Bombardier ran out of money

There is no way to explain Bombardier selling out a 50.01% stake of its C-series jet (leaving it with a minority 31% stake, with the Government of Quebec with a 19% interest) to Airbus for zero other than the simple fact that they ran out of money. They couldn’t keep things going for a few more years while all of the trade dispute issues played out.

With airbus fully incentivized to starting marketing the C-Series (and acquiring most of any industrial secrets contained within the aircraft design), they will be better positioned than Bombardier was with respect to the upcoming Boeing trade dispute (which will be a multi-year bloody battle, especially since Boeing has the full support of the US Government). One question internally for Airbus is how they will reconcile selling Airbus 319’s instead of CS300’s with this arrangement. Or are they just doing this to shut down the aircraft entirely?

The key paragraph is:

At closing, there will be no cash contribution by any of the partners, nor will CSALP assume any financial debt. It also contemplates that Bombardier will continue with its current funding plan of CSALP and will fund, if required, the cash shortfalls of CSALP during the first year following the closing up to a maximum amount of US$350 million, and during the second and third years following the closing up to a maximum aggregate amount of US$350 million over both years, in consideration for non-voting participating shares of CSALP with cumulative annual dividends of 2%, with any excess shortfall during such periods to be shared proportionately amongst Class A shareholders.

So Bombardier’s downside is US$700 million over the next couple years.

Long term, assuming this isn’t an agreement by Airbus to effectively shut down the C-series program, this should bode well for the C-Series program, which should remain in Canada and will have a more powerful marketing partner, but this is a negative for any upside to Bombardier – the promise of a wildly profitable commercial jet program will have now shrunk down to a 31% stake.

If I was going to use an analogy here, it is “Would you like 31% of something, or 100% of nothing?”. Bombardier seems to have taken the first option.

Bombardier has plenty of other cash-positive business units (Transportation and smaller-scale aircraft) that will be bringing in cash flows, but most of the upside in the business (via the promise of significant C-Series jet revenues) is gone.

I continue to hold a much-diminished stake of BBD.PR.C and BBD.PR.D shares, of which I am tepid on valuation and still do not see any imminent (I added in this word a couple hours after making this post!) dividend risk despite this deal.

Yellow Media – Senior Secured notes debt re-financing

Yellow Media (TSX: Y) managed to refinance its 9.25% senior secured notes due November 30, 2018 to November 1, 2022. According to the press release, the new notes are priced at 98 cents on the dollar and will give out a 10% coupon. This works out to roughly a 10.6% effective yield (assuming payout at maturity of par value).

The original senior secured notes had a payment provision where the company had give out a large percentage of its free cash flow to redeem the notes at par. It is not known whether that covenant will be in place for the new notes issuance.

My question is – why are the unsecured debentures (TSX: YPG.DB) (due November 30, 2022 and about $107 million principal value) trading at a value that is comparable to the 10.6% yield of the newly issued senior secured notes? The conversion option at $19.07/share is over double out-of-the-money and these holders don’t have security. It would seem to me that the unsecured debentures should be trading lower.

Q3-2017 Performance Report

Portfolio Performance

My very unaudited portfolio performance in the third quarter of 2017, the three months ended September 30, 2017 is approximately +4.2%. The year-to-date performance for the 9 months ended September 30, 2017 is +24.2%.

My 11 year, 9 month compounded annual growth rate performance is +18.2% per year.

(2017 performance figures may change very slightly mid-October once they are officially confirmed with September statements when published – when they are processed I will remove this notification)

Portfolio Percentages

At September 30, 2017 (change from Q2-2017):

20% common equities (+0%)
26% preferred share equities (-2%)
30% corporate debt (-1%)
0% net equity options (-4%)
25% cash and cash equivalents (+7%)

Percentages may not add to 100% due to rounding.

USD exposure: 48% (-4%)

Portfolio is valued in CAD (CAD/USD 0.8019);
Other values derived per account statements.

Portfolio commentary

This was mostly an inactive quarter other than cashing in the remnants of KCG and making a minor debt acquisition purchase (this is net of the KCG debt redemption which also occurred during the quarter). The largest movement was not of my own action, but rather the appreciation in the Canadian dollar – going up from 77 cents to 80 cents on the dollar was a 2% drag on portfolio performance this quarter.

