“Looks like they did it to manipulate the stock price down to help the note holders pick up more shares at a cheaper…”
Kev, why would MNKD do this? Quite the contrary, a company wants to convert notes for common at the highest pps possible to minimize dilution. To do otherwise, would constitute corporate malfeasance and I don’t think Al Mann (nor corporate management) would risk their life’s successes to help a few note holders. Remember, the clock was ticking and this debt needed to be renegotiated ASAP. With each passing day this debt remained outstanding, the shorts used it to fuel their feeding frenzy. MNKD had to act immediately; and IMO, should have completed this debt re-negotiation weeks ago. However, I believe they held off intentionally to strengthen their negotiation position in hopes of better post-launch Afrezza sales… which of course didn’t happen. Now they were under the gun; and considering the short-fuse, I think they came out with a pretty good deal for all parties involved.
Did anyone catch the fact that the $27.7M in remaining notes (now due in 2018) is "unsecured debt." This refinancing is really great news! Strengthening the balance sheet is exactly what was needed to suck the wind out of the sails of short traders. Stock exchange is minimal at less than 3%, and will prove to be a strategically smart move going forward. MNKD can now just sit back, collect their "growing" Sanofi royalties check(s) and put all their focus on advancing Technosphere. IMO, after the note exchange is completed (or possibly before), Institutional Ownership and pps will steadily improve. Added to my long term position today.
Be sure to research Goldman Sachs "The New Oil Order" - Making Sense of an Industry's Transformation ... especially listen to the podcast with Jeff Currie, Global Head of Commodities Research, Goldman Sachs. US P & E production is becoming far more nimble and resistant to International supply pricing pressures due to its' advanced and lower cost production technologies, thereby emerging as a significant swing producer and potential market maker (a major threat to OPEC). IMO, note holders see this "New Oil Order" transformation and will continue to invest heavily in the US energy industry. EXXI's aggressive actions to focus on reducing capital expenses and focusing on becoming a low cost (swing) producer in the region will definitely strengthen its' outlook and ability to renegotiate its' debt (earliest due in 2017).
PS. Ask yourself why the Saudi's want a piece of the US energy action ... Research "Petrochemicals manufacturer Saudi Basic Industries (Sabic) plans to invest in shale gas projects in the US through joint ventures" dated 27 July 2015.
"These guys mean business"...
And, so do many others with oodles of liquidity and borrowing capacity. Totally agree that we will see a surge in buy-out and partnership activity (immune-oncology space) in the not so far distant future, particularly given the recent biotech pull-back. Ripe for the taking.
If Sanofi does not live up to its' agreements, MNKD can revoke them and go it solo, if necessary. But this won't happen. Sanofi is fully aware of the potential impact to Lantus, which is exactly why they partnered up with MNKD to begin with. Lantus and Afrezza will be marketed as a complementary treatment regime, along with their other diabetic products according to the needs of the patient. Sanofi's long term vision is to become the "one-stop, customized" diabetic treatment Pharma in the world and they have every motivation to see Afrezza succeed.
No one disputes that EXXI is assuming extreme risk ... EXXI is certainly not an investment for the weak in heart. There are no guarantees, and investing in any oil play is "not in a very good place" as you so aptly state. That being said, IMO, if oil averages $60 - $65 bbl over the next 12 months, EXXI has significant potential to rebound, more than others in it's category. They've got over $1B in liquidity to continue paying on their debt thru to 2017. I believe EXXI is aggressively pursuing a note conversion or refinancing to push these notes back even further. If EXXI is successful in refinancing or renegotiated the 2017 notes, we will see a dramatic turn around in the stock pps.
No, it's too lengthy for MB board ...it's easy to find via Google search using the title of "Energy XXI's Preferred Stock Now Yields Over 55%" published by Seeking Alpha.
"the yield for preferred is horrendous"
I think you confuse common stock with "preferred" stock ... try reading the article, then we can discuss.
Typically, I never put much weight on Seeking Alpha articles. However, they do occasionally get a decent commentator and I like how George Rho supports his comments and analysis. Lastly, I'm not a pumper, nor basher ... people can do their own DD and make their own conclusions.
Excellent read and valuation analysis.
"we got major problems ahead!"
Correction...we got major problems now, and we can't afford to fall victim to the "re-set button" trick anymore.
Stupid is as stupid does! OMG, how little HRC understands the basic business model and what it takes for corporations to expand, create jobs and internationally compete. Attacking dividends is like #$%$ on a bomb fire and totally #$%$ backwards! If this is any reflection of what we can expect from HRC w/r/t to national security ... we got major problems ahead! After this comment, I'm starting to believe she could be worse than Obama (if that's even possible) ... IMO, very scary if she becomes President.
You are correct. A simple balance sheet comparison of before and after proves your point ... which is why people need to do their own DD research and not just rely on an MB for investment guidance.
The cited article is excellent and worth the read ... it provides an outstanding analysis of debt and liquidity concerns of EXXI. It also answers your questions and discusses risk comparison between preferred versus common stock. I would also strongly urge that the responses be read as they provide an even greater analysis into EXXI's options to address the long-term debt
Yes, I agree ... the deal wasn't cheap; but it bought them time and they're now in a far better position compared to most other "highly leveraged, developing" energy companies. Management bought the needed time to focus on their strategy of becoming a low cost producer and improve cash flow via aggressive cost cutting, spinning off low ROI non-core assets, increasing market penetration into natural gas via the Highlander Discovery Well--Freeport McMoran partnership, ect... We're already seeing some evidence of this with the sale of the Grand Isle Gathering System [GIGS] to CorEnergy (NYSE:CORR) for $257mil and the smaller $21mil sale of their East Bay Fields. No doubt, EXXI remains a speculative play; however they must have something that's appealing to attract a $1.46B debt deal during one of the most historically challenging times in the energy sector. And, I don't believe it was just because of the 12.5%. I think the Highlander Discovery Well--Freeport McMoran partnership may prove to be the golden egg going forward.
Yes, pps still holding even with low volume and weak support. Oversold, odds favoring long trades.
Yes, and the $750M debt due in Dec 2017 is "unsecured" debt; and these note holders are indeed anxious to negotiate a "secured" debt reissue. IMO, EXXI is in a position of considerable strength (with over $1 B in liquidity) to negotiate an extension along with many other favorable terms to the company. Bankruptcy is definitely not desirable for the 2017 note holders, especially in view of the $1.45 billion "secured" debt issue (due 2020) recently completed in March '15. Make no mistake, this action really concerns the 2017 note holders since now their investment (IMO) just got booted down into the "Bankruptcy" steerage quarters (along with us common stockholders). I think we may hear some good news about renegotiating the 2017 debt at the next quarterly reporting.
Yes, and the $750M debt due in Dec 2017 is "unsecured" debt; and these note holders are very anxious to negotiate a "secured" debt reissue. IMO, EXXI is in a position of considerable strength (with over $1 B in liquidity) to negotiate an extension along with many other favorable terms to the company. Bankruptcy is definitely not desirable for the 2017 note holders, especially in view of the $1.45 billion "secured" debt issue (due 2020) recently completed in March '15. Make no mistake, this action really concerns the 2017 note holders since now their investment (IMO) just got booted down into the "Bankruptcy" steerage quarters (along with us common stockholders).