There's no chance the banks will get all the equity without a massive fight, looking at how peers trade versus PV10's, doesn't blow out the vnr bonds entirely, hence the 20c on the dollar. The pref and common have zero hope.
$2.28 at time of posting....Gotta give a shout out to the laggard commodity behind oil..LOL....And of course oil over $50 brent and WTI $49.90 great news with this article coming out about net short positions being lowest for oil:
Oil prices have gained more than 80 percent over the past three months, bouncing off of $27 lows in February to hit $50 last week. Those sharp gains raised the possibility of another crash in prices because the fundamentals still appeared to be bearish in the near term.
By early May, oil speculators had built up strong net-long positions on oil futures, extraordinary bullish positions that left the market exposed to a reversal. Speculators had seemingly bid up oil prices faster than was justified in the physical market.
But the physical market got some help. The massive supply outages in Canada (over 1 million barrels per day) and Nigeria (over 800,000 barrels per day) provided some support to prices, erasing some of the global surplus.
Now speculators who had started to short oil in May have retreated, pushing short bets down to an 11-month low. "If you’ve been short since February this has been a very painful ride," Kyle Cooper, director of research with IAF Advisors and Cypress Energy Capital Management, told Bloomberg in an interview. "There are always a few die-hards but otherwise you’d want to get out. This is indicative of the improving fundamentals."
One doesn't have to think VNR is viable long-term to conclude there is value in the bonds. There are scenarios (likely ones) where VNR eventually is forced to restructure/liquidate and the bonds end up with a positive overall yield, based on current market prices.
ie - its not zero sum. Its not "the bonds go to par, or they return zero".
Why the stock is trading for a market cap of nearly $200 million is another question altogether....
Which begs the question - given EROC has higher coupon, and lower accrued interest, why are the bidding less than VNR bonds? The opposite should be true. And some of those VNR bids are institutional in size. Amazing ignorance out there.
speaking of capital structure dynamics, does eroc 2019 or vnr 2020 take precedent or are the equal when #hit hits the fan? I'm assuming the 2023 since 2L take priority over eroc and 2020, so do either have priority over each other?
"CH 11 isn't much of an option"
Not at current prices, it doesn't pencil out. I don't see how private equity could be attracted, the debt would have to be very low and the capital high, and there just isn't enough cash flow to make that work. Which doesn't say much for the long term viability of the company.
Analysts at Stifel Nicolaus upgraded Vanguard Natural Resources, LLC (NASDAQ: VNR) from Equal-weight to Overweight. Vanguard Natural shares fell 3.36 percent to close at $1.44 on Thursday.
I know it seems like I might be splitting hairs and/or being a bit too harsh - but its crucial to get the capital structure dynamics right.
These energy bonds are all about capital structure dynamics.
"Not unless the banks just decide to get what they can from a liquidation and move on"
Yeah, but that's a CH 7, not a CH 11.
VNR is a play on survival - cuz its either survival, or CH 7. CH 11 isn't much of an option.
''or maybe a new retail bond investor made a mistake"
Unless they have $4 million in buying power in their account, its not a mistake their broker would allow them to make.
"there is no point to a CH 11"
Not much, no. Not unless the banks just decide to get what they can from a liquidation and move on. To some extent they may be driven by their own rules and lending committees, it might not necessarily be a straight up business decision. The MCEP resolution will be instructive, if we ever hear about it, isn't today the last day of their extension?
"This recent turmoil lead to some serious mispricing"
No doubt, and we profited handsomely from those situations. I'm just not sure this is one of them, because I'm not sure VNR can survive, or that the bonds would be worth anything if they filed. Conviction on either point would be enough to buy some, I have conviction on neither.