Deep, Frontline makes a good point about the Deferred Tax Assets (which are in addition to what the litigation with PR is about for the refunds owed by PR). We could see a pre-pack where they keep some value for the preferred and common holders to avoid a "change of control" that voids the DTA. They want to bring in new money and also avoid a "change of control". Capitol Bancorp (CBCRQ) had a complex plan that would have done that. It didn't work because the FDIC trolls seized operating banks before they could pull it off and refused to waive old liens making it impossible for new money to come in. That's a good model to look at though. Management stays in control in a pre-pack and ends up with new shares.
I'm here because if PR does settle or there is some other miracle there will be a big trading opportunity. That's why I watch things closely and end up replying to posts because it's sad to see people so misinformed.
DRL, DORLO, DORLN and DORLP have been among my most profitable trading issues over the last couple of years. I trade all the distressed preferred issues. I'm here because it amuses me to see Liberals being targeted as "wall St. millionaires" by the politicians they still continue to support.
Actually Avi, I do talk with my good friend Haoleboy who just returned from Peru. In fact I first heard about BPZ from him as it was a local company he was excited about. Looked at the deal with Pacific Rubiales and that's how I got in at much lower levels. I'm happy that me posting the positive case is causing your little team of shorts so much aggravation and losses. I'm only posting the positive case because your BS blatant lies about Dolphins and Peru offend me. Heck, I don't even own NHLD (close to a new 52 week high) and enjoy beating up on you there as well. You were warned, now suffer the consequences loser.
I respect your opinion as I know that unlike most of the daytraders who post here you know how to read a Call Report (most here wouldn't even know what is was, when it comes out or where to find one). Things have changed from the financial crisis. You're right that a bank would never have done a pre-pack years ago. That was before Capitol Bancorp (even if they were unsuccessful) and others figured out how to do a holding co pre-pack and leave the operating bank solvent. Take a good look at the failed CBCRQ plan which you probably recall if you traded CBCRO / CBCRP.. I think that's where DRL is headed. Maybe the DRL common and preferred keep something for the same reason that the bank tried to keep something for the CBCRQ issues (preserving the DTA). I just can't see new money coming in and giving a free ride at 100 cents on the dollar to 200+ mil of existing preferred and some holding co debt.
Maybe a sale or merger will happen, but I'm not optimistic. With all the new regulatory rules and consent orders in place, golden parachutes are out. There is really not much incentive for management to sell the bank, even if it's in the best interest of shareholders. Management does much better for themselves in a pre-pack.
Nothing wrong with day trading the headlines and making a few bucks (as I did) if you don't overstay your welcome. The positive legal headlines were predictable. I don't want back in at this point. We're getting too close to the capital plan deadline. Good luck. I hope I'm wrong, but you really should actually read the SEC filing. The asset sales reduces tier I capital and says that rather plainly. It doesn't "shore up" the balance sheet.
Robert, I think wolfman has it right. The shareholder lawsuits go in the unsecured debt pile when they do a reorg and get paid at 10 cents on the dollar. The best solution for shareholders may be to just sell the whole bank. It's certainly the best outcome for the preferred. The problem there is that management is looking out for themselves - not shareholders. If they keep their jobs and recapitalize the bank, it's a huge success from their point of view. They'll get new shares for free anyway and the new ones will be worth more than the old ones. If you own DRL you've got to either be day trading the headlines, betting on a buyout of the whole bank, betting on a quick settlement with PR or betting they win outright in court in the next couple of weeks including appeals.
I think deep explains it pretty well. Market cap is around 35 mil. They need to raise in the ballpark of 350 mil minimum to cover the loss on the asset sale, the loss of the PR tax asset and some cushion for other stuff that the regulators are probably throwing at them right now. No one is going to put up new capital unless about that amount is being raised. New capital doesn't want to put in money unless it's enough to resolve the crisis and leave the bank well capitalized. No one is going to put in 200 mil and still have a bank in crisis for their investment.
As a general rule most companies can raise about 20% of their market cap doing a secondary or rights offering. DRL needs to raise 10X the market cap. That's why I don't think a private pavement or rights offering is going to work. I think they will try a pre-pack to raise that amount. Don't think they can do it any other way (except selling profitable US mainland operations, which they don't want to do).
I think I'm in the right ballpark. I know Boyt thinks they only need to raise 20 mil - LOL. Must be the new Liberal math or something.
Robert, I think you are on the right track. I don't think the sale will close until they raise capital to cover the loss from the sale as well as the tax issue shortfall. A private placement without a bankruptcy is conceivable, but I don't think it's likely. They need to raise more than 10X the current market cap of the equity. That makes a rights offering or private placement difficult. There is also significant par value of preferred stock. I think that new investors would rather clear out the existing common and preferred holders.
If you look at the initial plan from Capitol Bancorp (which used to trade as CBCRQ), I see something along those lines. They were trying to sell NPA's, raise capital and do a pre-pack. I see DRL as headed down that same path.
The sale improves liquidity (assuming it closes), but worsens the capital ratios. I think that many of the people in PR like that the government is playing Robin Hood and taking money from rich Wall St. Millionaires (that would be you) and supposedly giving it to the poor and downtrodden. My view is that the government won't stop playing politics until they lose in court (which could take awhile). In the meantime, DRL needs capital and I believe they are likely to restructure (their word) their balance sheet with some type of a pre-pack bankruptcy to raise capital.
