Petrofac Share Discussion Threads

[investtofly] 14/4/2024 19:56

Let's see what happens tomorrow, UP, DOWN or TREAD WATER

[hades1] 14/4/2024 19:53

ghhghh14 Apr '24 - 18:56 - 39682 of 39686
None of which apply here.
No rumours and no media speculation.
Also the RNS made absolutely no reference to price movements, rumours or media speculation

[armbar] 14/4/2024 19:12

Likewise We can agree to disagree which is ok GL

[ghhghh] 14/4/2024 19:07

Armbar

The difference is that it was odd for the share price to go up 13% in the middle of a restructuring that was likely to include significant dilution. Perhaps the FCA wanted clarification that no imminent takeover.

Perhaps the FCA did ask why down 10% and PFC simply said the reason (possible dilutive restructuring) is already in the market.

The FCA are looking for unjustified price movements

Anyway we are going round in circles. Good luck.

[armbar] 14/4/2024 19:05

We will have to agree to disagree on this one The FCA need to look into how this is being managedGL

[jaknife] 14/4/2024 18:58

Armbar,

"We will see, but this is being taken imo , how is yet to play out but someone wants it , Middle East , banks, sovereign wealth funds or adnoc"

Occam's razor tells us "The simplest explanation is usually the best one."

The simple explanation with Petrofac is (and always has been) that its balance sheet is horribly weak and needs strengthening. No one is prepared to put fresh equity into the business on a plain vanilla basis because that would simply result in "the can being kicked down the road" to November 2026, when the bonds mature and Petrofac facing another cash crisis. Hence investors require that something is done about the bonds now, in advance of fresh equity being invested.

That's it. There's no need for conspiracy theories and no need to assume nefarious dark forces. There are simply long negotiations about saving Petrofac.

JakNife

[ghhghh] 14/4/2024 18:56

Hades1

Yes, typo. Meant FCA

When we make contact with issuers

If we see unconfirmed media speculation that could indicate a leak of inside information under UK MAR, market rumours and/or an unexplained significant share price movement, we may follow this up.

We do this by contacting the issuer or its advisors as soon as possible to discuss the issuer’s disclosure obligations. This could include asking whether the speculation is true, and if so whether it constitutes a leak of inside information.

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[armbar] 14/4/2024 18:52

No I do not agree, It clearly states All options remain under consideration, AllSignificant could imo be 30% + so you can work out the math on a D4E or a private equity placement using similar percentages with further bod and ayman contributionsThen calculate a valuation with assumptions on the discounted cash flow , or enterprise value and compare and contrast all the calcs, $8bn backlog. Someone wants in either partially or wants it all and that is what that RNS was for , that is just my opinion But lets see takeover or JV

[armbar] 14/4/2024 18:33

Ghhghh similar the way PFC commented on the several days over 10% drop on the way down Oh yes I remember now , they didntWe will see, but this is being taken imo , how is yet to play out but someone wants it , Middle East , banks, sovereign wealth funds or adnoc As I have said it wont be pretty they will want it the cheapest way possible with or without the BOD founder AA facilitating.Now they could offer Ayman and Co a private deal share swap , hostile or play fair which I doubt.The RNS was purposeful to halt the rise as share price could have really escalated If the bank lenders are ME then they could try and force the issue but remember bonds Nov 2026 Short term liquidity is more the challenge right now GL

[armbar] 14/4/2024 16:45

100% agree with your comments GL

[hades1] 14/4/2024 15:48

Ghhghh
FSA abolished in 2010
FSA today is the Food Standards Agency.
I have no idea what the rules were in 2010 but the rule you quote is not in today’s FCA Handbook.

[investtofly] 14/4/2024 14:36

What would you think they would offer per share?

[ghhghh] 14/4/2024 12:40

Armbar

There is no conspiracy theory! PFC traded up 13% on Thursday and were therefore forced (by the FSA since over 10%) to update to avoid a false market.

PFC spelt out that a D4E was the most likely outcome. Do you accept this?

So please explain your risk reward analysis?

A $350m capital exercise at 22p versus 5p.

Even if only say a 10% chance of 5p, why expose yourself to such risk for such a minimal short term return?

[action] 14/4/2024 12:01

I recon this shares will looking ripe to be taken over by D4E. May be PI have to wait may be long time to regain the 115p right issue price....DYOR . I am not buying or selling.

