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Central European Distribution Corp. Message Board

  • symmetric_prime symmetric_prime Feb 15, 2013 8:58 AM Flag

    a question about the March bonds

    Right now the March bonds, which mature in 1 month are selling at about 25 cents on the dollar. Wouldn't everyone benefit if we offered say 75 cents on the dollar in stock for the bonds? Yes there would be significant dilution, but that trumps bankruptcy and the wiping out of all the near-term debt at a bargain price should benefit the common stock The bond holder takes a haircut, but gets more than the market is predicting he would get in case of bankruptcy. . (I picked 75% out of thin air, so if you respond as either a bond holder or a stock holder, I'm interested in your view of my wacky idea, not the wacky number I have picked to illustrate it. I also see there are significant details that I have omitted; e.g., the offer would have to be contingent on it's being accepted by at least ??%, lest a significant number of bond holders hold out for payment in full).

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    • Most stakeholders (not all though) benefit with that kind of dilution. Common SH should certainly like this over bankruptcy. My analysis of the parties involved is this: 1- Tariko wants full share of Vodka market in Eastern Europe; he wants CEDC and he wants it cheap; but he has made a couple of bad decisions so far regarding CEDC. First one was to buy shares of CEDC. Next was to offer new capital to keep CEDC afloat late last year. If I were Tariko, I would have wanted CEDC to file CH 11 and then buy the assets in a firesale or a distressed offer to the bond holders; I would let the common share holders to wipe out. The fact that he is actually a shareholder and has pledged new capital late last year makes this plan less attractive since he loses those investments; but still the best for him. 2- Common SHs (unfortunately including myself probably with my naked puts) are wishing for any outcome other than bankruptcy. Kaufman is just in this group and has no power whatsoever; just talks and makes too much noise. He is not a player here. 3- BOD or the company: Part of the management is affiliated to Tariko and wants what Tariko should want now which is Bankruptcy at best. The independent part of decision-making body in CEDC wants to avoid bankruptcy at all cost. The best option for them is to first ask Tariko to offer a tender to buy the whole company; I doubt Tariko offers any tender this way. Next the company should talk to other lenders for other debt capital sources. If CEDC can convince a bank or something to provide a $300 million loan, problem is solved. The polish fund that recently bought significant shares may be part of such a deal. If loan is not possible, the company should issue simply plan to issue 300 million new shares for $1 each ASAP (unfortunately they are running out of time for this option fast every day that passes). With the prospect of such a heavy dilution, Tariko will come on board and provides a counteroffer to the company (either a Tender or just providing new credit as a loan).

    • There are all kinds of options for handling the March convertible bonds. Converting into equity would result in significant dilution. Converting into new bonds (convertible or straight) plus some equity (shares, warrants, etc.) would minimize dilution but kick the bond can down the road.

      The big problem is convincing the bondholders that this is in their best interest. Especially Tariko, who owns some of the convertibles and has a major say on any restructuring. He will likely play hardball since he has put himself into a position where he may benefit more from bankruptcy.

      • 2 Replies to wsurfer06
      • hope someone can help here. I have a lot of money invested in cedc because of the announcement that mr. Tariko, was stepping in to help save company,I thought it would be a good investment.Now all I here is Hostile Takeover. what do I do, sell and take whats left or hold on . already lost 5o persent. any tthoughts appreciated.

        Sentiment: Hold

      • "benefit more from bankruptcy"...why does anybody think Tariko will benefit from bankruptcy??? In that case shares and convertible=0 and everything goes to the secured bondholders....nothing left for anybody else. Those bonds have a number of very tough clauses which protect them. "Sales of assets" and "negative pledge" etc. Tariko came AFTER those bonds so ALL his loans etc are BELOW sneior bonds.

 

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