We are fully engaged in a process to restructure Sunrise, our obligations and how we operate. While we clearly think all of our stakeholders benefit from such restructuring we don’t control this process and we cannot assure anyone we will succeed. Of course people listening to this call in this economic environment are wondering if we can successfully restructure this company without filing for bankruptcy protection. Let me assure you that as of now we believe we are working on viable initiatives to accomplish an out of court restructuring. We will keep you informed of any material changes.
We are engaged in active discussions with our largest lenders and our capital partners to restructure our debt and to provide additional liquidity to Sunrise. We are also continuing to downsize the company to reverse cash drain and restore a then smaller Sunrise to profitability. I have been meeting continually with many of our stakeholders who see that an in-court process would be extremely expensive and potentially volatile. They are also aware of our liquidity constraints and timing under our ten bank amendment. We hope that this understanding will prompt parties to do all that is necessary to accomplish this restructuring in the coming weeks.
Sounds "good" but still not "positive." I certainly hope he's correct about the "understanding" the stakeholders have. Normally, this thing would be under, but with the economy so bad, it's just possible that prices this low are not a sign of impending bankruptcy. I do keep coming back to the question: In an economy this bad, what does a bank gain from forcing a business into BK 11? Wouldn't it be better for the bank to hold on for an big upside at a future date? They could force BK and get pennies on the dollar or take nothing now and hope for dollars on the dollar in the future. I don't own a bank, so I have no idea which option looks better. Anyone with meaingful insight?
The problem from the bank's perspective is they are being asked for more money (in the form of continued access to the credit facility) to fund operations that are still losing money. At some point they must refuse to throw good money after bad. I think it's a highly likely scenario that the banks will not renegotiate the credit facility and will ALSO not accelerate the debt (even though they would maintain the right to at any time after 3/31) since that would force Ch. 11 which doesn't benefit anyone. This is what is happening with General Growth Properties (GGP) right now.