I have been an investor in CEDC for 2 years. I have felt a lot of pain, and continued disappointment. Finally, I bailed on the stock and took a huge hit. My logic was that the bonds that are maturing in less than two months are in the 50s. There is not question that I am a fool for continuing to invest in this company after disappointing quarter, after quarter. Can someone who understands this better than me explain how it is possible to pacify the bond holders (which are in the 50s with less than two months to maturity), and increase the value in the equity?
IMHO, CEDC will be 12+ in few quarters. The company is taking steps to streamline operations, cut cost, improve productivity, get rid of waste, and become profitable. Bonds will become whole soon. That is what they want. All matters will be taken care of at the right time and in a proper fashion. CEDC will be a great company again.
and repays these investors in full. The bulk of the outstanding bonds mature in 2016 so he would buy plenty of time to adress the situation.
The 2016 bonds actually are trading in the mid 60s so Tariko should try to buy more of these at the discounted price to improve his position at CEDC.
at this point Tariko's motivation is quite clear: he wants to take CEDCs assets as cheap as possible and doesn't want to invest any more money at this time. What remains unclear is how he is planning to do so without violating securities and criminal laws (most likely he doesn't care about things like this) as the 2016 senior bonds will be superior to the majority of his claims.
the stock is weak because of the uncertainty created by the latest drawback from Tariko when he fled his obligation to repay the maturing convertibles.
( the easiest way would be that Tariko finally takes the obligation for the maturing convertibles
and repays these investors in full. )
Why would he do this when he can buy them on the market for 50 cents on the dollar. And why isn't CEDC buying back (and retiring) these bonds at 50 cents on the dollar? Are there restrictions on CEDC's use of cash for such purposes?
Whomever ends up holding these bonds (assuming CEDC can't buy them back before they come due) is going to hold a hammer over CEDC. They must be redeemed or CEDC will default and be forced into bankruptcy. I expect these bonds will be replaced with a new, highly dilutive bond issue that includes:
- attractive conversion price
- attractive interest rate
- lots of additional goodies - warrants, options, etc.