I am reasonably optmistic about survival, but I am not willing...

I am reasonably optmistic about survival, but I am not willing to be my house on it, or even a small portion.

The announcement on debt provision this week was a little higher than I thought it would be and that will probably make things just a little bit tougher. In TIM's favor is that a fair value for their assets is well in excess of their debt. The big question would be whether or not they can achieve that fair value.

The announcement this week also reinforced an aspect of their debt arrangements, that is if one of their MIS investors defaults, then they have rights to that investment and its income. If the investment was fair to begin with, then it should probably work out in favour of TIM. The problem here though is that the income stream from this may not be big enough initially to make a difference. They will only receive the full benefit once production gets fully ramped. Will they have enough time wait?

I started taking a closer look at TIMG today. I always find the prospectus for these things to be a bit of a slog. Its easy enough to get the general gist of it, but right now its is very important to also understand all the possible outcomes if things get worse. That will take me a while since I have to fit in the reading with an excessive amount of other work but hope to come to some sort of view in the next week or so.

On the surface though, it looks very promising. If you start with the initial assumption that the company will make it, then the returns should be quite good indeed. More so than TIM or TIMPB. But the kicker is always in the detail. If they don't pay the next dividend, then does it trigger a redemption of some sort? If not, then what? The payments are cumulative so that if they miss this one then they will have to make up for it later - if they are still solvent. Also, the scheduled redemption is still away off so it may be awhile before you get your capital back (one of the reasons I preferred TIMPB earlier I might be able to convert back to shares with the value of TIM still above zero).

The last distribution was on the order of $5. Interest rates have gone down since then (I would need to check the actual rate before deciding) so it should be lower but still quite high. People really seem to be pricing in failure.

There are a lot of things to consider before you can actually make a firm decision as to which one is better. Don't forget that TIMPB and TIMG are not very liquid which may make it hard to get out in a hurry at a fair price. If TIM goes belly up, then the math isn't as hard. I suspect they will all be worth about the same - zilch.