[armbar] 14/4/2024 11:03

Jaknife were not saying D4E was wrong I personally saying that A) your six monthly doom and gloom , guarenteed D4E 4p , breaking the covenants , bond restrictions, that you do not seem to have a copy of, was an opinionB) that the major shareholders and founder will have their interest first so a D4E if they have the sphere of influence would be down option list , takeover , JV, PE equity , Andoc JV other options first imoC) that your 4p D4E imo is off the mark and I suggested 15-20p if it happens which I still believe is latter on the major holders options for obvious reasons This is heading imo to the Middle East for all my reasons stated , Middle East banks , Adnoc especially imoThis has been played for a while , kitchen sinks , leaks to allow shorts to drive price down , no comms form IR, announced schroders late, contracts like Algeria stated by MEED but unannounced , where are the 30M schroders shares and the 60m plus shorts they are not with retail imo.The RNS smells of a purposeful haltingReason , by hook or by crook someone wants PFC, they dont want to pay , need further accumulation , this has been well played but bordering on the lines of legality imo but when huge sums of money are involved all tactics to be used So more twists and turns yet Now if the lenders are Middle East banks which seems difficult to ascertain then they really do have more control but the founders and bod may have a sayBonds not due 2026, RCF yes So we dont know the outcome all to play for someone will get left holding the baby GL

[ghhghh] 14/4/2024 07:55

PFC spelt out on Friday that the most likely outcome is a significant D4E.

O&G claimed a few months ago that restructuring c.$450m so my guess yesterday of a $300m D4E and $150m equity raise probably in the ballpark.

So anyone currently holding equity should run the risk reward assuming say 5p and 22p.

5p is obviously disastrous and 22p perhaps marginal short term upside?

The risk reward screams sit on the fence until terms announced.

I accept that some of you are here for the short squeeze (if that's the reason for the buy side volume) and are timing your exit. Good luck as long as you are not ramping gullible PI's

[tahmina1] 14/4/2024 04:36

I may be getting this D4E stuff entirely wrong but just on my limited grasp

If the bondholders are owed $600m and the EV currently is $150m then the dilution if there was no haircut at all for the bond holders would be 5:1 e.g. the bondholders get 80% of the equity. Lets say without the balance sheet issue PFC shares are worth £1 debt free ( they were trading at this level in the last 12 months before the contracts were announced!) , this suggests 20p a share. However, of course, debt free, PFC starts to gather in the performance guaruntees with additional capital and no debt, and then as the profits start to come in, all equity holders benefit. so the 20p share could easily be a multibagger as contracts start paying off.

The issue is the immediate need for capital to fund essentially on going operations and restructure debt. The bondholders, confident of an increase in the value of the swapped equity as the $8 billion contracts start yieling profits, would probably take less equity than the above, which seems IMHO to suggest a worst case scenario. This would also explain why the shares have found a floor need the current level. No suggestion of them going bust, for example.

The banks dont hold all the cards. With injected capital or relief from debt, covenants wont be breached. Im not a city professional, so comments welcome.

[jaknife] 13/4/2024 22:05

ryad123,

"@jaknife can you explain how do you get the 4p figure from, you seem to be assuming that after the bond holders taking a haircut along with a fresh equity cash injection, the valuation will remain the same, as if the business will be worth the same even though it has less debt, dilution means the percentage of ownership shrinks not necessarily loss in absolute money terms, unless you are saying that 26p a share is misguided and the market is still mispricing pfc."

I explained that in post 39,411 here:



Yes "26p a share is misguided and the market is still mispricing PFC". But this is quite normal. If you look back at every major D4E swap you will find that it takes time for shareholders to come to terms with the situation and to realise that the position is not what they thought. It is very similar to the five stages of grief (denial, anger, bargaining, depression and acceptance:

Note, for example, that just days ago, posters here were (very rudely) telling me that my forecasts of a D4E swap were completely wrong ... now the question is "at what price is the D4E swap going to take place?". Shareholders are always slow to realise what exactly a D4E swap means for a company.

The simple fact is that, unless the bondholders graciously agree to swap some of their debt for equity, then Petrofac is insolvent. And if the bondholders aren't going to get repaid in full then why on earth should they agree to a cushy deal where shareholders get to retain a chunk of the company? Do you think that bondholders/bond funds are charities?


"Would you agree that the price action in the last week is weird, who was scooping up the shares that were being dumped?""

No. And I think that I answered that in 39,438:



There was an element of a short squeeze at the start of the week as the cost of borrow for PFC stock has soared to 85% and so some of the shorts decided to call it a day and close their positions.


