Google Finance
Filing
Nov. 20, 2016
2016 Q3 Data
Current Price: $18
1.Basic Information
(1) History
Asset based lender(ABL) created and majorly owned by Catalyst Capital at around 2006. Catalyst Capital is a private equity firm mainly specialized on distressed debt investment. It seems Catalyst is more on buying distressed debt while Callidus is to offer distressed debt.
(2) Business related:
(3) Management.
Newton Glassman is the key person of both the parent and the company. Very good tracking record managing Catalyst. The equity fund might be around $4B in assets.
(4) Debt and Credit facility.
(5) Insider holding, options, Insider trading info, share buy back.
(6) Employee numbers
(7) Auditor
(8) Industry comparison.
(9) Major events
2. Financial data.
The company started a tender offer at April 2016 at $14/share for up to 3.57m shares. It bought back 1.1m shares. Later it increased the price to $15.5 and then to $16.5, totally bought back another 1.5m shares. Currently it the $16.5 buy back still in effect until Nov. 30. But I don't think anyone will tender it since it below current market price.
3. Valuation
Currently around $1.3B loan outstanding. Allowance for loan losses is $78m. Total debt liability is around $520m, total equity is around $500m.
The company is very likely going private next year. At April 2016 Nation Bank has a valuation at $18-$22. But Glassman says $22 should be a base for the price, I would expect maybe a little more than that. $18 in kind of a bottom line.
4. Risk
(1) The company got involved with litigation with West Face regarding a former employee who joined West Face. Also regarding a short report generated by West Face at 2015. In my opinion, this is quite unnecessary.
(2) The West Face report doesn't provide much valid concern except it mentioned a company called Xchange Technology which owned the company more than $40m in loan. But seems Xchange is worth much less than that. However, at march 2016, the parent company Catalyst took over the loan and paid Callidus $101m under a guaranty agreement which is not bad for Callidus.
(3) I think the only problem the company could have is that it underestimate its bad debt allowance. Or maybe fraud behaviour could related to this. Since its loan are usually short (12m-18m), it can't hide the lost unless it keep refinance previous loans. Based on Q1 2016 presentation, since 2006 till may 2016 , the company got 1 loan was acquired by Catalyst which I think is the Xchange case. 5 companies went restructuring and repaid loan in full. 4 companies went restructuring and result a loss of $17m. There are 8 loans in restructuring. Totally 34 loans outstanding at Q1 2016.
Gray Agua Group: Don't know when and how much the company owns to CBL. At Q4 2015, it had trouble and later filed for bankruptcy again in 3 years. In total it has $55 million in debt. At Q4 2015 CBL write down $22.6m in loan. At Q2 2016 CBL wrote down another $12m. In total in has recorded $37.4m in provision for Gray Aqua. At Dec. 2016, Marine Harvest acquired Gray Aqua for $15m. Don't know whether it includes CBL's claim of Gray Aqua.
(4) Glassman talked a lot about Yield Enhancement in Q3 conference call. I don't really understand it.
(5) The privatization may be fail or last long and then the stock may be repriced by the market.
(6) Currently the company keep the tender offer going one and may increase the price again in future. Anyway, the $16.5/share provides a downside protection currently. However, the company will eventually end the tender offer before it can strike an offer from third party. It might get down again once the tender offer is expired.
5. Conclusion
Current $18 is pretty attractive and the downside is quite protected, major risk is whether and when the privatization will be done.
6.Links
Mar. 31, 2017
Current Price $18.27
The company recorded big bad loan allowance which is unexpected to me. Also it indicated the biding price for privatization might be close the previous tender offer price $16.5 if I comprehended it correctly.
Mar. 31, 2017
Current Price $18.27
The company recorded big bad loan allowance which is unexpected to me. Also it indicated the biding price for privatization might be close the previous tender offer price $16.5 if I comprehended it correctly.
