About a year with the appeals process and extensions, so not going to happen near term. Bigger concern is them executing better operationally. If they did eventually get delisted there are some implications for preferred stock holders (higher penalty rate), but not something likely to happen neat term.
Disc: No position currently in the Mill issues.
I agree 100% Sam. It is foolish not to protect an industry this important to national security. Perhaps we would have avoided some costly mid-east wars if domestic production had been different.
Sam, I think that you were correct awhile back when you posted that the seller on the "D" was the NF buyer that took a portion of their payment in the "D". They were determined to be out of the "D" by the end of the year regardless of price. Now that they are out ,the issue rebounded even though fundamentals certainly have not improved for Mill since December. The Panick Report is tracking a few of these issue "preferred pair mispricings". If anyone wants to try 2 weeks of alerts at no cost, send yahoo mail to mrpanick.
Most of the time the common stock will rally first and the preferred issues will follow when a company has good news like positive well results. We also had buying in some other oversold energy preferred issues yesterday (despite oil trading lower). For example GDP-PD also rallied and the seller in ESCRP got taken out. The rally wasn't specific to the mill preferred issues, although they were among the best performers (perhaps because they were so oversold). The gap between mill-pd and mill-pc is starting to close as the Panick Report had been predicting. Another group of preferred issues with a weird "gap trade" is the SB pref issues. SB-PB is trading above par. SB-PC-PC is nearly identical and trading at 17.40. Another weird preferred stock "inefficiency" likely to correct that's being covered in the Panick Report.
Suppose the Japanese and the Koreans got together and decided that they were going to break Ford and GM by flooding the US market with low priced cars. They announced that as soon as they broke the US automakers using their govt deep pockets, they would then gouge the US consumer with high priced cars for many years to come. How fast would the president and congress move to protect the auto industry? Wouldn't even need to pass legislation. Just a couple of phone calls saying it would be under consideration would fix the problem rather quickly.
Just to be clear the Keybank borrowing base is now officially at 60 mil. However, I think it's already effectively at 40 mil based on the recent covenant changes to allow the Badami deal to close. Some of the analysts appear to still be using the 60 mil amount to calculate liquidity in their estimates - LOL. A "cut" to 40 mil would actually be maintaining the status quo.
Meanwhile ESCR (like Mill they are highly leveraged, unlike Mill the ESCR common rallied big yesterday) just got their 50 mil borrowing base reaffirmed in December. So ESCRP has a very high probability to pay the next couple of dividends. The borrowing base is based on factors such as reserves, cash flow and of course commodity prices. The risk to Mill is that given weak production and oil prices, KeyBank could take a hard line with them. My guess is that KeyBank will be cooperative.
For those trading the high yield preferred sector, send yahoo mail to mrpanick for latest copy of on the Panick Value Research Report. Lots of good opportunities in high yield lately in shipping & retail as well as energy.
I think it would make sense to sell some of the oil hedges since they are focusing on drilling for gas near term. The key event is really the upcoming January KeyBank loan redetermination. Geisler talked about selling hedges on the call, so he must think it's plausible. Mill is going to need to work with KeyBank and Apollo though. I took profits on my mill-pd trade a few days ago on the nice "January effect" pop. Waiting on the mill issues to see what happens with the KeyBank redetermination. I don't think many investors fully appreciate what a critical event that is for Mill. My feeling is that KeyBank will be cooperative and keep the borrowing base at around $40 mil (where they are currently drawn).
We are getting some nice cold weather down here in Delaware. I'm trading ESCRP which is almost a pure natural gas play. Mill is trying to move in that direction. Unlike mill, they already got their borrowing base reaffirmed. Geisler made it perfectly clear on the conf call that he wants to pay the preferred dividend. He can monetize hedges and do it assuming that KeyBank cooperates. Something to be said though for trading issues where the borrowing base issue has already been resolved.
The FDIC will never go after PR. If DRL fails then their assets (including the claim against PR) will be assumed by another bank. You are essentially correct though. The claim won't go away and PR will eventually lose one way or another.
Maybe the US should put a $10 tariff on imported oil. It would raise billions and protect the economy from dumping.
Thanks, I was using 125 shares before and switched to 100. Sorry for the inconsistency. 105 mill-pd + either 100 or 125 shares of Mill easily beats mill-pc. At current prices you could swap 100 mill-pc for 105 mill-pd + 125 mill so the conclusion is correct even if I was a bit inconsistent in the example. The bottom line is that anyone with mill-pc would be better off doing the swap.
