay clear of his next new position. As a result those will end up being the ideas that do pretty well but everyone will be skeptical. Kind of like when Facebook had that terrible IPO and the next year it was a bunch of under priced IPO's because no one wanted to do another over priced deal. It was one of the best times to invest in IPO's since the 90's. All that said, I think Pabrai had several warning signs of a change in thesis. For some reason he stuck around and bought more shares and that is what is most confusing. Perhaps it's a lack of maturity (I'm one to talk) or the pressure of looking wrong by selling when you're always talking up your book. We all make mistakes but this was a pretty nasty one.... Link to comment Share on other sites More sharing options...
Nicholas Posted January 15, 2016 Share Posted January 15, 2016 I don't mean to be rude, but..... The brain damage that has gone into thinking about this company on this board could much more easily spent contemplating a great business. And waiting.... Don't get me wrong, I find myself occasionally messing around with special situations, but they have never as been profitable as merely paying a fair price for a great business. I think that's one of the greatest lessons Munger taught Buffett.... Anyway, my two cents... I am long and wrong with ZINC and was thinking the exact samething...what the heck was i thinking....time to refocus! Link to comment Share on other sites More sharing options...
gfcfa Posted January 15, 2016 Share Posted January 15, 2016 Another thing I find interesting is in Pabrai's speech at BC he says something to this extent: If wealth is lost nothing is lost If health is lost something is lost and If character is lost everything is lost. Not trying to derail the thread but something tells me his LP's may not wholeheartedly agree with the above. I'm an LP in Dhandho Holdings, and, for what it's worth, I agree wholeheartedly with Pabrai's statement. And, frankly, I'd be surprised if any of my fellow LPs disagreed. George, I agree too. But at the same time Pabrai has said he believes in Buffett's no 1 rule of investing - don't lose principal. And I assume he strives to honor that rule. But mistakes happen. A question to you as an LP - to my knowledge Pabrai bought about 2m shares of ZINC at around $8 last July/Aug for Dhandho. Has Pabrai conveyed anything to the LPs recently as to what is going on with this stock and what he expects to unfold? Hey, good morning. Mohnish has not shared any thoughts on Horsehead with the LPs. But, that's hardly surprising -- Pabrai rarely discusses current positions. I think it's fair to say that he's (more than) aware of ZINC's "difficulties." I did want to take this opportunity to share a couple of thoughts with the board on ZINC...and on Pabrai. Very few of us, if we're being completely honest, anticipated the collapse in zinc prices (along with every other commodity). There was "supposed" to be a zinc shortage, right? And, very few of us anticipated the degree of difficulty ramping up Mooresboro (a plant based on proven technology). Barring a favorable restructuring or sale, which seems increasingly unlikely, it looks like I was wrong. ZINC's management was wrong. And, Pabrai was wrong. But, I don't judge myself, or anyone else, on the basis of one decision. If I did, I'd think Buffett a terrible investor given his large investment in IBM. Pabrai has, no doubt, stumbled badly with ZINC, but, his long-term record remains stellar. With that, I wish everyone here the very best. Link to comment Share on other sites More sharing options...
Ham Hockers Posted January 15, 2016 Share Posted January 15, 2016 To anyone saying there's absolutely no reason to think the equity is worthless right now: for f***'s sake people, have some respect for market prices. Sorry. Rant over. Link to comment Share on other sites More sharing options...
500pages Posted January 15, 2016 Share Posted January 15, 2016 To anyone saying there's absolutely no reason to think the equity is worthless right now: for f***'s sake people, have some respect for market prices. Sorry. Rant over. Taking market prices for secured, unsecured, and equity, one can buy the entire thing for something like 200m. That's with latest quote on secured from 1/11/16. Link to comment Share on other sites More sharing options...
luck Posted January 15, 2016 Share Posted January 15, 2016 wow. down another 35% to around 42 cents so far. don't think the market believes zinc mgmt is going to make the payment. can't blame them given mgmt track record. Link to comment Share on other sites More sharing options...
jawn619 Posted January 15, 2016 Share Posted January 15, 2016 Pabrai's most recent presentation, where he talks about under performance at around 47:00 Link to comment Share on other sites More sharing options...
