if it is the requirement of the courts that 2/3 of the bondholders need to approve the restructure deal, then a deal WILL be made before the 30 of january .... according to http://biz.yahoo.com/bw/020116/160053_1.html, where it says "In addition, as of 5:00 p.m., New York City time, on January 15, 2002, holders of approximately $956,185,000 in aggregate principal amount of McLeodUSA senior notes had informed McLeodUSA that they did not intend to tender their senior notes in the exchange offer, and that they did not intend to consent to the Company's recapitalization as currently proposed." ... tells me there already exists the 2/3 approval since (956185/2900000)*100= 32.97% is the percentage that DISAPPROVE of the proposed plan, therefore 100-32.97= 67.03% which is larger than (2/3)*100=66.67% ... therefore a deal will be done prior to court .... if the bondholders do force a court action, the judge may not look favorably on them since the required amount to approve the deal was established prior to court action .... any comments??
It is my understanding that if it stays out of court you would be able to keep your bonds, assuming that they are not otherwise callable by the company.
However, the company has said that if at least 95% of the bonds are not tendered they will go to court. In otherwords, you not tendering your bonds could have the effect of forcing the court alternative in which you would be forced to give up your bonds if the court approves the restructuring. For the good of all, please tender your bonds.
You would have to exchange your bonds under the terms of the in-court plan. If you were one of the "lucky" 5% who didn't exchange their bonds in a successful out-of-court plan (i.e. were 95% agreed), you really do win, because the remaining bonds will be worth near-par and will pay interest. Of course, this kind of thinking is what makes solicitations of this kind extremely difficult to pull off.
It's my understanding an entire class will be constrained to the same terms under the in court restructuring. That is, if it goes to court, 100% of the bonds will be exchanged if 2/3 approve, which would mean you would be required to surrender them, but I'm not totally sure. You may want to call IR for a definitive answer.
The documents say, the company intends to exchange cash and equity for all principal and interest due and accrued on the notes and they would defer any cash interest payments to the extent of the grace periods for interest. No where do they mention they have any intent to default. The interest on the 11 3/8% due Jan 1 is about 45.5M, for the 9 1/4% due 1/15 it's about 11M and for the 12% due 1.15 it's about 9.6M. If interest is paid, and I am not saying it will be, the payment might reduce these series settlements by some pro rata amount pending consumation of the restructure. This seems consistent within the terms of the senior facility amendment. Speculation on my part, of course, but more plausible than a rush to C11, IMO.
2/3 approval is not enough to avoid the courts. To avoid chapter 11, MCLD needs 95% of the bondholders. With 2/3, MCLD can file voluntary chapter 11 and present a plan for restructuring to the judge. The judge will then order a vote for all bondholders. If more than 2/3 (this is not precise. There are other requirements involved) bondholders approve the deal, then the judge can force the other bonholders to accept the deal as well.
Chuckyuc - It's not so much that the judge can force the other bondholders to do anything, but that an approved plan is binding on all creditors (even those who didn't vote for it). -m
It's not true they need 95% approval to avoid C11. There are an infinite number of material changes that could be made to the senior secured ammendment to avoid C11 if everyone is in agreement.
It is true they need 95% approval to comply with the senior secured amendment to proceed with the restructure out of court. They need 2/3 to proceed with the in court restructure. In regards to your scenario #3, it is not possible, at this time, under the existing amendment.