The three-year chart of this company is self-explanatory:
If you ever wanted to own a huge stake in a soon-to-be delisted publicly traded company, now is your opportunity – put in a bid of a penny and see how many of the 14,971,799 shares outstanding you can capture before you have to take a zero!
Earlier this week, Fortress (TSX: FGE) announced:
VANCOUVER, Dec. 10, 2019 /CNW/ – Fortress Global Enterprises Inc. (“Fortress” or the “Company”) (TSX: FGE) (OTCQX: FTPLF) announces that it has failed to receive any indications of interest pursuant to its previously announced strategic and financing initiative (the “Strategic Initiative”) by the required deadline under the financing agreement (the “Financing Agreement”) entered into among the Company’s wholly owned subsidiaries, Fortress Specialty Cellulose Inc. and Fortress Bioenergy Ltd., and their secured lenders or their affiliates (together, the “Lenders”). Failure to meet a material deadline under the Strategic Initiative when required constitutes an event of default pursuant to the terms of the Financing Agreement.
With $208 million in debt outstanding (and this debt being accelerated due to covenant breaches), and the operations being cash negative due to the pulp industry, it does not look good at all.
$62 million of the debt consists of convertible debentures (TSX: FGE.DB.A), which are trading at 0.1/$1,000. Amateur investors don’t apparently realize that this amount trades with accrued interest – i.e. with the 9.75% coupon, a purchaser would pay virtually nothing for the convertible debt, but they have to send to the seller nearly 487bps in interest!
In CCAA, the recovery on the debentures are most likely to be zero.
That concludes today’s financial amusement.
(Update, December 15, 2019): Well, that didn’t last long. They went into CCAA on the evening of the 13th.
I’ve posted a chart of the debentures for historical reasons.
As for armature investor, could you please explain where these 487bps in interest coming from?
Where I can find this information myself?
Thank you!
Almost half a year of interest; 9.75% / 2 = 4.875%
If sold today, settlement would be just slightly over 5.5 months of accrued interest, so around 450bps.
Ok, the thing I can’t understand is why purchaser of convertible debentures should pay interest to the seller.
If I buy FGE.DB.A for $0.01 now, should I pay interest to someone?
This is just how bond like instrument trade is by convention. Seller pays the buyer accrued interest. When the issuer defaults, it’ll trade on a ‘flat’ basis and you are not owed that amount.
Sacha….just a heads up, subscribing without commenting….I do get the validation email, but I do not get notified of new posts, such as the one above by Will ?
Hi Marc, I truly have no idea what’s going on with the mail notification system. I see in this post that your email is approved for comment subscriptions and validated, but I have no idea why you’re not receiving subsequently notifications. There is something clogging the works, and I don’t know whether it’s my own mail server, your mail server, or something inbetween. Not too reassuring, I know. Maybe later in the month I can comprehensively look at things, but that’s what I get for using free WordPress tools I guess…
Well this one got through OK….weird, as I said just a heads up, I’m not sure if anyone else
is having problems or even notifying you. Cheers.