The portfolio was in line with the performance of the S&P 500 and TSX. I am somewhat disturbed by this “rising tide lifting all boats” market environment.

Also a minor unforced error on my part is putting idle Canadian cash into the short-term VSB.TO instrument in a very ill-timed trade over the past few months. This has been a minor, minor drag on performance (less than 10 basis points on the overall portfolio), but it should be a painful reminder to me that even the most safest of short duration yields can still contain price risk.

A minor error of omission is that I was planning on deploying a significant amount of cash on a particular US insurance firm as a result of mild panic trading from Hurricane Irma, but sadly it did not depreciate to my desired price level. This would have been an “invest and forget” type investment as I believe its management is top-notch and their capital management applications have equally been as such. I did actually own shares of this company more than five years ago.

I am happy, however, to sit on cash until I can figure out where to deploy it. My research pipeline is still relatively dry. Indeed, I have been investigating more on the short sale side of things than long.

Outlook

I’ve been examining the rise of the Canadian dollar and it is difficult for me to figure out. I’m generally of the impression that things will stall out at present levels (maybe up to 85 cents or so just strictly on technical momentum) simply because I do not see where foreign demand for Canadian dollars can come into play when we are simply not in a position to competitively facilitate exports of primary industry commodities. Almost every relevant government in this country is hostile to natural resource production and this leaves urban real estate as the other primary export. My policy to keep a range between 30-70% CAD/USD balance is still the most prudent course of action given my completely lack of investment edge on the currency situation or the lack of compelling alternatives in either currency.

I note with mild amusement that marijuana seems to be a hot sector again, with Canopy Growth (TSX: WEED) jumping over $10/share again during the quarter. Although I will not short them, I most certainly will not go long on them either. I find it incredibly fascinating how a commodity industry that will be controlled like liquor distribution could command a market value as if they were like the Microsoft of the marijuana industry (Microsoft earning monopoly-like margins on sales in their hay-day). It will not work this way for marijuana. Take a look at a miserable liquor store retailer like Liquor Stores (TSX: LIQ) for what the end-game of these companies are – even though WEED is involved in the production part of the value chain, most of the value is going to get extracted out from the regulatory protection aspects of marijuana distribution (in other words – taxes for money-hungry governments, paid for by both the consumer and companies alike). WEED’s insiders will make a fortune and should be commended for this, but third party investors will (pun definitely intended) go up in smoke.

I’ve also been eyeing what this year’s tax selloffs are going to be as this usually provides for a ripe picking ground for stocks that are force-sold in already weak conditions. There are two sector candidates for this type of action: retail and fossil fuel production.

Retail is getting annihilated by Amazon. I am contemplating whether there will be any traditional retail winners after retail’s transformation into a winner-take-all situation. I am barely seeing enough evidence that Walmart is getting its act together and should survive in some form, but I also question whether the space is big enough for Target to compete in as well. Smaller retailers are most certainly doomed unless if they specialize in a niche that cannot be commoditized by clicking or otherwise require an “in-person” presence to conduct. Has Sleep Country (TSX: ZZZ) peaked last July?

Fossil fuel companies deserve a bit of examination. Although they have spent the year in perpetual decline (the rise in the Canadian dollar has not helped them any, nor is the fact that getting oil to market has been severely hampered by government regulation), they are deserving of another examination. Crude demand, despite the media thinking that electric vehicles will make fossil fuel demand in terminal decline, is increasing and capital expenditure budgets will lag in the existing price environment. Eventually there will be a point where that supply-demand balance will tip – when this will be is anybody’s guess. There’s been somewhat of a revival in share prices in September, which obviously is some sector rotation going on with large funds.

In terms of expected future performance, if the quarter proceeds to fruition, I am expecting a 2% or so quarterly performance in the fourth quarter. Ideally, however, some sort of market crisis will hit and prices will go lower again. I’m not holding my breath – there’s just too much cash still sloshing around, looking to scrape a yield above the risk-free rate. As a result, the opportunity to make outsized gains is not in the current market environment.

