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Krispy Kreme Doughnuts, Inc. Message Board

  • mememe765445 mememe765445 Aug 20, 2005 12:56 PM Flag

    ST & insolvency

    it's hard to speculate on what exactly is going on with ST, but we know that KKD said they think ST is insolvent and ST probably thinks the same, yet they did not file ch.11.

    We always talk about how insolvency implies filing ch.11 but apparently there's a time delay there too...

    stores burn cash, ch.11 allows for closing stores. why arn't ST and other AD's filing ch.11 so that they can close stores and maximize EV. why are al these banks still thinking that the going concern value is the way to go?

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    • <<Furthermore, it appears from the list of multiple signers, that only a portion of the KKD loan is in the CDO. >>

      what tells you that? the hedge funds who replaced BAC, or also some of the other entities? does CSFB actually lend too?

      is it possible that CSFB finds more ppl to further finance this and they CDO it with SP, and KKD can go on for longer? two questions arise:

      1) will they be able to find ppl stupid enough, will the ppl who buy into the CDO at least look up KKD on yahoo finance or do they trust the manager (SP?)
      2) is SP managing the CDO kind of like a fund? is it in their interest to only throw good paper in there or to sell anything that sells? what role does SP playin this i still don't get. hedge funds do CDOs? Don;t you need a bank for that?
      3)is there a serious legal liability associated with selling CDO paper to a hedge fund and misrepresenting KKD's situation?

    • The collateral manager of the CDO makes investment decisions for the entire facility.
      Generally, the manager owns the first-loss piece, and so rightfully should make any decisions that could result in realized losses.
      There is no syndicate committee equivalent until triggers are breached which allow the removal of the manager.

      Remember, the KKD loan is likely only a small fraction of the CDO's assets, and thus its impact is mitigated through diversity.

      Furthermore, it appears from the list of multiple signers, that only a portion of the KKD loan is in the CDO.
      As such, there'll be an intercreditor agreement that governs decision making amongst the participants.

      The KKD saga likely isn't keeping any of the CDO's investment grade bondholders from getting a good night's sleep.

    • wavewatcher are you still around? anyone here in touch with him?

      do you know how these CDOs work? Are the decisions really up to SP? Today's filing seems to suggest CSFB is in the driver seat. Is it possible CSFB is listening to SP? is there an equiavalent to a syndicate commitee here?

      We have SP, we have other lenders, we have CSFB as agents, and then we might have a CDO within the SP part. Do the paper holders have voting power, or does SP decide for them?

    • Correction: The sentence:

      "Placated means foreclosure."

      should read:

      "Not placated means foreclosure."

    • Placated means that ST is allowed to continue on for the time being. Placated means foreclosure.

      ST has promised to recapitalize by the end of September; this might mean sale/leasebacks or, as they have stated, a recapitalization from an investment bank.

    • why do you say they are they placated? they can always cause a ch.11 and even have some inidvidual stores closed and sold a la. GE-capital-kremko...

    • From the court filings it is explicitly stated that the banks were expecting kkd to defer receipts from ST in similar magnitude as the banks did. The implication was that, if kkd did not also provide relief, the banks would foreclose (because they would receive neither principal nor interest).

      As long as they get interest payments they appear to be placated.

    • something just hit me:

      Why didn't KKDC or the lenders help ST's liquidity unilatteraly? why was there a negociation about 3.8mm in return for moratorium?

      think about it: by forgoing payments, KKDC provides liquidity to ST. same thing for the break on the 3.8mm. The 2 parties seem to be collaborating to provide liquidity for this thing!
      Collaboration not negotiation!

      well, there are 2 possibilities i can think of to explain this paradox:

      1) ST needed a certain amount of liquidity and both sides could have done more than they did.

      So they negotiated as to how much each side will give. This would mean that neither KKDC or the creditors were desperate enough to save ST. (remember the seinfeld episode where Newman and Jerry negotiate on saving the "pool guy" who drowned?). But if they arn't desperate to save ST, why do they let it live in the first place ?!?! that's a contradiction, and the players involved seem pretty desperate and intense. so this possibility looks unlikely.

      2) 1 of the 2 parties could NOT have done more than they did in terms of proving liquidity.

      This party was outweighed by the other party. We know that it's not the creditors, because they are still getting their interest payments, so it must be KKDC. This also fits in with a possible 4.5mm transfer to BNS (almost no more cash help for franchisees except Mix&Fees moratoriums). So according to theory (2), the lenders forced KKDC to do as much as they possibly can for the liquidity, and this means they had a token against KKDC. What was that token??

      I can think of one: threatning chapter 7

    • <<2) Doesn't want to take a chance that the new bankruptcy law would force the court to appoint a trustee, and he would be forced to choose between (a) becoming a trustee himself, which he strenuously worked to avoid at Enron, and (b) giving up the million a month in billings and exposing former management to potential legal risks if the company is placed in unfriendly hands with so much litigation going on.>>

      what exactly is the implication here? let's say cooper is trying as hard as possible to make it seem that corporate governance is not reducing the value to creditors (thus avoiding trustee), what does he concretely need to do?

      although you provided a pre-pack as an alternative, arn't 1) and 2) compatible? you do a pre pack and tell the judge: "look my creditors are happy, you don't need a trustee, we all agree".

      Another question is w.r.t. the BOD and SC report. Would BOD resignations not decrease the chances of a trustee being sought?

      what happens if BOD resigns? does the cooper-protecting-management scenario go up in flames or can he still protect them?

    • I was suggesting two alternative explanations for what is going on. We need more information to choose among these two, and other possible explanations previously suggested by di_vur.

      I really don't know what's going on right now. We have more than one alternative explanation that is consistent with the known facts. Maybe we can find some information on the web that allows us to discriminate -- otherwise we have to wait until there is more disclosure from the company.

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