The bond market doesn't have the liquidity needed for the fund holding $10sMM to exit. I think these swaps offer a much smoother exit. Just prior to the swap they probably short (hedge) the shares.For the company view I get taken out the upcoming maturities and puts, but they have time and options. So far they've increased equity by 10% for 3.3% of total debt. Highly dilutive. Also there's a growing list of companies that have done these swaps and ended in BK anyway.
Peers are catching a bid while CHK can't get out of the red.
Since Icahn didn't (at least publicly) respond it wasn't stupid?..."Try again", moron.
Signaled worry. And now the market doesn't know if there's more to come. Lawler really #$%$ the bed on that decision.
Seen a few posters say that they may turn around and buy back the common they issued. Don't know about the credit facility covenants but the preferred stock is in arrears - wouldn't that be a problem?
Blanket statement there. They had a 2.5% return in a year when the 10 year averaged 2.2% - very narrow differential when almost half is in corporate. if credit spreads are that tight why not own a slice of equities. just see a lot of earnings power on a $4.7bln port not being utilized. each 50bps = +/- $0.07/share pre tax
Surprised to see that 47% of the port is in corp. debt. - Not a good area to park that much on a risk/reward scenario IMO. Not asking for them to go find the next Buffett to manage the port but 2.5% even in this enviornment is pretty low.
As far as I can see the CEO of a major does his acquisitions and projects at the top of a cycle and sits on his hands at the bottom. Okay maybe "stupid" isn't the right term because individually (for them) it might be better to not take a chance at risking their cushioned life if results don't pan out within a year. But as far as their shareholders are concerned they should be considered as stupid.
Nice run after maintaining the credit base. However the collateral value is scary. Going further the stock price should be capped at today's range because they may need to backstop asset sales (or lack of) with secondary's.
The "guy" who ignores the bigger story but likes things in distress. His only metric is strictly present value over previous results. In the past he has been bullish on Enron, Worldcom, Fannie/Freddie, Lehman, 2007GM, Oil at $80, BRIC/ETF 5% from the high...So why wouldn't he like VRX this weekend?
Risky indeed. A lot seems to be hinged on the Bourbon business. Inventory is a major investment. If it doesn't work out and cash conversion slows they would need to issue more stock. The market seems to be forecasting that as a likely hood.
They are not incorrect in marketing Whiskey to millennials. However, no disrespect to the second President, but the brand name "Jefferson" isn't exactly one that stands out on shelves, especially if next to Jack or Beam. Also a google search doesn't show any brand activity on youtube, FB, or Twitter. Needless to say i have my doubts as well.
You might disagree, but supply/demand dynamics in natural gas could dramatically change within 18mos. If that happens it could take CHK to $15 bad balance sheet and all. You have that possibility, and the current one, which is shorts have piled on this to the point where 80% of the real float is borrowed. That float has turned 1.5 times since Wed. It might take 3 turns to wash out. Along the way you could get momentum bulls bidding up the price further. I don't see this as a "value" short as you seem to.
It gets even more interesting when using market value of debt and preferred rather than par. Market value of the enterprise may not even break $4b for CHK. I would assume that the PV/10 is $10b alone. So for $4b you can pocket $6b by liquidating the reserves, and make the OKC campus headquarters your home.
His L.P looks to be levered 4 to 1. If he's forced to de-lever (raise cash) he would have two options. Either sell more units to the public, or cut holdings. With IEP tanking today early chances are that the latter is more likely. One thing I find interesting (again) is the news flow timing on all this. Two hours before those $2 puts expire! Is this an attempt to "play" a little defense?
Citing leverage relative to losses on holdings
To be clear, you think that they would rather not use "precious liquidity" than execute the above scenario? If that plan were executed you essentially banish $6b from your book by simply shifting bond debt into bank debt. The $500m in annual interest rate savings will then go towards paying down the revolver. BTW without $6b the debt ratio covenants naturally get a lot looser. Now what would this mean for the stock? If you can eliminate $500m in fixed cost, or $.75 per share on a stock that's trading at $1.60, it's safe to say that the stock might go up a little...even in this climate.
In theory they could tender the debt for cash from the panicked market at $4b by maxing the revolver. In doing so they free themselves from a net ~$500m in annual interest
Not including next months maturity, I believe that the corporate debt is trading in aggregate total of around $2B. Depending on how in love he is with the assets - he could tender offer the notes for maybe $40 and still haul in majority of it from a spooked market.
He filed a 13d so by rule any transaction that results in a greater than 1% (plus or minus) change in stake he would have to update immediately.