This follows from my last post: Elders Ltd (ELD) v Elders Hybrids (ELDPA): Reservoir Dogs edition.
Coincidentally, Jonathan Shapiro (who does an excellent job covering this part of the market) from the AFR picked up on Tuesdays proposal by Paperlinx to convert PXUPA holders to equity holders. Like ELD/ELDPA, the PPX/PXUPA situation is a complete mess. And this is similar to the Gunns drama as pointed out by a reader here.
It really highlights the danger of these capital structures, and in my opinion completely undermines the notion that hybrid holders are somehow safer because they are higher up in the capital structure.
PPX has even gone to the extraordinary length of reminding PXUPA holders they can't vote. Why this should be a valid reason to set aside the capital structure is beyond me. This really is holding a gun to their (PXUPA holders) head.
It's a pity: for income seekers, hybrids as a sector have been a great part of the market to be invested. It's a shame to see the image tarnished.
Kristian
Disclosure: no position in ELD, ELDPA, PPX, PXUPA
Oh so true, Kristian.
ReplyDeleteFor another prime example of how holders of these things can get utterly screwed, check out the history of CMIPC.
I know that story very well - I followed it for years in my previous role. GNS, PPX and ELD have shared the same thing in common: a terrible underlying business. When I covered CMI, it was a collection of solid underlying businesses with plenty of cash-flow. But as you know, that didn't stop management from suspending distributions for years. Non-cumulative and discretionary distributions can be very nasty indeed.
ReplyDeleteThanks very much for the input.