UpTickMeA$AP
10年前
http://www.zenolytics.com/2014/07/client-letter-on-the-subjects-of-capitalizing-on-corporate-greed-imagination/
In fact, by the time this decade is done, I believe that corporate exploitation of NOLs will be one of the great legacies of the financial crisis, creating an outcry from Congress that will be as great, if not greater than what we are seeing currently with respect to corporate inversions.
In the meantime, it is fair to assume that corporate profits in the U.S. will continue to increase in the face of limited options for tax efficiency. As a result, I expect NOL shells or corporations with an operating structure that preserves an inordinate amount of NOLs to become increasingly valuable, in proportion to growth in U.S. corporate profits.
This is well ahead of the curve thinking that I feel will benefit our portfolio returns going forward. Our two largest holdings – WMIH & KFS – are both NOL shells. In the case of WMIH it is a pure NOL shell without an operating entity (WMMRC is a legacy operation in runoff) and KFS is a revitalized shell, with a vast majority of its operations being newly formed entities that had no part in creating the NOLs in the first place. In other words, the structure of the balance sheet and operational profitability has been deliberately set around the NOLs. The eventuality in the case of both KFS and WMIH is a much larger entity taking shape that eats through the NOLs in 3-5 years, resulting in a tremendous surge of profitability for both companies going forward.
The potential for maximum utilization of NOLs through reinvesting tax free profits into ventures that will further provide outsized returns will best be experienced by financial companies that have the expertise to seek out a diversified portfolio of active or passive investments while possessing a history of providing a high internal rate of return.
While a company involved in technology or industrial manufacturing will divide an inordinate amount of corporate profits brought by NOLs in a variety of ways, financial companies, in particular Property & Casualty Insurers, tend to focus investments on areas that provide a high internal rate of return within their area of expertise. This type of leveraged, compounding return scenario can very well turn into a virtuous cycle of profitability for financial companies, especially when tax liability is nullified.
The CEO of Kingsway Financial (KFS) in a recent shareholder letter commented on this type of potential by saying: “We believe in the power of compounding. Insurance companies provide unique vehicles to compound investment results. The unfortunate history of Kingsway has resulted in hundreds of millions of dollars of tax losses (for which we have reserved from an accounting perspective) but provides us the opportunity to not pay federal income tax so long as the losses remain available to offset gains. This enhances our compounding.
He goes on to say: “So you could sum up our value-building philosophy as: Compounding capital in the long-term with investments/acquisitions/financings that offer asymmetric risk/reward potential with a margin of safety support by private market values.”
It can’t be understated and in fact should be emphasized clearly what a powerful business model this is in a highly-lubricated economic environment that is filled with opportunistic companies searching for an enhancement in their possibility for achieving returns. There is no shortage of capital that is looking for deals. And there is no shortage of deals that are looking for capital.
Private equity firms are raising record amounts to put together creative acquisitions in a variety of industries. Venture capital is running at two hundred miles per hour. And hedge funds are becoming increasingly creative in their ability to structure deals that resemble a hybrid between private equity and venture capital. In essence, it is a deal environment that has no shortage of opportunities or capital to make those opportunities reality. This will benefit our portfolio investments that are concentrated in NOL plays for Property & Casualty Insurance (I have little doubt that WMIH will eventually merge into a P&C insurer) tremendously going forward as I expect the maximum benefit possible to flow into these names."
ScovilleUnits
14年前
Kingsway announces repurchase of outstanding indebtedness
Thursday , July 08, 2010 18:38ET
TORONTO, July 8 /PRNewswire-FirstCall/ - Kingsway Financial Services Inc. (NYSE, TSX: KFS) (the "Company") announced today that since the debt repurchases made in connection with the disposition of Jevco Insurance Company at the end of March 2010, it has repurchased an aggregate principal amount of C$33,932,000 of Unsecured 6% Debentures due July 11, 2012 issued by Kingsway 2007 General Partnership (the "2012 Debentures") and an aggregate principal amount of US$25,583,000 of 7.50% Senior Notes due 2014 (the "2014 Notes") issued by Kingsway America Inc., for a total purchase price of approximately US$55.1 million.
As a result of these acquisitions, the aggregate principal amount of 2012 Debentures and 2014 Notes that remains outstanding is C$12.5 million and US$26.9 million, respectively.
The acquisitions were made in the ordinary course for capital management purposes and the Company may make additional repurchases in the future, depending on price, availability and general market conditions.
ScovilleUnits
15年前
Sale of Jevco Insurance Company
Kingsway announces definitive agreement for the sale of Jevco Insurance Company
Monday , January 25, 2010 06:52ET - 100% cash transaction for all of the issued and outstanding shares of
Jevco
- Transaction subject to regulatory approvalTORONTO, Jan. 25 /PRNewswire-FirstCall/ - Kingsway Financial Services Inc. (NYSE, TSX: KFS) (the "Company") announced today that it has entered into a definitive purchase agreement with The Westaim Corporation (TSX:WED) ("Westaim") pursuant to which, subject to the satisfaction of certain standard closing conditions, including receipt of the approval of the Minister of Finance (Canada), the Company will sell all of the issued and outstanding shares of Jevco Insurance Company ("Jevco") to Westaim for an aggregate purchase price of approximately 94.5% of the book value of Jevco as at December 31, 2009, subject to adjustments. Prior to the closing of the transaction, and subject to insurance regulatory approval, the Company will also receive a dividend of up to CAD$40 million from Jevco. The approval of Westaim shareholders will also be required in connection with associated financing activities. Completion of the transaction is not conditional on financing.
If successfully concluded, the Company plans to immediately purchase sufficient Company debt to ensure it continues to satisfy all financial covenants contained in bond agreements to which the Company and its affiliates are a party. Conditional debt repurchase agreements have been executed in respect of approximately US$47 million of the Company's debt to ensure the timely completion of the debt purchase transactions.
In connection with the negotiation and entering of the definitive purchase agreement, CIBC World Markets Inc. has acted as financial advisor to the Board of Directors of the Company, Ogilvy Renault LLP has acted as legal counsel to the Company, and Cassels Brock and Blackwell LLP and Heenan Blaikie LLP have acted as legal counsel to Westaim.
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