Portfolio - Q3-2017 - Historical Performance

Performance and TSX Composite is measured in CAD$; S&P 500 is measured in US$. Total returns indices are with dividends reinvested at time of receipt.
YearDivestor PortfolioS&P 500 (Price Return)S&P 500
(Total Return)
TSX Comp. (Price Return)TSX Comp.
(Total Return)
11.75 Years (CAGR):+18.2%+6.2%+8.4%+2.8%+5.7%
2006+3.0%+13.6%+15.6%+14.5%+17.3%
2007+11.7%+3.5%+5.5%+7.2%+9.8%
2008-9.2%-38.5%-36.6%-35.0%-33.0%
2009+104.2%+23.5%+25.9%+30.7%+35.1%
2010+28.0%+12.8%+14.8%+14.5%+17.6%
2011-13.4%+0.0%+2.1%-11.1%-8.7%
2012+2.0%+13.4%+15.9%+4.0%+7.2%
2013+52.9%+29.6%+32.2%+9.6%+13.0%
2014-7.7%+11.4%+13.5%+7.4%+10.6%
2015+9.8%-0.7%+1.3%-11.1%-8.3%
2016+53.6%+9.5%+12.0%+17.5%+20.4%
Q1-2017+18.6%+5.5%+6.1%+1.7%+2.2%
Q2-2017+0.6%+2.6%+3.1%-2.4%-1.6%
Q3-2017+4.2%+4.0%+4.5%+3.0%+3.5%

Genworth MI buying shares again

Genworth MI (TSX: MIC) filed with SEDI last week that they executed a share buyback in the month of August, purchasing approximately 913,000 shares at roughly CAD$36/share. This is nearly 1% of their shares outstanding. In light of the fact that they were making rumblings in filings a year ago with respect to the adverse consequences of increasing capital requirements with respect to the OSFI policy changes, this is most definitely a signal that they are now in an excess capital situation. The share buyback is at a discount of 13% to book value, so management cannot be accused of wasting value with this purchase (a rare characteristic that I very rarely seem managements of other companies perform when they conduct share buybacks).

Finally, Genworth MI traditionally increases its quarterly dividend rate in the third quarter announcement or announces a special dividend. The current regular quarterly dividend is likely to increase from 44 cents a share to around 47 or 48 cents. Management has a good track record of prioritizing buybacks when the share price is depressed to book or giving out special dividends when the share price is relatively high – I do not view a special dividend as being likely. Although my Genworth MI position is smaller than it used to be in the portfolio, it is a significant equity holding of mine and I see no reason to sell at this juncture, in absence of other opportunities.

Toys R’ Us – Looking back

Earlier in April, I said I was going to avoid Toys R’ Us unsecured debt. It was trading around 97 cents on the dollar at that time.

I looked at my quote screen today for lesser-attention securities and noticed they (October 2018 unsecured debt) was trading at around 56 cents on the dollar on reports that on September 6th, they decided to engage a bankruptcy firm to explore options. The bonds went down from 97 cents to 78 cents in a day, and they’ve straight-lined to their present trading price (53 cents and dropping as I write this) a week later.

I ask myself from the perspective of credit analysis – is there any hope for unsecured holders? The easy answer here is going to be no – I count at least $3.5 billion that is either “secured” or asset/real estate based loans out of a total of $5.2 billion in debt. Although their credit facility is about half-tapped (i.e. they’ve got time to structure a restructuring), I find it unlikely that they’re going to wait around until October 2018 and pay off that particular unsecured issue. The advantage of going into Chapter 11 prematurely is simple – they can offer the unsecured creditors (lease landlords, etc.) an unfavourable “take it or leave it” type deal (see yesterday’s post on Seadrill), be able to shed their high-cost items (including conversion of their unsecured debt into a token amount of equity) and move on with life.

There is one reason, however, why this may not happen:

Although Toys R’ Us equity is not traded on an exchange, it is a publicly reporting entity. Bain Capital owns 32.5% of the corporation. Are they willing to give up this equity? I’m guessing their own private valuation of the entire firm is small in relation to the amount of debt that would have to be paid back (if Bain wishes to keep control).

Also if Bain controls most of the secured debt, their interests lie with Chapter 11 instead of keeping control of the firm (via their 32.5% equity stake).

I find this one difficult to judge, but I would weigh on the side of a restructuring that will involve a material impairment of value to unsecured bondholders. There’s just simply too much secured debt and I do not think they will hold Chapter 11 back a year and a month just to pay the US$208 million that’s due with this specific obligation (there are too many others that will be due as well). This is especially true considering the overall entity is not producing a lot of cash.

