$7200/acre is about the average price of Ohio farmland. Surely Marcellus/Utica prospects are worth more than farmland. So this sounds like a distressed sale to me.
Overlooked in the focus on cheap steal prices, cheap boxes, etc., is a point that one of the TAL execs made on the conference call. Logistics is a very important aspect of the container business. Boxes can be bought cheaply, but the ability to position the boxes profitably is an equally important part of container leasing. The over-focus on the effects of cheap steel prices and the slowdown in Asia-Europe traffic probably account for most of the knee jerk reaction. If competitor boxes get stranded in far-away locations, a surplus of boxes won't mean much. Execution will produce winners and losers in this space, and I like TAL's savvy. They were smart enough to lock up long term leases in front of a cut-throat downturn and they are now well-positioned to wait for opportunities to pick off competitors that are in over their heads. TAL is a likely beneficiary of the current environment despite the stock price plummet.
The insurer only has to make the interest payments until the bonds mature. The insurers have years of room to maneuver.
PR is making its July 1 payments on GO bonds. Also, it made the final payments today to the banking syndicate from which it borrowed millions to get through the past year. Looks like there is some cash flow in the PR treasury.
Wall St. Journal estimates loss to AMBC on PR bonds at $4.9 bilion. That would be a nasty hit to AMBC's capital base, a reason it's been down today.
The lawyers are in it for themselves, not shareholders. They will make themselves a nuisance and then accept a settlement to go away. They get paid, shareholders get nothing from it, and the deal goes through.
At today's recent low of $3.65, there is a 1-year return of 15.7% before taxes and commissions. If the deal takes over 12 months to close, the gain is taxed long term instead of short term. NKA has no choice but to go forward with the deal, and major shareholders have agreed. So chances of a blow up are slim. I've started building a position at 3.65 as I think the potential 15.7% gain is a fair reward for taking on the risk of the deal collapsing.
June 15. In response to the Barron's et. al. article Credit Suisse maintains a $52 PT:
Contrary to the article, the valuation paradigm has not really changed. True, the
structure is corporate and as such will ultimately pay taxes (but not for about the
next 5 years or so), but like MLPs which we value on the cash flow, we value KMI
on the dividends it is likely to pay to its investors over the long term. We continue
to like the fact that unlike many companies that destroy capital and ask investors
to value them on earnings irrespective of how much cash they actually give back
to shareholders, KMI management continues to be oriented toward returning its
cash generated from operations to shareholders.
We don’t think Kinder Morgan's dividend growth endeavors will disappoint as is
contended in the article: As far as looking at free cash flow as a way of evaluating
Kinder's cash generation capability we disagree – it invests sizable amounts of
capital each year to grow its cash generating capabilities. And properly maintained, its asset mix of pipelines and
terminals should last well beyond accounting notions of useful lives. We don't
think dividend growth endeavors will disappoint and Kinder has over a decade of
delivering to prove it. Over the balance of the decade Kinder has to source
roughly $2-$2.5B in additional opportunities beyond its backlog to meet its
guidance. Given the size of its massive asset footprint and that it sourced $6B in
new opportunities last year alone, we believe the ~$10B in opportunities needed
to meet its outlook guidance appears reasonably likely.
The Debt Load Argument: What matters is not the absolute level but the ability to
service such debt load and we are confident that Kinder is adding the assets that
will provide the cash flow to do just that as it invests in assets with long
term contracts that are capable of delivering cash flow above KMI's cost of capital.
"Looking for other bidders" makes it harder to sue the Board for not getting enough for shareholders. Once the period ends, Board can say that it got the best price possible. Price may have to drop to $3.50 to compensate for the long wait if interest rates rise. NKA is now for patient investors.
I find over 200 bond issuances for Chicago guaranteed by AMBAC. They seem to be carrying Chicago bonds on their books as an investment grade credit. If you poke around on AMBAC's website, you'll eventually get to a database of bonds it guarantees, but to get there you have to agree not to post from the database. Under "Financial Information" go to "Insured Exposure" and follow onwards. I found about 80 exposures to Illinois bonds.
It's another step in making the company's capital structure simpler. If KMI is going to pay $2.00/share or more in dividends, then it pencils out over the long term to retire the warrants. If someone exercises a warrant, KMI receives $40 cash and issues a share, to which it must then pay the quarterly dividends. Retiring the warrants today at $3 or less avoids share dilution and pays for itself in 18 months if one assumes that the warrants would otherwise be exercised for the dividends. It also signals that KMI doesn't want to raise capital at $40/share; it thinks an equity issuance should be at a higher price.
That's 100,000 more reasons in the boardroom to increase the dividend.