Some thoughts on today's transactionJust looking at the details of the convertible preferred, I don't think its indicative of an interest to buy Aecon down the road. This to me looks primarily like a credit investment similar to what Buffet does with companies looking for some good PR. What got the markets attention was the conversion price at a level that implies an enterprise value of the Utilities business of ~$750MM. Given that the implied Enterprise value of the entire Construction ops on an uber low 4.0x multiple of 2024 Consensus EBITDA is also $750MM, AND Utilities is only 19% of Construction revenues, well it makes the stock look very cheap (which it is) as broken down in my valuation post. But I think the main impetus for this investment is the 12% coupon for the first 3 years and 14% for the next 4 years. They do not have to convert into equity.
I thought they could access the credit facility and pay prime + 1.85% to redeem the $150MM convertible debenture maturing in December.
I feel that Oaktree is getting the better of this transaction (like Buffet always does), which makes me wonder why they are doing this 2 days before Q3 earnings. Is it possible they are going to announce a bigger loss on the troubled legacy projects and they are giving the stock a vote of confidence from a high profile investor? Unfortuneately Oaktree is not buying the stock, they are buying a very safe high coupon preferred with potential upside on one of Aecon's subs.
Does anyone have any commentary from the analysts? I can't find anything.