All in all, I’m glad I avoided this instead of reaching for yield and getting burnt (which would be the only explanation why somebody would have invested in Toys R’ Us unsecured debt in the first place).

Seadrill Chapter 11 details

Seadrill, a publicly traded company that does offshore oil drilling, filed a Chapter 11 arrangement. The salient terms of the pre-packaged deal are:

The chapter 11 plan of reorganization contemplated by the RSA provides the following distributions, assuming general unsecured creditors accept the plan:

• purchasers of the new secured notes will receive 57.5% of the new Seadrill equity, subject to dilution by the primary structuring fee and an employee incentive plan;
• purchasers of the new Seadrill equity will receive 25% of the new Seadrill equity, subject to dilution by the primary structuring fee and an employee incentive plan;
• general unsecured creditors of Seadrill, NADL, and Sevan, which includes Seadrill and NADL bondholders, will receive their pro rata share of 15% of the new Seadrill common stock, subject to dilution by the primary structuring fee and an employee incentive plan, plus certain eligible unsecured creditors will receive the right to participate pro rata in $85 million of the new secured notes and $25 million of the new equity, provided that general unsecured creditors vote to accept the plan; and
• holders of Seadrill common stock will receive 2% of the new Seadrill equity, subject to dilution by the primary structuring fee and an employee incentive plan, provided that general unsecured creditors vote to accept the plan.

This is one of those strange instances where the common stock was trading like something terrible was going to happen, but in relation to its closing price Monday, they received a relatively good “reward” out of this process, 2% of the company (compared to zero if creditors take this to court).

The question is whether the unsecured debtholders will agree to this arrangement – my paper napkin calculation suggests that bondholders will get about 10 cents on the dollar (probably less after the “subject to dilution” is factored in) compared to the trading around the 25 cent level before this announcement.

Their alternative is that if they vote against the deal, the secured creditors will receive everything.

Please read the Pirate Game for how this will turn out and also a lesson on why being an mid-tier creditor in a Chapter 11 arrangement that requires all capital structures to vote in favour of the agreement can be hazardous to your financial health.

I will also note that Teekay Offshore effectively went through a recapitalization, and this leaves Transocean and Diamond Offshore that both in relatively good standing financially.

Want to make a few pennies? Temple Hotels Debentures

This is a bet on the confidence of your fellow investors to vote against a bad deal.

Temple Hotels (TSX: TPH) is a borderline-profitable hotel operating company. Financially they are in miserable condition. They have mortgages that are in covenant default, loads of debt and other issues (being in the wrong geography at the wrong time).

For whatever reason (still can’t figure it out today), on December 2015 Morguard Corporation (TSX: MRC) decided to take them over (via control of the asset management agreement) and recapitalize the corporation with equity capital through a rights offering. They used the funds ($50 million) primarily to retire about $60 million in convertible debentures in cash. Morguard owns about 56% of Temple’s stock.

Temple still has about $80 million in convertibles outstanding (TPH.DB.E, TPH.DB.F), and $45 million of it is about to mature on September 30, 2017. Yes, that’s in about three weeks.

Looking at their June 30 balance sheet, they have $14 million in cash and the Morguard parent would need to pay up. (I’ll note at this point the busy Canadian summer hotel season will produce about $7 million in operating cash flow, but this is not including mortgage principal payments and maintenance capital expenditures which would bring this figure down a little).

Management, therefore, is floating a proposal to extend the maturity of the debentures 3 years to September 2020. The terms are to keep the interest rate the same (7.25%), decrease the conversion price to something astronomically high ($40.08/share) to something very high ($15/share, or something that’d need to more than triple in order to get at-the-money) and do a 5% redemption at par at the end of the month.

In other words, they are offering nearly zero incentive for debenture holders to extend.

Indeed, management is continuing a practice that the Securities Act should ban, which is the payment to third-party dealers to solicit YES votes in proxies:

Subject to certain terms and conditions described elsewhere in this Circular, the Corporation will pay a solicitation fee equal to $7.00 per $1,000 principal amount of Debentures that are voted FOR the Debenture Amendments, payable to the soliciting dealer who solicits such proxy or voting instruction voted FOR the Debenture Amendments, subject to a minimum fee of $150.00 and a maximum fee of $1,500.00 per beneficial owner of Debentures who votes Debentures with principal value of $10,000 or greater FOR the Debenture Amendments. No solicitation fees will be paid to the soliciting dealers if the Debenture Amendments are not approved by the Debentureholders at the Debentureholder Meeting.

