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Central European Distribution Corp. Message Board

  • hageneriksson hageneriksson Nov 19, 2012 9:01 AM Flag

    clash Tariko / CEDC - implications

    reading between the lines of both letters clearly bankruptcy is in the cards now. Especially CEDC has nothing to lose (only its shareholders) and Tariko obviously doesn't want to spend any more money to gain control over CEDC (most likely to strip the company off its assets on the cheap). In case of CH11 he will lose some money but still has a good chance to buy the assets out of court then.

    So with CEDC looking for new permanent outside management and a chief restructuring officer as well as financial advisors this points heavily towards a chapter 11 filing as without the help from Tariko there's no way to avoid this.

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    • There is an informal committee of CEDC bondholders, does anyone have an idea which funds are there?

      As of now, there's nothing to act upon, as the coupon has been paid. But getting ready in case of something is a good idea. And if bondholders don't agree with Tariko, they'll be fighting to get control of the company.

      • 1 Reply to kievjan
      • a handful of large funds, HFs predominantly, with GLG at the forefront I believe.

        The equity will be wiped out, end of story. Bond holders will have to take some sort of haircut, Cnverts likely to get par first tho. The exact manoeuvre, vis a vis the conflicts of interest, is Houlihan's job.

        Tariko has not been smart here, clearly should have toppled the structure from the top at a fraction of the cost, and appears to be a vodka mad megalomaniac... Clearly he has far too much skin in the game to back off now... Notwithstanding his ego ...

    • As the company has indeed hired a restructuring firm specialized in large bankruptcies (e.g. handled the Lehman Brothers bankruptcy) and a chief restructuring officer recently.

      The boards decision was unanimous, so even the Tariko directors didn't oppose.

      There would be no sense in doing so if there was the slightest chance for the involved parties to come to terms anytime soon.

      With Mr. Tariko now going after the bondholders his strategy seems quite clear: getting CEDCs assets on the cheap out of bankruptcy court. The benefits of such a move would far outweigh the pretty modest loss on the equity investment so this looks like a smart move.

      Would expect a bankruptcy filing in the first quarter of 2013 as AlvarezMarsal will need some time to prepare all the documents. Russian Standard might decide to provide DIP-Financing to upsize its stake in the company. Court will then hand over control to the major creditors which will get the new to be issued shares in the restructured company - with Tariko being the major creditor he will be in control then - without spending any more money and even better most of the current company debt will be erased then. That's smart.

      • 2 Replies to hageneriksson
      • ( As the company has indeed hired a restructuring firm specialized in large bankruptcies (e.g. handled the Lehman Brothers bankruptcy) and a chief restructuring officer recently.

        The boards decision was unanimous, so even the Tariko directors didn't oppose.

        There would be no sense in doing so if there was the slightest chance for the involved parties to come to terms anytime soon. )

        While the Tariko directors may not have initially opposed these moves, they appear to have changed their tune: From the Nov 16 letter from the Board in response to Tariko's letter:

        ------------------------------------------------
        As recently as yesterday, the Special Committee’s attempt to select a bank was opposed by Russian Standard – an interesting turn of events since Russian Standard had accused wrongly the Special Committee of dragging its feet in this regard and had participated in a unanimous vote in favour of retaining advisors just a few weeks ago. Part of the reason expressed as why the hiring of financial advisors was delayed by Russian Standard was that financial advisers were “hostile” because they contemplated the possibility that alternatives to a funding transaction with Russian Standard may need to be considered.

        -----------------------------------------------
        Thus far, Russian Standard has expressed concern with the CRO suggestion and appears to be interested in delaying serious consideration of this agenda item.

        The Special Committee intends to continue to promote this agenda item because it believes it is critical to the short and medium term needs of CEDC.

        Hopefully, Russian Standard will be fully supportive of this initiative, although it is possible that such action will not be fully embraced by Russian Standard and that the members of the Special Committee may be required to outvote Russian Standard on this matter too.

    • Seems to me everyone is missing something. By taking a position on the board of directors, Tariko has relegated himself to a position where his first concern has to be the shareholders. He himself is a shareholder, but a minority one, and as a board member he as a responsibility to do what is required for the benefit of all shareholders. It is obvious that he has a disagreement with the other members of the board as to how best represent the interests of all shareholders. By releasing the letter and the resulting decrease in share value, if he were the attempt to take advantage of this by, say offering to buy the company at a decreased value, he would be opening himself up to lawsuits from other shareholders. Also, as a board member, he is required to avoid/declare any conflicts of interest. I would think that on any decisions that might be seen as in conflict with Russian Standard he would have to recluse himself to avoid any conflicts of interest. He is in a very interesting position, he is a shareholder of CEDC, a board member of CEDC which requires him to act in the best interest of all CEDC shareholders, he is a bond holder of CEDC and is also a competitor. He needs to act appropriately or he could find himself in some legal difficulties.

    • The probability you are correct is substantial. What is your email? Id like to bounce some thoughts off you.

 

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