Noranda Income Fund Unit NNDIF

RE:question

[Bigbird999]

Glencore has 25% of NIF but these ordinary shares that do not receive the dividend (unless it goes above $1 per year).  They are prevented by the agreements in place and NIF's status as an Income Fund from purchasing the priority (mine and yours) shares.  If they do not renew the SPA and the other agreements by Nov 2, then the agreement expeires on May 2, 2017 and Glencore's shares convert to priority units.  If this happens, the will own 25% of the income fund but it will still be an income fund and we (the 75% owners) will still be represented by the 4 independant directors vs 3 for Glencore. 

I might be mistaken but I do not believe that the independant directors hold any NIF stock. They would have to disclose and I do not recall reading that they hold any  stock.  The most important thing is that thave a fiduciary duty to the priority unit holder (us) to maximize distributions in a sustainable manner.  The share price is simply a function of the distribution and the market's view of the sustainability.  If they get a long term agreement the uncertainty will cease and the dividend will become viewed by the market as sustainable.  The SP will reflect the dividend at about a 10% rate like it is now.  If the dividend is sustainable at $.50 per year, the SP will be ~$5.  Which is what I expect to see when the dust settles.........  Unless Glencore makes an offer.  In which case I would expect a $3 offer to try an scoop up enough of the $2.60  shares to take control.  If that happens, resist the urge and hold out for something like the true value somewhere north of $5.

Notwithstanding the fact that Glencore is prevented from increasing its holdings in NIF, based on the discussion below, I don't trust them.  Somebody with deep pockets is keeping the SP in the $2.60 range.  This benefits only Glencore and I speculate that the deep pockets are related in some way to Glencore..... or somebody who hopes to benefit from holding a bunch of shares at $2.60 when the dust finally settles.  Glencore is playing a game of brinksmanship.  And they do not play nice.  They will wait until the very last moment (think Nov 1) before they renew or make an offer.

Interesting times are ahead.  I agree with tbthunderbay that it will take some very creative accounting to make the Q2 results worse than Q1. 

BB