Insiders own 2.49% of the debentures. The vote requires 2/3rds of those voting to pass and a minimum quorum of 25% (which should be attained).

So this becomes a test of whether your fellow debtholders are stupid enough to vote in favour of this agreement or not, and also a function of whether you believe Morguard will back up Temple in the event that this proposal fails. You would think Morguard would provide some debt credit to Temple because otherwise why dump the tens of millions of dollars into the corporation and just have it get thrown away with a CCAA arrangement at this stage? Or have they decided that the salvage operation they are currently conducting is negative value and basically want to throw away this asset?

Since the TPH.DB.E series is trading at 96.5 cents on the dollar, it means that if you bought $1,000 par value you’d be looking at a 3.6% gain in three weeks if the proposal is rejected (it is too late for management to exercise the share conversion option) AND that Morguard gives capital into Temple to pay off the subordinated debt (nobody else would be sane enough to do it without ridiculous concessions).

The risk/reward is isn’t high enough for me to take the risk but I’m floating this one out here for the reader if you are!

Will Hurricane Irma cause insurers to drop?

Hurricane Irma is looking like it will blast a path through most of Florida in just over two days:

The media is making it look like that it will be apocalyptic. Indeed, the island St. Martin (famous for having an airport where you can sit on a beach and look up about 100 feet and see a landing Boeing 777 jet) was nearly annihilated. Right now Irma is one of the strongest (if not the strongest) in recorded history, but the question is where it will strike landfall in Florida (if there) and how much it will dissipate by that point – 75 miles can make a material difference in the damage calculation. If it goes through the heart of Miami, there will be tons of damage, but if goes through the western part of the peninsula, there’s a decent chance that the winds will slow down sufficiently by Tampa to still cause a lot of damage, but not the insane amounts the media is making it to be.

Thus while the media hype is overwhelming, the markets are treating certain insurers like the catastrophe is already a done deal, which may not be the case.

This is the classic information mismatch that creates market opportunity.

Canadian interest rates – probably level from here

The Bank of Canada “surprised” the market by increasing rates by a quarter point.

What I am feeling very regretful about is about a month ago I thought they were going to do it, but the BAX futures were assigning a rough 20%-25% probability of them doing it. I should have dipped my toes in there.

Readers of history (and it really feels like history since it happened such a long time ago) will recall that the last time they raised interest rates (from 0.25% to 1.00%) they did it in three consecutive meetings with three 0.25% rate increases.

The Bank of Canada clearly had a target in mind and contrary to what the talking heads on the media have to say about the matter, I think they will hold at 1% for the intermediate term. There are a couple reasons for this, but one is that their original policy stance to stay at 1% (before they dropped to half a point) is that the Bank of Canada has accumulated considerable research that ultra-low policy rates create their own risks by virtue of being so low. There seems to be “mean reversion” to this. The other is that the inflationary threat does not appear to be forthcoming at present, especially now that the Canadian export economy will be dampened by the increased Canadian dollar.

There is also the matter of bringing the short term rates up to a point where the spread between the short-term and 10-year bond will converge to nothing. The federal reserve is going to run into the same problem when their central bankers will be asking themselves a correlation/causation question of whether an inverted yield curve is a predictor of a recession, or whether an inverted yield curve causes one.

Markets are predicting a 70-75% chance that the Bank of Canada will raise rates by the end of the year. If this goes to 80% or higher I’ll probably take a bet against rate increases.

This brings me to my next point, which is the Canadian dollar. It has risen dramatically over the past three months.

In fact, the rise in the Canadian dollar has been my biggest portfolio “miss” over this time – it has generated a lot of paper bleeding since I keep my portfolio balanced between CAD/USD. The Canadian dollar has gone up 6.5% from July 1st of this year, and it has represented a 3.2% drag on performance quarter-to-date. My gut instinct says to increase my own position of USD but I am still reluctant to do so since the momentum of the Canadian dollar feels like it is stepping in front of a freight train. There is probably a logical point to do so (around 85 cents if it gets there?) but it is something I am acutely looking at.

An increase in my USD positioning will mean that my research will be more US dollar-focused. I have been focused on Canadian securities for a considerable period of time, but considering what bland opportunities I have found in domestic markets, it is probably a better for me to set my sights south for investment candidates.

