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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Paul Senior who wrote (59772)	8/20/2017 3:19:31 PM
From: E_K_S	Respond to of 78958

Re: TIS "(The new plant) is a $150M investment" Former Scuttle's Island spokesman worked closely on Barnwell County tissue plant Here is the history on the TIS Barnell County Plant. I did not realize TIS took over the project from South Georgia Tissue. Not sure if TIS bought the original assets at a discount but from the article that they cut the budget/investment by 27% from $141mln to $110 mln. TIS assumed $35.8 mln in tax-exempt revenue bond financing and $3.3mln in additional sewer and infrastructure funding (provided by the County to the earlier developers that filed Ch 7) in some type of incentive package, perhaps part of the bankruptcy settlement. TIS came in in April 2015 to take over the project w/ the help of an incentive package from the Economic Development Agency. As a "Value" investor, I like to get assets on the cheap especially from some other failed project. I did not realize TIS came into this project w/ this prior history and I like the deal even better now as they probably were able to reduce their cost of acquisition/constriction by 30% w/ the State & County subsidies. TIS still took a big risk but from what I can see their debt commitment to this project (about $131mln) increased their total debt by almost 80% but s/d increase BV by $13.00/share if/when that debt is paid off. (Remember their current bank note includes principle payments that goes to increase company BV directly). Furthermore, the deal looks like TIS received a subside of 27% in lower tax and infrastructure fees. I guess the unknown is how/when will the $131mln debt/note be restructured w/ equity or a term note (or both). I think interest and principle is now being paid so much of their FCF is going into paying down that note ( I can not recall but it is either a 5 or 7 year term construction loan/note). Remember that $131mln increased their debt by 80% and they still can manage that (they did need to get some debt covenants waived by the bank that provided the new construction financing). I think your price estimate is low since it does not account for the huge increase in future BV. Earnings are key, and the growth in earnings from the new facility s/d be huge. There is pricing pressure so that may/could impact how fast the market recognizes the quality and sustainability of those earnings. I do agree w/ you that the downside risk is low. I would like to see TIS refinance their debt into a longer term loan w/ interest only (in the early years) and a scaled back principle payment greater in the out years. If/when the company trades back to $20/share-$25/share do a secondary offering of 4mln-5mln shares. That's still high dilution 40%-50% so not sure they would go that much on a first round equity offering. My strategy is to Buy up to another 50% if/when there is end of year tax loss selling. Then watch the FCF spicket start flowing when their new facility is running at greater than 90% capacity. EKS