I found a good article and would like to share with my readers on how technical analysis can come into a good play to analysis a stock and save you from facing a bankruptcy company in your portfolio holding.
I saw this article from Bloomberg and I think it serve a good reminder for me. Although I did think that who win the upcoming election will affect your investment portfolio. You surely don’t want to see your investment portfolio drop 20% in value although is just paper-loss right. Well, still, a good perspective to read.
I encounter this article and i think is a good read and would like to share with my readers.
So the latest month NFP Data just release and it seem quite you know, disappointing. I mean, it is not hard to beat the forecast number yet it is 10%-15% lower than the forecast. Man, that’s pretty push down the odd of Sept Fed Hikes.
Swiber filed for bankruptcy.
Now what, for shareholders, and even bondholders?
Are you going to get anything back?
There is a hierarchy of claims. It can be simplified to this:
- Secured Debt Holders (assets are collaterized for the loans)
- Unsecured Debt Holders (IOU without any assets collaterized)
In such bankruptcy cases, bondholders should be in a better position than shareholders to make a claim. But it isn’t necessarily so if the Company does not have enough assets to distribute. Hence, bondholders can still be left with nothing.
The disclaimer is that I am not a corporate lawyer and the purpose of this article is a curious pursuit to figure out if bondholders and shareholders are likely to get their capital back. It is not, in any way, to be regarded as a document to prove your claims, nor to be treated as an advice.
Secured Debt Holders
Let us determine the secured debt holders of Swiber who have the first claim on the assets. We can refer to the latest annual report (31 Dec 2015) released by the Company.
Swiber owed the banks a total amount of US$332m and it was mentioned the following assets were collaterized for these borrowings (note 16).
- First legal mortgage over certain vessels and equipment;
- Assignment of all marine insurances in respect of the vessels mentioned above;
- Assignment of earnings/charter proceeds in respect of the vessels mentioned above;
- Lessors title to the lease assets; and
- Charge on certain trade receivables.
For items 1 to 3, the value of the vessels was about US$600m as stated in note 13 of the annual report.
For item 4, the financing companies would takeover the lease assets and claim against the remaining lease obligations. Would these lease assets be sold? Not sure.
For item 5, the trade receivables amounted to US$442m.
It seems like there are sufficient secured assets (US$1,042m) to cover the borrowings (US$332m). There are a lot of assumptions though. For one, the market value that the assets are sold can be lower than what was recorded in the books 6 months ago.
Unsecured Debt Holders
Swiber owes the Note holders (or bondholders) at a total value of US$535m. These are unsecured debts.
Below is a screenshot of the debt maturity profile stated in the annual report, under note 17.
The cash level in the Company was about US$100m. It is unlikely the bondholders would be repaid before the secured debt holders. As the cash pile is low, the liquidators have to sell away assets to raise cash, in order to repay it to the bondholders.
The shareholders would be the last recipients if there are excess money after the above parties are fully paid. Else, shareholders may get nothing.
You might think as a shareholder you will receive the NAV per share of S$1.42. It is not accurate to refer to the NAV per share because it is very unlikely the assets are going to worth the value recorded in the books. During liquidation, buyers of these assets know the desperation and would low ball the offers. Asset value can vaporise quickly.
I would prefer to use the Net Net value as a good proxy for a quick liquidation value. Or even CNAV, as we take the assets at half their worth. As you can see from the screen shots below, the Net Net and CNAV are negative. Sad to say, I am afraid there might be nothing left for the shareholders after the entire liquidation exercise.
The liquidation process would probably take a few years to complete. Meanwhile, there is nothing much shareholders can do. Just wait for the liquidators to inform you the next course of action. As for bondholders, you might want to check with your wealth managers, or even consult a lawyer, to get professional advice.
Full credit to : Alvin Chow@BigFatPurse
“The first rule of forecasting should be that the unforeseen keeps making the future unforeseeable.”
Since the Brexit incident, a lot of analyst forecast that the July Fed Rate Hike is equivalent to zero and the chances of 2016 rate hike has dropped to 22.9%. There are some traders even speculate of rate cut.
But I beg to differ.
The concern of Brexit from Fed and the key person Yellen perspective is that the impact to the economic but as we can see from the past 1 month, the economic don’t really impacted much by the effect of Brexit, more on speculation basic. If we talk on the US economic itself, it is advancing to its peak.
The US dollar index just break their mid term resistance on 96.7 and attempt to rally higher. This mean that more bullish speculators trade on that and the bearish speculators has retreated and realized profit.
The stock market has create a new high on its index accompanies by its US economic data which proven one of the strongest month this year. With ADP Nonfarm employment change and Nonfarm Payroll create a new high. Positive ISM Manufacturing Employment and Core PPI, Continuing Jobless Claim getting better, although CPI didn’t live up to the forecast but it still maintain last month performance.
This is to say, July is the best month for FOMC to rate hike. They can try to increase 10 basic points instead of 25 basic points and see how the global economic react to it but to have the first rate of 2016. My opinion is, this month is the best month to make the move.
The S&P 500 is trying to break 2177 but we can see some distribution symptom happen above 2160 which the bull trying to half their position or exit their trades. Currently the 20MA is reaching higher to 2116 where the support might tested there and the upper BB has widen to 2216. The Q2 earning for most blue chip company didn’t show positive sign,a dip is expected but whether the upward continuous trend will sustain, the pullback support shall be checked and this mostly relied on next thursday 28th July, FOMC rate decision.
US economy data for July:
Happy investing and trading Pal and stay safe!