TSX Bargain Hunting – Stock Screen Results

I’ve been doing some shotgun approaches to seeing what’s been trashed in the Canadian equity markets. Here is a sample screen:

1. Down between 99% to 50% in the past year;
2. Market cap of at least $50 million (want to exclude the true trash of the trash with this screen)
3. Minimum revenues of $10 million (this will exclude most biotech blowups that discover their only Phase 3 clinical candidate is the world’s most expensive placebo)

We don’t get a lot. Here’s the list:

September 1, 2017 TSX - Underperformers

1-Year performance -99% to -50%
Minimum Market Cap $50M
Minimum Revenues $10M
#CompanySymbolYTD (%)1 Year (%)3 Year (%)5 Year (%)
1Aimia Inc.AIM-T-74.89-72.74-86.9-84.6
2Aralez Pharmaceuticals Inc.ARZ-T-73.77-76.19-56.6
3Asanko Gold Inc.AKG-T-62.86-71.4-38.8-58.1
4Black Diamond GroupBDI-T-58.41-56.78-93.7-91.4
5Cardinal Energy Ltd.CJ-T-60.91-51.8-79.7
6Concordia InternationalCXR-T-42.81-85.24-95.6-69.2
7Crescent Point EnergyCPG-T-53.04-56.72-80.8-79.1
8Dundee Corp.DC.A-T-51.6-51.76-84.7-87.4
9Electrovaya Inc.EFL-T-42.72-61.8822201.2
10Home Capital GroupHCG-T-55.42-52.16-74.3-45.2
11Jaguar MiningJAG-T-54.31-62.14-55.8-99.7
12Mandalay Resources CorpMND-T-53.75-66.36-65.7-52.6
13Newalta CorpNAL-T-56.9-59.68-95.5-92.7
14Painted Pony EnergyPONY-T-64.97-60.94-77.4-65.9
15Pengrowth EnergyPGF-T-60.62-59.57-88.9-88.6
16Redknee SolutionsRKN-T-51.92-64.95-78.2-41.4
17Tahoe ResourcesTHO-T-53.04-66.27-78.2-66.9
18Valeant Pharmaceuticals Intl.VRX-T-15.25-56.68-87.4-67.3
19Western Energy ServicesWRG-T-61.61-55.09-88.6-82.7

Now we try to find some explanations why this group of companies are so badly underperforming – is the price action warranted?

1, 8, 10 and 18 are companies with well-known issues that have either been explored on this site or obvious elsewhere (e.g. Valeant).

2 is interesting – they clearly are bleeding cash selling drugs, they have a serious amount of long-term debt, but they have received a favorable ruling in a patent lawsuit against (a much deeper-pocketed) Mylan. There could be value here, and will dump this into the more detailed research bin.

3, 11, 12 and 17 Are avoids for reasons I won’t get into here that relate to the typical issues that concern most Canadian-incorporated companies operating foreign gold mines, although 12 appears to be better than 3 and 11. 17 has had huge issues with the foreign government not allowing them to operate their primary silver mine.

4, 13 and 19 are fossil fuel service companies.

5, 7, 14 and 15 are established fossil fuel extraction companies with their own unique issues in terms of financing, profitability and solvency – if you ever predicted a rise in crude oil pricing, a rising tide will lift all boats, but they will lift some more than others (specifically those that are on the brink will rise more than those that are not). 14 is different than the other three in that it is mostly natural gas revenue-based (northeast BC) which makes it slightly different than the other three which warrants attention.

6 If you could take a company that clearly makes a lot of money, and drown it in long-term debt, this would be your most prime example. It just so happens they sell pharmaceuticals. Sadly their debt isn’t publicly traded but if it was, I’d be interested in seeing quotations.

9 A cash-starved company selling a novel lithium-ceramic battery at negative gross margins would explain the price drop. Looks like dilution forever!

16 Lots of financial drama here in this technology company. They went through a debt recapitalization where a prior takeover was interrupted by a superior bid. Control was virtually given at this point and the new acquirer is using the company for strategic purposes that do not seem to be in line with minority shareholder interests. A rights offering has been recently conducted that will bring some cash back into the balance sheet, but the underlying issue is that the financials suggest that they aren’t making money, which would be desirable for all involved.