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LTC Properties Inc. Message Board

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  • ferdiefor ferdiefor Sep 9, 2000 4:51 PM Flag

    Subordination question

    BAC is asking LTC mgmt to go to the bond and prfd
    holders and in essence asking them to structurally
    subordinate themselves to the new credit facility. It is
    possible for those parties to agree if they believe it is
    in their interest to do so.

    What does this
    mean? BAC does not believe in the valuation of assets
    to be there in the event of a downturn in healthcare
    again and are unwilling to do a refi w/o obtaining
    senior creditor status or as high as they possibly
    can.

    As to your analysis of the MT situation. I am of
    the belief that debt will move from the healthcare
    side to the lodging side when all is said and done.
    Any debt moving to the lodging side will be seen as a
    huge overhang on the stock's ultimate valuation once
    this process is completed. It does not matter how much
    debt is being reduced right now...today. It is the
    debt load that LQ inherits from the healthcare side
    that is the name of the game right now. Until LQ can
    show what its ops will look like post healthcare no
    one is willing to put a solid NAV on the successor
    MT. There are a lot of well educated guesses but
    nothing solid until healthcare has been entirely disposed
    of. LQ is not exactly a primo asset and it was
    overpaid for given today's operating environmt.

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    • ferdiefor,

      Hate to tell you this, but the
      preferred equity holders are subordinate to all debt
      holders in every company. This is standard
      finance.

      As far as other debt holders subordinating
      themselves to BAC, good luck. What would be in it for the
      other debt holders?

      • 1 Reply to ConfusciousSay
      • Obviously there are some provisions in the
        prferrd arrangement that BAC is asking for some sort of
        subordination to. I have run across enough strange prfd
        provisions to know that this comes up every once in awhile
        where a prfd actually can hold itself superior to all
        new debt obtained for example. Clearly there is
        something there that represents a bug up BAC.

        The
        other debt holders would only subordinate if they
        thought BK was an alternative worse than subordination to
        BAC.

        Its a game of chicken right now.

        Not all
        prfd equity holders are subordinate to all debt
        holders depending on what mgmt agreed to at the time they
        floated the prfd. REITs have found all sorts of new ways
        to float prfds I have never seen before in terms of
        Fortune 500 companies. Find out what those terms are and
        perhaps you can find out why BAC has a burr up its rump.

    • But no secured creditor or unsecured for that matter is going to subordinate itself to anyone.

      BA is going to accomplish exactly what they are trying to avoid if this is their demands.

 
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