EXCO Resources ("EXCO")
In early July of 2019, the company emerged from bankruptcy and the 1.75 lien term loans were converted into 28.38 equity shares for every $1,000 in par value, after netting out certain adjustments. We received 1,518,570 shares of EXCO (ASX:EXS, Financial) in the Fund. The equivalent price is $9.5144 per share of EXCO.
Looking back on this investment, we underestimated how long the price of natural gas would stay low for and how low it has been relative to the price of oil. Historically, there had been a strong relationship between the prices of oil and natural gas. Thinking about the two fuels in terms of energy equivalency, 6,000 cubic feet (6 mcf) of natural gas has the same amount of energy content as 1 barrel of oil. In the past, this 6 to 1 ratio guided the relationship between oil and natural gas prices but for the last few years the ratio between prices has gone up to as high as 50 to 1.
Long story short, it was not such a great idea in investing in the 1.75 lien of EXCO.
From Francis Chou (Trades, Portfolio)'s Chou Associates Fund semi-annual 2020 letter.