DRL was trading around $10 before the tax issue hit. I would say you have about an even money bet that they settle with PR or win outright in the near term and can avoid a pre-pack. I don't like those odds. No position.
From the 8K:
The sale of the Assets pursuant to the Purchase Agreement will adversely affect the Company’s compliance with its regulatory capital ratios and as a result the Company will continue to be “undercapitalized”
The company has a much stronger balance sheet. They are now consistently profitable and have grown (including the GTAX acquisition). The shares trade more actively than they used to and float has grown (GTAX acquisition, private placement, etc). The company just upgraded to a larger auditor.
The shorts are right that NHLD does trade at a discount because it's not listed. I predict that management does a reverse split and gets the shares listed within a year. The company certainly meets listing requirements (ICH was listed and had lower revenues, a weaker balance sheet, a smaller market cap and was not consistently profitable). The problem with the short argument is that it's a GOOD THING to buy stocks like this BEFORE they get listed while they trade at a discount. Shorts have it backwards as usual. No wonder they are losing money.
Bump the truth about favorable conditions in Peru. One of the best countries in Latin America to invest in. I am also partial to Colombia.
Good point latenightinvestor. The FDIC is a bunch of Vogon trolls. The regulatory consent orders invariably make a bad situation much worse. The regulators have already caused a potential liquidity crisis by limiting access to some types of funding. The bank is battling that crisis as well as the capital deficiency simultaneously.
Suppose DRL does win outright in Court or settles with PR favorably. Are they going to say put the 200 mil back in tier I and have a nice day? Seems hard to imagine that would happen. At best they are going to want a big valuation allowance against that asset.
George, the bank is in a desperate situation. The regulators have their boot on their neck and the bank may only have a couple of weeks to beat PR in court or raise capital.
Good luck. I'm done gambling with this one for awhile. I feel lucky to have made some cash trading the common and preferred issues. I agree with you that NORMALLY selling distressed assets is a good thing for a bank. Many trade higher after if happens. You need to view the asset sale at a loss as half the solution. The other half is that they need to raise some capital to offset the loss on that sale as well as the rest of the capital hole they have. They use the word restructuring in the 8K. They could have said they were looking to sell profitable mainland assets. They could of said they were looking to sell the whole bank.
The good news is that I think you'll get some positive headlines on the court case in the next couple of weeks. The court is spanking PR. Liberal propaganda can apparently deceive 51% of the people, but it doesn't fly very well in court. Don't overstay your welcome.
dhb, you are truly ignorant. What exactly do you think that restructuring the balance sheet which they referred to in the 8K means? Do you think that's a good thing for equity holders?
George, why trade a stock if you really don't gave a clue what's going on? The sale is being made at a loss. It helps their liquidity crisis, but worsens the tier I capital situation. The company is doing a balancing act trying to manage those dual problems - either of which can put them out of business.
Disc: no posiiton
From the 8K
The sale of the Assets pursuant to the Purchase Agreement will adversely affect the Company’s compliance with its regulatory capital ratios and as a result the Company will continue to be “undercapitalized” and subject to further regulatory action as described in the Risk Factors section of the Company’s Form 10-K for the fiscal year ended December 31, 2013 as filed with the Securities and Exchange Commission on March 21, 2014 as well as in further disclosure in subsequent filings by the Company on Form 8-K. The sale of the Assets pursuant to the Purchase Agreement will also improve the Company’s liquidity position, reduce its brokered deposits and reduce its expenses relating to managing non-performing assets.
Why do you suppose that PR keeps losing every single court battle then? It was predictable that PR would lose in court based on the reality of what happened. Recent court decisions are the most objective evidence. Unlike you, the court is not easily swayed by left wing propaganda.
I checked the announcements in 2013. They had the Global Hunter Conference in late June 2013 (just like this year). Next announcement after that was the Q2 earnings report and operational update on Aug 8th. Perhaps the company will provide more frequent updates this year. I think they should. The drilling schedule is much more active than last year, so more frequent updates would be warranted. On the other hand, they might just wait for the Q2 report in August to give an update as they did last year.
I would suggest reading the Hitchhiker's Guide to the Galaxy by the late Doug Adams (or finding the movie) to get a good feel for what the FDIC is like. The FDIC are bureaucratic Vogons. They could care less about what is logical or cost effective. They could care less about wasting money to shut down a bank that doesn't need to be shut down. The bureaucrats are probably looking forward to some extra weekend overtime and a tropical vacation to PR including meals and a nice hotel. No taxpayer money is involved. All banks pay a fee that goes into a fund to cover seizing banks. There are less troubled banks these days, so they have more money in that fund.
Doral management is well aware of the above. They will come up with a plan to raise capital levels and save their jobs. I don't think they will be seized even if the court case is still ongoing. The problem is that shareholders might not like the plan. Shareholders would be very happy if they sold mainland assets or sold the whole bank. Doubt that is their plan though. They can also raise some new capital if they clear the deck of the existing common, preferred and holding co debt.