Friday, July 19, 2013

PineTree Capital's Debt In Free Fall, Now Cheap

Canadian investment firm Pinetree Capital (PNPFF.PK) has been a destroyer of capital over the last few years. Consider the following chart depicting the company's Net Asset Value (NAV) over the last decade: Read more...

13 comments:

Anonymous said...

Good analysis. I checked the relevant SEDAR filings and it looks like a good value investment.

However, these debentures cannot be traded by a US person as shown here - http://www.pinetreecapital.com/investors/news_releases/index.php?&content_id=467

Don't understand why they are not allowed in US?

Saj Karsan said...

Thanks, Anon.

Yeah I don't know why that is. I haven't seen that before.

Chris of Stumptown said...

Hi Saj

Are you shifting the full posts off to Seekingalpha only? If so will I eventually need an account there or will it be viewable to non subscribers as well?

Saj Karsan said...

Hi Chris,

Only occasionally. Is this one not viewable for you? It should be viewable for 30 days at SA without requiring an account.

Ces said...

Nice find, Saj.

In reading the indenture, I wondered about the implications of clauses 4.6 and 4.10 (the right to repay redemption principal amount in common shares, and the right to repay principal amount and accrued interest in common shares, respectively). Are you concerned at all by these clauses or are these pretty standard in convertible debentures?

What reading would you recommend for learning more about convertible debentures, debt value plays, and how to dig for these in Canada and the US?

Saj Karsan said...

Hi Ces,

I'm somewhat concerned, but not so much in this situation. There is no other debt, so any repayment in shares just shifts the capital structure around, and therefore makes the common safer. Also, it must be done at 95% of the common share price, and so management would get diluted if they chose this option, particularly at current prices.

I don't know of any sources for learning about debt specifically in Canada, but one useful general book on debt I've read is this one.

Chris of Stumptown said...

Hi Saj,

The content is available to me. And if you make some money off the deal, good for you. I hope you do.

It's just that SA has always struck me as rather pushy or aggressive and so I have avoided them.

The question I have is more general: whether this move presages bigger changes on your blog.

Saj Karsan said...

Hi Chris,

I've posted some exclusive content on SA for years now, and you can expect that to continue. I will always link to it from this site though.

HeresyValue said...

Hi Saj, great idea.

Are you aware of any screeners/resource tools/lists for TMX debentures? I can't seem to find any way to find information on debentures in aggregate in order to filter them down to the things which are interesting.

Saj Karsan said...

Unfortunately, no

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Anonymous said...

Hey Saj, any thoughts on revisiting the PNP.DB. There are less outstanding now at $54m than last year and there are more "assets" backing them than last year based on the NAV yet they are trading where they were last year when they breached the covenant. They are not in violation yet of the convenant but that might happen by the end of October if this pace of selling keeps up!

Saj Karsan said...

Hi Anon,

For me the thesis of this one remains intact. Whether they breach or not, I expect them to be able to repay. I enjoy the high coupon payments in the meantime.

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