See reference to Verizon Spin off of IAR and how Anti MORRIS Trust rules affect such spin offs
Subsidiary Spin-offs Can a corporation spin-off a subsidiary and, in the process, extract funds from the subsidiary in amounts well in excess of the corporation's basis in the subsidiary's stock and do so without tax consequences? The answer is yes, so long as the spin-off is part of a so-called ‘D' reorganization and the corporation distributes the funds so extracted to its shareholders and creditors "in pursuance of the plan of reorganization". This strategy is now employed in most spin-offs, including the spin-off of Idearc by Verizon and the "split-off" of Domtar Corp. by WY, with the result that the "monetizing" spin-off, which was supposed to have been "laid to rest" by the "anti-Morris Trust" rules, is alive and well.
Anti-Morris Trust rules What are the "anti-Morris Trust" rules? When can a corporation, either the distributing parent or the spun-off subsidiary, which has participated, recently, in a tax-free spin-off, be acquired? Is there really a two-year embargo on such acquisitions? If so, how can we explain the fact that Realogy, spun-off by Cendant, announced an agreement to be acquired by Apollo, some five months after the spin-off was completed or that First Data, which spun-off Western Union announced, within six months of the separation an agreement to be acquired by KKR? The I.R.S. has issued final regulations setting forth the rules that apply to post-spin-off acquisitions. These rules are quite liberal and belie the notion, widely and erroneously held, that such an embargo exists. In fact, in the case of an acquisition following a spin-off, the events are part of a prohibited "plan" (with the result that the spin-off would become taxable at the distributing corporation's level) only if there was an agreement, understanding, arrangement or "substantial negotiations", regarding the acquisition or a "similar acquisition", at some time during the two year period ending on the date of the spin-off.
Management surley had a plan, with council, to allow its stock to be delisted.
Just put together the possibility of debt reacquisition, capital restructure, expense reduction goals, current eps and pps, and cash balances. Certainly a risk, do your own dd, but wow what an opportunity even by first qtr next year. Idearc is not even priced for reorganization, it has been smashed as if it missed interest payments and is being liquidated for $0, with NO revenue possibilities. WRONG!!!!
One could acquire this company, today, for say .14 x 148 milllion shares = 20.7 million
You are paid back in one quarter. This is not a pharma one time wonder. It is a required and necessary business with real revs for goodness sake. This is an example of what bashing shorts can and will do to companies if allowed. Feel so bad for those that held. But NOW is the time to be buying.
I also feel they should not be buying their own stock here. Buy their debt instead, which will have a much greater impact on the pps. Most likely, Idearc will merge or be acquired(once the debt is resolved), with a massive gain for those who held.
Allowing the stock price to fall may in the long run be a good thing, if they are in fact allowed to buy the debt for cheap.
The de-listing may further help the stock since it should make it harder and more expensive for short sellers to buy back to cover their bets. It also takes away the one event that might encourage the couple remaining holdouts to sell their holdings.
I bought in a few times towards the bottom and plan to hold out for a substantial recovery. I might still sell my original spinoff shares to take capital losses, although I have enough losers elsewhere to make that unnecessary.
Eureka! This is very pertinent information with regard to what the Idearc management has been saying in the last two CC's that they have an eye toward buying back the senior notes in the open market (now discounted over 90%) but that there are potential tax implications in doing so under the terms of the tax-sharing agreement with Verizon.
The link says "In fact, in the case of an acquisition following a spin-off, the events are part of a prohibited "plan" (with the result that the spin-off would become taxable at the distributing corporation's level) only if there was an agreement, understanding, arrangement or "substantial negotiations", regarding the acquisition or a "similar acquisition", at some time during the two year period ending on the date of the spin-off."
The two year anniversary of the spin-off occurred on the date of delisting such that Idearc is now in safe territory with respect to an acquistion but more importantly, by inference, should be safely distant from the spin-off to acquire the discounted bonds. If they acquire a significant portion of the $2.8 billion bonds now valued at $280 million by the market using the $500 million cash available after the revolver drawdown the big issue that the stock market has had with the debt levels in the midst of a recession should be resolved for Idearc. No private letter ruling from the IRS is therefore needed and likely was never requested.
<The two year anniversary of the spin-off occurred on the date of delisting such that Idearc is now in safe territory with respect to an acquistion but more importantly, by inference, should be safely distant from the spin-off to acquire the discounted bonds.> --------------------------------------- How do you draw the conclusion that they can acquire their own debt without a problem from this? An "acquisition" sounds more like the purchase of assets owned by an unrelated party, not re-purchasing one's own liabilities. If it were that simple, I think IDAR would have made this known and not hired Merrill to look at a re-cap, would they?