Bankruptcies

Ok, I just read more into the filings. AJ, correct me if I'm wrong, but looks like unsecureds will be getting 15% of the company and have $10m split amongst them.

-Second lien outstanding $1,328m gets 85% of the company
-Unsecured outstanding $2,349m gets 15% of the company

I wonder if everything passes as-is, what the approximate recovery will look like through the equity. I am still in the midst of my first experience with a company going through Chp. 11 so haven't seen this play out fully before.
 
FCXoptions said:
Ok, I just read more into the filings. AJ, correct me if I'm wrong, but looks like unsecureds will be getting 15% of the company and have $10m split amongst them.

-Second lien outstanding $1,328m gets 85% of the company
-Unsecured outstanding $2,349m gets 15% of the company

I wonder if everything passes as-is, what the approximate recovery will look like through the equity. I am still in the midst of my first experience with a company going through Chp. 11 so haven't seen this play out fully before.
More...

Are unsecured trading for around 7.5? So... after reorganization the new Sandridge is worth approx 1.2 bln?
Or are second lien trading at 7.5 and new Sandridge is 120 mln...

Total Property/Plants/Equipent stands at 1.475 bln value as of end of June. So assuming those are the only assets that survive and no debt on balance sheet...
New Sandridge close to that number minus depreciation? Or will there be some of the current 600 mln Cash left as well?

EDIT. it's 83.5% and 16.5%+10mln
 
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Just had a deeper look into it... it's the unsecured debt is trading at 7.5... So question is, would you pay 1bln+ for the new company? Equity will likely be severely diluted with new offerings...
 
JackRab said:
Just had a deeper look into it... it's the unsecured debt is trading at 7.5... So question is, would you pay 1bln+ for the new company? Equity will likely be severely diluted with new offerings...
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Yeah, thanks for the analysis. I'm not so sure on this one.

I came across the preferred shares for Dynegy trading under $50 on a $100 par. I think the yield is around 11% currently. I am going to dig in a bit on this. They filed bankruptcy a few years ago and they have coal plants which is a bit concerning given the way coal is going, but will take a look regardless.

One thing I found interesting is their debt seems to be fine as far as pricing goes, no really depressed prices, yielding around 5-7% but they have one issue under the name Amerenenergy Generating Co that is linked to them and is trading around 40 cents on the dollar. There is a company called Ameren Energy (AEE) but they seem to be doing fine. The symbol listed for this issue is DYN though and it comes up with Dynegy so I am guessing Dynegy bought it. Just trying to figure out why it is trading at such a discount to par....UPDATE: http://seekingalpha.com/article/1163461-ameren-genco-bonds-crushed looks like one not worth looking into. Also appears those preferred shares are mandatory convertible next year, so that explains the discount.
 
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FCXoptions said:
Yeah, thanks for the analysis. I'm not so sure on this one.
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Well, it's still interesting. The 600 mln cash will stay in the new company and if assets sit at 1.2 bln the value would be 1.8 bln... so there's a potential 80% profit in it if costs don't blow out and there's no litigation from current shareholders that want their money back via other ways...

If you buy the unsecured bonds now, do you automatically receive new shares when the transfer is done? Or do you have to apply for it?
 
I'm actually still in the midst of my first bankruptcy with one of these, but I believe everything is automatically converted. The only time you should do any type of applying is if they make a special offer to bond holders in an attempt to restructure before chp 11.

I'll be at my computer shortly and will check if I can see the price of the second lien bonds, that would be useful in figuring out the value since I'm assuming they are trading higher than the unsecureds. Unless you already got that price in your analysis?
 
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Looking at bond quotes on IB, I see several bond issues that are institutional only, so not sure which ones encompass all of the second lien tier. With that being said I found info on the 8.75% second lien and the last closing price I could find is @ 40, but no clue how close to accurate that is. There might be some potential in it. I guess the biggest plus to most of these restructurings is these debt loaded companies are coming out of Chp 11 with significantly less debt so their costs per barrel to produce will be coming down significantly.

When I was digging into EXXI before buying, one thing I really liked was their management was buying up their own bonds like crazy when they tanked. They bought them at serious discounts and if I recall correctly they lowered their production costs by an average of like $6/barrel just from cutting down that interest expense.
 
FCXoptions said:
Looking at bond quotes on IB, I see several bond issues that are institutional only, so not sure which ones encompass all of the second lien tier.
More...

Those institutional ones are all redeemed and not tradable anymore, I think they initially were for large traders only.
The unsecured bonds are still tradable. The 03-2021 7.5% sits 7@7.30... and basically all unsecured bonds should trade at the same price when debt restructuring is finalized as proposed. At 7.30 the new company is valued at close to 980 mln.

The second lien debt, the 9.76% 06-2020 and 7.5% 03-2021 have no active market I think. Last traded price was 39.9 and 94 resp.

The stock shot up friday 150% probably because equity holders are trying to get a piece of the pie and seek a court judgement on the release of documents to prove there's still value enough in the assets to keep them in the loop:
upload_2016-8-29_13-33-21.png
 
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