Posts Tagged ‘PIGS’

  • PaperlinX offers hybrids a majority stake ahead of AGM

    A 250 shares for one security swap will potentially give hybrid security holders a controlling 54% of the troubled paper merchant if they all accept the terms. According to the company, hybrids who knock back the $14 offer are likely to be out in the cold after the deal goes down.

    The tortuous wrangling between PaperlinX and its step-up preference securities investors (hybrids) is coming to a head with the confirmed offer to swap 250 ordinary shares for every hybrid security. The hybrid investor support group (PaperlinX PIGS) has already knocked back the contentious deal but the board is confident it will be picked up by a good number of investors with a short-to-medium investment time frame.

    The majority of hybrid holders are a long way off from the original investors who got burned with the $100 securities when they were offered in 2007. Since then the securities have dropped 88% and most of the original investors bailed out, taking whatever they can get. The swap offer is pitched at making it attractive to the new investors, representing a 16.7 % premium at the closing prices on 21 August. The company warns those hybrid holders who do not accept the offer that they are likely to become minority security holders with potentially less influence over the future direction and control of the PaperlinX SPS Trust.

    There are few conditions to the offer and no minimum acceptance condition, which means that whoever takes it up gets the PaperlinX shares. It is unlikely that sufficient numbers will accept to change the majority control of the company.

    The alternative is that the hybrid PIGs will continue with a legal challenge already before the courts to force a better deal, which is been contested. According to the company, a protracted legal challenge is likely to materially disrupt and undermine the company’s operations and stakeholder and financier confidence.

    The hybrid/share swap offer comes ahead of what is sure to be a rambunctious AGM in Melbourne on Friday where Andrew Price, CEO, will front his critics and supporters. He said he is confident the shareholders will pass every motion proposed by the board.

    The AGM will also be seen though the frame of a more assertive stance by the company to potentially libellous comments about its ability to operate as a viable concern. Jeremy Martin, president of the Paper Industry Charitable Trust in the UK found himself having to issue a public apology for comments he made at an industry function in March. In a statement he said, I made comments… I now recognise were understood by many to mean that PaperlinX is insolvent, cannot pay its debts and is a credit risk. I retract my comments in their entirety and I apologise for any embarrassment caused.

     This heightened level of scrutiny is likely to keep the AGM a little more sedate than forecast.

     

     

  • PaperlinX balance sheet stoush ahead of results

    Intense speculation surrounds the PaperlinX  full year presentation on 21 August as battle lines are drawn between Andrew Price, the executive director charged with turning around the company’s ailing European business and Graham Critchley convenor of PaperlinX Investors Group Supporters (PIGS).

    Price is flying back from London to face the disaffected PIGS in Melbourne who were once his strongest supporters in taking on the company. On 5 August, PIGS announced it would hold two webinars about the future of PaperlinX and its hybrid shareholders in light of the group’s expectations for PaperlinX’s second half financial result – scheduled for 21 August.

    In a statement, PIGS convenor Critchley , said:

    Unless the Board has pulled rabbits out of a hat, PaperlinX’s net equity position will have continued to deteriorate in the second half of FY2013, increasing risk for all stakeholders given its fragile balance sheet. We maintain this wealth destruction must stop now.

    A statement from PaperlinX rejects this: “As we indicated in our half year results, PaperlinX continues to make solid progress with its business transformation program.  We look forward to providing a full update to the market at our full year results announcement on August 21.  In the meantime, the Board is fully aware of, and compliant with, its fiduciary responsibilities and responsibilities to shareholders.”

    According to PIGs, the balance sheet should be of concern to every stakeholder – not just hybrid investors – and that the proposed webinars will be of interest to hybrid holders, ordinary shareholders and all other stakeholders in PaperlinX.

    PIGS says it intends to increase pressure on the board of PaperlinX to address what it calls an “obvious” problem. It also says that “hybrid holders have been ignored for far too long, and the unresolved capital structure is jeopardising the entire business.”

    Andrew Price, PaperlinX executive director

    The paper merchant has undergone over a year of massive upheaval, with former shareholder activist and current executive director, Andrew Price (pictured), toppling former chairman, Harry Boon, after a months-long leadership challenge and securing a place on the board himself.

    Price has since spent several months in the UK, working to streamline PaperlinX’s British operations. Last year, the company sold off its businesses in the US, parts of Europe and South Africa in a bid to stem losses and raise capital for its restructure.

    While the company has since made moderate investments in Sweden and New Zealand to add to its increasingly diversified product portfolio, the company saw a fall in local paper volumes for the six months ending December 2012, and recorded A$-57.3 million statutory loss for the same period.

    PaperlinX’s share price has settled around the 0.05c mark since the beginning of July – where it sits at the time of writing – from a six-month high in February of 0.10c. Five years ago, the company’s share price stood at over $1.75.

    Despite the first half loss for the 2013 financial year, the company maintains it is on track to return to profit in the financial year ending 2014, following extensive restructuring efforts.

    The first of the two PIGS webinars will be held on 13 August 13, 2013, which is about a week before the scheduled release of PaperlinX’s full year results for 2013. The group says it will set the scene for what to look for in PaperlinX’s FY2013 results.

    The second, post-financial results webinar will be on 27 August, with the group saying it will review PaperlinX’s full year results for FY2013 and discuss what’s in store in 2013/14 for all PaperlinX stakeholders, not just the hybrid holders.

    According to PIGS, this review is important, because under ASX disclosure guidelines, the FY2013 earnings should not now be materially different from the FY2012 earnings (over 10-15% above or below) – if the result is materially different an announcement should have been made.

    PIGS says that this could indicate another significant loss and thus a further reduction in PaperlinX’s equity base. As at December 31, 2012, PaperlinX’s net equity was $374 million, of which $285 million (76%) has been contributed by the hybrid holders; compared with $639 million twelve months earlier (hybrids then contributed 45%).