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Exide Technologies Message Board

  • sean89928 sean89928 Apr 19, 2013 6:49 AM Flag

    Re-structuring play

    Hi all,

    This is a fairly poorly run company that ordinarily I wouldn't invest in but I wonder if there is still some value to be found here?

    If we take it as highly probable that there will be some kind of debt retructuring, does the current price ($1.27) provide an opportunity to buy now and still gain after the restructuring is announced?

    Specifically I am thinking of buying some shares with the following simplified plan in mind, all constructive comments welcome,

    Shares OS - 79m
    Mkt price - $1.27
    Mkt Cap - $100.75m

    Senior secured notes - $625m

    Now let's randomly guess that the bond holders are offerred a partial debt-for-equity swap along the following lines,

    Senior secured notes OS - $300m
    Equity compensation - $500m

    at the current price of $1.27 that would mean an issuance of 394m further shares.

    If we add the newly issued shares onto the currently issued and OS then we have a float of 394 + 79 = 473m

    If we make an overly simplified addition to the market cap of $325 as a result of the decreased balance sheet liability of the senior notes, then mkt cap will increase to 100 + 325 = $425m

    I know you can't expect this to work so simply but hopefully you get the idea.

    Therefore you now have the following,

    Shares OS - 473m
    Mkt Cap - $425m
    Mkt price - $1.12

    Now there are lots of permutations, and I only arbitrarily selected this debt-to-equity swap ratio based on what i as a bond holder might find inducive, but my point is that investing on the uncertainty might still have a lot of value.

    Also to spell it out further, having a $1.12 mkt price and a healthy balance sheet an improved income statement due to less interest burden is a lot more attractive than having a $1.27 mkt price and an overburdened debt position.

    Like i said, all constructive comments welcome, and lets make some money...?

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    • calculation doesn't look bad - I also estimated dilution from around 400 million new shares but I wouldn't use the equity here to place the bet. The senior notes are the much better choice here as they have all the negotiation power while the common shares still could be wiped out or be diluted far more severe.

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