Gotta love the shorts giving my posts the thumbs down. They doth protest too much. Think I really hit a nerve - LOL.
The first rue of shorting, is that you are not supposed to talk about shorting. No doubt the borrow rates for MILL-PD and MILL-PC must be astronomical. Shorts all piled into that trade and coming on the message boards to taunt Geisler. No position in the MILL pref issues. GDPAN, ENRJ-P and SDRXP are better values, but I sure am rooting for Geisler to lower the boom on a few obnoxious shorts (no need to even name them) here. Maybe Geisler will pay the divvy and then sell shares to the shorts when they cover at 15 after paying the divvy and the borrow rate. Would be fun to watch.
Geisler already sounds a little #$%$ off on the conference calls. I just don't think that it's been wise for the shorts to keep taunting him here. The guy does have a few connections to pull off a midstream deal and they may have provided him with some extra motivation - LOL.
No company is going to disclose in advance what companies they might be interested in acquiring. Gran Tierra says they are interested in more Putumayo expansion. Vetra is out partner in Putumayo and lost a bidding war for Suroco with Petroamerica. Parex is our operating partner at Las Maracas and some other properties. Those would be 3 at the top of my list.
I've been negative on the MILL preferred issues lately in the Panick Report since the requirement to raise 10 mil was disclosed (no position in the MILL issues personally). I say 2/3 chance they defer the next dividend and 1/3 they pay it. Shorts are way too comfortable here though. Geisler may just be crazy enough to pay it and flirt with the loan covenant violations. Any other CEO and I would say 90% chance of deferral. Given all the shorting, the preferred could pop to 15 if it they surprise people and pay it. I wouldn't own it, but would want to be short either.
Aside from the big gains on the MILL pref issues, there were some nice gains on other issues like GDPAN and ENRJ-P. Look for my GDPAN / GDP Bonds Seeking Alpha article out shortly. Article also coming out this week on ENRJ-P.
Disc: Long ENRJ-P, GDPAN and GDP bonds. No position in the MILL issues, but enjoying watching the shorts squirm while they pay huge borrow fees on MILL-PC and MILL-PD . Heard from someone who had MILL-PC in an IB account and was collecting the 40% fee for loaning out the shares. Could be a triple disaster for the shorts if Geisler lowers the boom and pays the divvy. Capital loss, huge borrow fee and pay the dividend. That's gotta hurt - LOL.
If you read the actual filings (must be a lost art - LOL), they hired a new CFO. He was granted 300K shares at no cost. The grant vests 50% immediately and 50% in a year. It's good news that they hired a new CFO with some experience in doing midstream spinoffs. I wouldn't get too excited though about his routine grant of some free shares. Wouldn't call that an insider "buy".
I agree and picked up a few shares of MILL-PD as a short term trade. The odds of them paying the May dividend increased with the new CFO. The shorts are too heavy in the preferred shares and things could go either way. Could be a nasty squeeze if Geisler takes some of the abuse he has taken from the shorts here personally and pays the dividend.
GDPAN is still a much better value even with the nice run last week. The big move in ENRJ-P last week shows how much these issues can move when they surprise the market positively. SDRXP is a much better value at 40 cents on the dollar and the dividend being paid in shares of SD (which takes deferral off the table). Still it would be fun to see if Geisler is going to fight back here instead of just rolling over as the shorts expect.
One item that stands out from the call is that their wastewater capacity is doubling with new disposal wells coming online. Is any other company moving wastewater from a central terminal to disposal wells by pipeline and barging wastewater to that terminal? GRH is definitely a pioneer and is going to be the low cost disposal supplier.
So Apollo is "nurturing them back to health" by charging them 15% interest? In the old days doctors used to bleed patients. Maybe Dr. Apollo is using the same quack medicine. Global Hunter's mission is to find a way for MILL to get rid of Apollo. None of the MILL issues are going anywhere until that happens.
There is also holding company debt ahead of the preferred stock, not to mention the 750 mil that in "expenses" that the FDIC is claiming. Preferred appears worthless to me.
The tax case is moot for shareholders at this point. Even if the holding company retains the tax case against PR (which I think they do) and eventually wins on appeal for 250 mil, there are still debt holders and an FDIC lien for 750 mil in "expenses" ahead of equity holders.
In my experience it's hard to bet on left wing politicians to do the correct thing unless they absolutely have to. The socialists in Greece didn't change their tune until they were days from a bank liquidity crisis. Most PR taxpayers / voters will never connect the dots and understand why their local economy is in such dire shape. Look at many US urban cesspools (Detroit for example) that keep electing the same party with the same policies that have failed for many decades.
A US mainland asset sale is more likely if they are going to pull off a miracle. Maybe they can sell a portion of the judgement against PR to a 3rd party at a discount. I'm long a few shares of the preferred just in case they pull it off, although they probably won't.
Also MILL is not the only company in the world that can sell natural gas at favorable rates, so it's tough to argue that's sufficient reason to own the MILL issues. For example, other companies such as TAT, TAOIF, FXEN and EWPMF (upon completion of pipeline in May) can also sell natural gas at very favorable prices.
I agree that the company is not doing well. If they don't defer the next preferred dividend, they probably will defer the one after that. No position here, but just saying that it wouldn't shock me if Geisler dug deep and paid the dividend even though he probably shouldn't.
I think they need to defer the preferred dividend and try to get most of the preferred holders to swap for common. That seems like the best way to cleanup the balance sheet somewhat. If they can get that done and execute better on the gas wells they might ride this out. Even so it's hard to get excited about MILL when companies like PTAXF, TAOIF and EWPMF are selling at around 1X operating cash flow with the whole sector so depressed.
They need to defer the preferred dividends and try to get most preferred holders to swap for shares of common while reverse splitting the common. Not saying it's a great solution, but it might help. Common is buried under the preferred overhang even if they can execute better.
Disc: No position in the mill issues.
Apollo fouled up by insisting on overly restrictive covenants. It hurts Apollo's position when the MILL common and preferred get crushed (as they did) due to the capital raise covenant. Some of the MILL creditors would do well to realize that they would be better off if the company had some breathing room. There are still better alternatives out there than the MILL common or preferred issues, but betting against (and taunting) Geisler on MILL-PD might not have been the smartest move for the shorts. Fundamentals are bad, but Geisler could still dish out some serious punishment to the shorts here. Geisler has his personal reputation on the line here and based on his bio I think he may still have a few friends willing to participate in a midstream deal. No position, but I'm no fan of the shorts and really would enjoy watching Geisler dish out some serious punishment here.