Every bankruptcy is different. CJES is not comparable to SUNE because SUNE has a cash flow problem arising from operating problems, made more complex by way of an asset valuation problem. CJES had no cash flow problem, but had violated a loan covenant, potentially resulting in a cash flow problem by way of triggering a default. The matter was then addressed with negotiation, making the CJES bankruptcy more orderly. However, in both cases the final resolution will depend on the value given to assets, and the capital structure appropriate to a return to normal operation.
All you will have in exchange for your shares is the right to buy additional shares at a price yet to be determined. In other words, you can participate in the equity rights offering.
I expect that Chapter 11 will be declared when they get agreement on a detailed plan to issue new equity to existing bond holders. Since there are many creditors, all with varying security levels, it takes time to get everyone on board.
The new equity is not likely to be issued side by side with the existing equity. The creditors will not be willing to share much, if any, value with existing common stockholders. In the case of SWFT, which was very similar, existing common holders received 4% of the new common, plus warrants with an exercise price set high enough to insure complete recovery by creditors. Something of that nature is likely to be the case with CJES. By the way, SWFT entered Chapter 11 in order to cancel existing equity, and issue new.
NBR tried to dump some unprofitable assets on C&J in exchange for an equity stake. They probably knew at the time that their effort was of questionable merit, but was more interested in saving NBR.
The document refers to an agreement to provide debtor in possession financing. That indicates that a trip through bankruptcy court will take place. I expect that existing common stockholders will get a piece of the action, but that piece is unlikely worth less than $0.20 per share.
A normal trading volume for a company is just a little over 2% of outstanding shares per day. Applying that ratio, only about 100,000 shares are in an active trading pool. Of the remaining 9,900,000 shares, many are held by former common holders, but most are in the hands of former creditors. They are certainly holding back in anticipation of something.
Nabors may be negotiating the purchase of CJES assets, at a deep discount to book, in a prepack. They just have to get the unsecured creditors to take less than 50 cents on the dollar. Common is, of course, toast.
A judge will only form an equity committee if he or she believes that there is value in the company in excess of the amount required to compensate higher priority claims. The reason is because the expense for an equity committee is paid by the company in bankruptcy, not individual stockholders acting independently. No judge will authorize this expense if it's expected that the costs for same will end up being paid by the creditors.
Equity committees are quite unusual. Once formed, it's equally unusual for existing common stockholders to receive nothing once the bankruptcy is resolved.
If the judge agrees to formation of an equity committee, it will indicate that existing common holders will recover something after all the higher priority stakeholders are satisfied. Postponement may be a good sign. In other words the judge may be favorably inclined, but needs more information on how this is going to shake out.
Fifty dollars a barrel is not enough to dramatically increase drilling activity such that lenders would feel comfortable. At this point, the best that CJES can do is an agreement that would provide some equity in a reorganized company to current stockholders.
If trading normally, SWTF would have volume of about 200,000 shares a day, instead of 1000. When that happens, we will get a true picture of the value of the company.
Yahoo can't even run its own company properly. Why would anyone consider their opinion on energy matters to be worth the time of day?
If Yahoo is to be believed, slightly over 50% of the common is owned by insiders. That creates a very strong incentive to stay out of bankruptcy. On the other had, any company with the same financial condition and near term prospects of CJES is assuredly a good bankruptcy candidate.
Another consideration is that CJES holds primarily physical assets that are almost impossible to liquidate in the current environment. So a fire sale in bankruptcy would salvage fairly little for creditors and may not be nearly as good as keeping the company in operation. A prepack in which creditors take most of the company as compensation for pain and suffering is very likely.