Agree that I didn't consider the eventual switch to a floating rate issue. Also, there are a couple of other minor factors that could be considered. There may be minor covenant differences in how the issues are treated in a buyout at a low price where Mill (or the buyer) elects not to call the issues. Certainly haven't seen anything to justify the huge premium of the "C" to the "D". Anyone that owns the "C" and hasn't already swapped it for the "D" or perhaps the "D" plus some common (using my example) is leaving money on the table.
From the prospectus of the "D". It's equal in seniority to the "C":
The Series D Preferred Stock will rank, with respect to rights to the payment of dividends and the distribution of assets upon our liquidation, dissolution or winding up:
(A) senior to all classes or series of our common stock and to all other equity securities issued by us other than equity securities referred to in clauses (B) and (C) below;
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(B) junior to the Series B Preferred Stock and all equity securities we issue which do not have dividend rights and which have terms specifically providing that those equity securities rank senior to the Series D Preferred Stock with respect to rights to the distribution of our assets upon liquidation, dissolution or winding up (please see the section entitled “— Voting Rights” below);
(C) on parity with our Series C Preferred Stock and all other equity securities issued by us with terms specifically providing that those equity securities rank on parity with the Series D Preferred Stock with respect to rights to the distribution of our assets upon liquidation, dissolution or winding up; and
But Geisler bought mill-pc and paid a big premium for it. He probably didn't get to be CEO by being bad at math. Why would he do that? The CEO almost has to buy mill-pc. If he had bought mill-pd then people would say that he was showing a lack of confidence in his stock.
Suppose Geisler did buy some mill-pd also. Would we even know it? Probably not. Since mill-pd is not convertible, I don't think an SEC filing would be required (although they might do one anyway). The fact is that I don't think there is any scenario where 100 mill-pc shares beats 105 mill-pd shares plus 100 mill shares. So why are the issues out of whack? I think they will correct over time. Not everyone bothers to do the math. We've had a big seller in mill-pd and that's distorted the "correct" trading relationship.
People like the idea of buying a convertible issue where they get the dividend and a conversion option for "free". In this case it's far from free.
Here's a math challenge for anyone who thinks mill-pc is a better deal somehow than mill-pd at current prices. Suppose that for each 100 shares of mill-pc you bought 105 shares of mill-pd and 100 shares of mill common. At current prices you could do that with a few dollars leftover. You would earn a higher cash yield with 105 mill-pd than 100 mill-pc. The issues are equal in seniority. The mill-pd dividend can't be deferred unless the mill-pc dividend is. If the issues are called (not very likely, but what the heck) you'd get more cash from 105 shares of mill-pd being called than 100 shares of mill-pc being called and you'd still have the 100 share of mill common for "free".
But what about the conversion option? Mill-pc converts to 250 shares of mill. Is there any scenario where 250 shares of mill would be worth more than 105 shares of mill-pd plus 100 shares of mill? No. Best case for the mill-pc conversion is that mill goes to 13 (not likely, but that's the best case). Mill-pc gets forcibly converted to 250 shares of mill at 13 since the "call" option in the convertible is capped. So the 100 shares of mill-pc become 250 shares of mill at 13 worth $3,250. If mill went to 13 the company would be doing well and mill-pd would trade near par 25 without a conversion. In that case 105 mill-pd + 125 mill is worth 2625 + 1625 = 4,250. So even in the best possible case for mill-pc it still loses by a wide margin to a slightly less expensive bundle of mill and mill-pd.
The whole energy sector got crushed. FXENP is down about 15% and MILL-PC which I did NOT recommend is down over 60%. Mill had a far higher level of leverage as I pointed out. That's why it got crushed in the energy selloff. Sure FXENP is down also. Frankly I'd be hard pressed to find ANY energy sector preferred stock that wasn't down at least 15% during that period. The sad fact is that FXENP out performed the sector. Sometimes a good pick is buying something that loses less if the sector gets crushed.
If the FBI did such a high profile raid of a public company to investigate their vendors, it seems like a terrible abuse of power to me. Would they have raised FBP or BPOP like that for questions on their vendors?
I have a degree in physics and am very familiar with the Big Bang theory. While I'm also an atheist, the bottom line is that we really have no idea at this point what "caused" the big bang to happen.
Johara, I hate to tell you this but science pretty much also says that things were magically poofed into existence. It's called the "Big Bang Theory".