"Also how do you explain the contracts being awarded in the last few months, were all these companies mistaken about the financial health of pfc? "

You (and many of Petrofac's retail shareholders) have completely misunderstood this point. It is common practice within PFC's industry that ANY important contact is guaranteed by a bank. The two big contracts that were announced on 20 Dec, for example:



"Further to the Group’s market update on 4 December, today’s announcement coincides with confirmation that Petrofac has secured the performance guarantee required for the Ijmuiden Ver Alpha contract."

had bank guarantees. The peculiarity with those contracts was that the only reason that the banks gave those guarantees was that Petrofac gave the banks cash collateral to mitigate their credit exposure to Petrofac.

So the clients didn't make a mistake about the financial health of PFC, they explicitly made no assumption whatsoever about Petrofac's financial health, they got a bank to provide protection against ANY financial problems that Petrofac might have!

The whole topic of financial guarantees is the one that forced Petrofac's hand and made them finally admit that they had a problem. The banks are no longer prepared to provide guarantees to support PFC's business unless PFC provides cash collateral for those guarantees. And whilst PFC did that with the two announced on 20th Dec it also admitted that that was not a reliable long term solution.


"Last but not least metro share price didn't move much from around 35 p, the share dropped from 100p but that was before D4E was made public knowledge. Any thoughts on that Mr Jaknife?"

The Metro Bank transaction was more complicated than a normal D4E swap and it's one that I decided to not get involved in. I would defer to WShak's greater expertise on Metro Bank. But the big difference was that the Central Bank got involved and threatened the subordinated bondholders with a bail-in unless they agreed to a debt for equity swap and it all seemed to get forced through on that basis over a weekend.

JakNife

[wellbutpoor] 13/4/2024 19:57

While sitting on the sidelines and pondering possible outcomes, I keep coming back to the bonds.

Can I therefore put a few bond related questions to the forum?

Firstly - could the bonds have been routinely shorted - presenting the situation where some holders are actually sitting on a paper profit, rather than the losses that you might automatically assume?

Secondly, considering their distressed state - and particularly after Friday's plunge, is it theoretically possible for a consortium to start purchasing the debt in order to build a controlling interest...ie are the bonds liquid enough?

Furthermore, what would constitute a 'controlling interest' in terms of the bondholders - for example would this number be 51% or is it more complex?

If such a 'controlling interest' was established, how much influence would this give the majority holders in terms of the imminent decision making?

I suppose what I'm driving at is the liklihoodhood of the debt being purchased quickly enough and in sufficient quantity to become the nuclear missile in the upcoming negotiations - for example could such a strategy be employed to influence a positive outcome for Asfari, Azvalor and their 'more friendly' bondholders?

Could it be possible that what we are witnessing here are the early stages of a transfer of the control of the business via the bonds, leading to the realisation of the future value currently hamstrung by the financials?

I don't believe we're anywhere near the end of the story - and it wouldn't be the first time that an apparent 'car crash' is almost completely written off before an unexpected bolt from the blue completely changes the game.

[ryad123] 13/4/2024 19:23

@jaknife can you explain how do you get the 4p figure from, you seem to be assuming that after the bond holders taking a haircut along with a fresh equity cash injection, the valuation will remain the same, as if the business will be worth the same even though it has less debt, dilution means the percentage of ownership shrinks not necessarily loss in absolute money terms, unless you are saying that 26p a share is misguided and the market is still mispricing pfc. Would you agree that the price action in the last week is weird, who was scooping up the shares that were being dumped? Also how do you explain the contracts being awarded in the last few months, were all these companies mistaken about the financial health of pfc? Last but not least metro share price didn't move much from around 35 p, the share dropped from 100p but that was before D4E was made public knowledge. Any thoughts on that Mr Jaknife?

[bouleversee] 13/4/2024 19:17

P.S. Why are they making large losses on all their contracts, if that is the case? Not much point in winning contracts if you have under-quoted for them.

[bouleversee] 13/4/2024 19:15

If things are so dire, why do you suppose the company bought a chunk of shares a week or so ago to give to senior executives? I'm an elderly investor, never a trader, and have to admit that I haven't a clue how things are going to turn out. However, I don't think it's inevitable that there will be a D4E. I wouldn't be surprised if there were a rights issue of some sort and the bosses don't want the share price to rise too high as they will need a lot of dosh to buy their entitlements. Nor would I be surprised to learn that at least some of the large purchases today when the price was low after the RNS were somehow on behalf of the bosses through associates One lesson I have learn from this stressful exercise is that one should take a reasonable amount of one's profits while the going is good and not hang on thinking that the good days will go on forever.

I'd like to think that the bosses have the interests of the ordinary shareholders at heart but I've lost so much money, I can't afford to gamble on that one.