This is a quick post on a issue that was brought to my attention last night (Tuesday night, Sydney time).
Christopher Sommers and his team/advisers at Blue Pacific (New York) look to have uncovered a potentially significant issue for PXUPA holders.
I won't regurgitate the press release fully, however in summary the argument is that a change in capital structure has taken place (2013 and 2014) triggering an event allowing Paperlinx SPS (PXUPA) to convert into preference shares. The preference shares have a face value of $100, so depending on how these are converted (cash or ordinary PPX shares) it potentially means PXUPA finally end up with control (at least 95%, if not 100%) of the business.
If the argument holds true, it is an incredible slip by the company and incredible slip by the rest of the investment community to not pick this up. I am working through this issue (along with everything else!). Any comments appreciated - feel free to email if you prefer private discussion.
Kristian
Disclosure: own PXUPA
nice one
ReplyDeleteHow many PXUPA units have Blue Pacific you reckon?
ReplyDeletenot sure sorry.
DeleteSo, basically each PXUPA note is worth $100 worth of PPX share. PXUPA is still a "bargain" at less than $14! Why no one is buying?
ReplyDeletePXUPA is technically worth $100, but even if PXUPA took over 100% of the business, the underlying fundamentals don't justify it. More like $30-$40 on the current business. No one is buying because of the stand-off between management and the capital structure. This has gone on for years and years, and therefore could go on for years. I could well have been premature in buying this year. The key catalysts to me are: 1. the board taking aggressive action to cut the cancer out of the business and 2. the new business stream looks promising and 3. the ANZA business looking fairly okay. If the fundamentals are getting better then sooner or later the elephant in the room needs to be addressed: doing a deal with PXUPA. We saw this at CMIPC. Alternatively, if the fundamentals improve enough then potentially no deal needs to be done and/or a gradual buy-back of PXUPA might do just the trick. Note what happened at ELD/ELDA - a terrific result for ELDPA.
DeleteAnother example is GMG/GMPPA. GMPPA is now worth slightly more than $100 per note (it was as low as $15 during the GFC). But, GMPPA was still paying 6% interest (approx 40% if bought at $15). Its paying 8% interest now after a step up even - Goodman did not buy back GMPPA.
DeleteCorrect. Ditto MXUPA and TPAPA. The best course of action may indeed to do nothing (in terms of a deal) and see if the intrinsic value of the business can now grow over the next number of years. This isn't as exciting as getting a deal in the short term, however could lead to substantial gains for PXUPA. Easier said than done: not an easy industry, and management does questions to answer.
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