AzCactus Posted January 15, 2016 Share Posted January 15, 2016 Another thing I find interesting is in Pabrai's speech at BC he says something to this extent: If wealth is lost nothing is lost If health is lost something is lost and If character is lost everything is lost. Not trying to derail the thread but something tells me his LP's may not wholeheartedly agree with the above. I'm an LP in Dhandho Holdings, and, for what it's worth, I agree wholeheartedly with Pabrai's statement. And, frankly, I'd be surprised if any of my fellow LPs disagreed. George, I agree too. But at the same time Pabrai has said he believes in Buffett's no 1 rule of investing - don't lose principal. And I assume he strives to honor that rule. But mistakes happen. A question to you as an LP - to my knowledge Pabrai bought about 2m shares of ZINC at around $8 last July/Aug for Dhandho. Has Pabrai conveyed anything to the LPs recently as to what is going on with this stock and what he expects to unfold? Hey, good morning. Mohnish has not shared any thoughts on Horsehead with the LPs. But, that's hardly surprising -- Pabrai rarely discusses current positions. I think it's fair to say that he's (more than) aware of ZINC's "difficulties." I did want to take this opportunity to share a couple of thoughts with the board on ZINC...and on Pabrai. Very few of us, if we're being completely honest, anticipated the collapse in zinc prices (along with every other commodity). There was "supposed" to be a zinc shortage, right? And, very few of us anticipated the degree of difficulty ramping up Mooresboro (a plant based on proven technology). Barring a favorable restructuring or sale, which seems increasingly unlikely, it looks like I was wrong. ZINC's management was wrong. And, Pabrai was wrong. But, I don't judge myself, or anyone else, on the basis of one decision. If I did, I'd think Buffett a terrible investor given his large investment in IBM. Pabrai has, no doubt, stumbled badly with ZINC, but, his long-term record remains stellar. With that, I wish everyone here the very best. I think the larger issue is Horsehead being such a large position (formerly) combined with his admiration for Buffett and Munger. Munger has a speech where he refers to something termed "chauffeur knowledge" which to me is essentially repeating what someone else has said without a clear understanding of its' meaning. Given that this may eventually be a 0---it's tough to call it a mistake when it has happened multiple times. Link to comment Share on other sites More sharing options...
stahleyp Posted January 15, 2016 Share Posted January 15, 2016 anyone know what pabrai's fund was down for 2015 (I'm assuming it was down)? Link to comment Share on other sites More sharing options...
racemize Posted January 15, 2016 Share Posted January 15, 2016 anyone know what pabrai's fund was down for 2015 (I'm assuming it was down)? It isn't out yet. Up to 3Q was ugly though. I can't imagine it is a pretty year at all. Link to comment Share on other sites More sharing options...
Vish_ram Posted January 15, 2016 Share Posted January 15, 2016 anyone know what pabrai's fund was down for 2015 (I'm assuming it was down)? By end of Q3, PIF2 down 23%. the rest down ~20% Link to comment Share on other sites More sharing options...
luck Posted January 15, 2016 Share Posted January 15, 2016 agree. everyone takes a zero once in awhile. it's the position sizing that is wild. i imagine smaller investors without pabrai's net worth with 20%+ in this were hurt big time. pabrai has actually made me a ton of money with fcau, gm, bac, which were all large positions. i have no ill will towards pabrai. zinc was a tiny position, but still an awful experience as we approach zero. Link to comment Share on other sites More sharing options...
stahleyp Posted January 15, 2016 Share Posted January 15, 2016 thanks race and vish. It'll be interesting to see the final numbers. Link to comment Share on other sites More sharing options...
Guest anilpandit Posted January 15, 2016 Share Posted January 15, 2016 Can anyone outline any possible scenarios if ZINC files for bankruptcy ? Will the company shut down and quit existing or just their debt will be discharged with asset sell but the company with continue to function, employee and administration will stick around.. Will continue to trade as ticker symbol ZINC exchanges.... can anyone provide some color on it? Link to comment Share on other sites More sharing options...
JayGatsby Posted January 15, 2016 Share Posted January 15, 2016 Can anyone outline any possible scenarios if ZINC files for bankruptcy ? Will the company shut down and quit existing or just their debt will be discharged with asset sell but the company with continue to function, employee and administration will stick around.. Will continue to trade as ticker symbol ZINC exchanges.... can anyone provide some color on it? This is general. I don't know anything about ZINC: Usually the debt holders either exchange their debt for equity and take ownership or the company is sold and the proceeds are distributed up the waterfall. If there's an economically viable business it will continue under the new ownership. The stock sometimes continues to trade until everyone realizes there are no longer assets tied to the stock. Link to comment Share on other sites More sharing options...
SnarkyPuppy Posted January 15, 2016 Share Posted January 15, 2016 No filings posted after market today which would indicate management buying or pabrai selling. Or, you know, the material event that occurred. Link to comment Share on other sites More sharing options...
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