CEF's can only do rights offerings (below NAV) by law. And the the reason is..you are NOT diluted unless you do nothing. Dilution, as per the law, means you own less percent wise of the fund then otherwise, ie. a secondary offering in ATT you do not buy.
If you have 1 one at $10 and buy another share at $5 you own them at $7.50. You still have equal ownership, just PRICE dilution on one share. Combined you are still the same profit wise and still own the proper % amount. You have not gained or lost anything in total, this is the point and why many countries ONLY allow rights offerings as a way firms raise money.
The ONLY dilution we are experiencing is dilution from the fees, which are relatively small.
The point is, don't do nothing....
DOn't count on the information agents...it is 95% of price (as per the 5 day formula) or 95% of NAV, whichever is lower. They can not just change the terms because they feel like it without canceling the offering and refiling. IF the 5 day formula is HIGHER than the NAV, then it will be the NAV, not the price.
You talked to a someone completely uninformed.
We're getting $0 in the new plan, no choice but to VOTE NO
If at first you don't succeed, try, try again. It's an adage that Great Atlantic & Pacific Tea Co. (>> The Great Atlantic & Pacific Tea Company) will take to heart as it returns Monday to the U.S. Bankruptcy Court in White Plains, N.Y., for a second attempt at getting out of Chapter 11.
The operator of A&P, Food Emporium, Waldbaum's, Super Fresh and Pathmark grocery stores put its plan to pay creditors and exit bankruptcy before a judge earlier this month. But after one day in court, the grocer postponed future hearings as its $750 million bankruptcy-exit financing package faltered and objections loomed.
After lead lenders J.P. Morgan Chase & Co. (>> JPMorgan Chase & Co.) and Credit Suisse Group AG (CS, CSGN.VX) couldn't find enough investors to help them fund the exit facility, A&P scaled down a $350 million term loan and a $400 million revolving-credit facility to $270 million and $375 million, respectively. It also decided to keep for itself the $40 million it had earmarked for unsecured creditors, leaving them with nothing.
Still in place is a $490 million debt-and-equity financing package from Ron Burkle's Yucaipa Cos., upon which A&P's bankruptcy-exit plan depends.
On Tuesday, in Manhattan, General Maritime Corp. (GMRRQ) will look to move forward with its restructuring plan and a related $61.25 million rights offering.
The operator of vessels that transport crude oil and refined-petroleum products around the world for customers such as BP PLC (BP, BP.LN) is slated to present an outline of its Chapter 11 plan of reorganization, called a disclosure statement. The court must sign off on this outline before General Maritime's creditors can vote on the plan.
A key component of the plan is a rights offering in which unsecured creditors may buy up to 17.5% of the restructured company's new common shares.
Under the plan, the company's senior secured lenders would be paid in full through $75 million in cash and new debt. Creditor Oaktree Capital Management LP agreed to put up $175 million in new equity, and existing equity would be canceled with no distribution for stakeholders.
Unsecured creditors aren't happy with the plan, which they said gives General Maritime's "old friend" Oaktree ownership of the company at their expense. Even though the plan itself isn't up for court approval yet, the creditors are moving to block the disclosure statement on the grounds that the plan can't legally be approved. They said the plan doesn't meet a legal obligation to distribute the most possible value to its creditors, among other alleged shortcomings.
by the time the rights hit $6.90 (the warrant present break even) 42m NEW shares are created ($2.50 new stock and $6 warrant). This is almost DOUBLE the amount of shares outstanding. this means they have to produce almost DOUBLE the income to be at the same income level.
Bad bet, I think. I am selling the rights as soon as they hit. The warrants are very over-valued, as is the common due to the offering amount and share count increase.
if you pay $.90 for the warrant value it is $6.90 to break even. Given the massive dilution that will hit before it even can get to that level makes it a bad bet, in my opinion.
the creditors can ask for a motion to have the stock canceled at any time. It is an overall pain for the courts to deal with a class that will never see anything and a big distraction. Probably a host of NEW lawsuits will happen because this thing is allowed to trade.
The creditors need to stop the madness before more confused people burn themselves.
CMO needs to sell shares above book value in order to add more income. Over time their spreads constrict. Over time it puts a lid on the stock price too.
Prices though have dropped in the ARM market.
CMO is over their seet spot unless you see the economy slipping again. A real possibility.
Also, in January and early February 2009, we further deleveraged our balance sheet through the issuance of additional equity, and we expect to maintain a debt to total capitalization ratio of between 45% and 50% throughout the remainder of 2009. While additional equity issuances mitigate the growth in per share results, we believe reduced leverage and an emphasis on liquidity are prudent during the current economic downturn
S&P LOWERS OPINION ON
SHARES OF ENTERTAINMENT
PROPERTIES TO SELL FROM HOLD
Recent Price : $17.22
The shares recently moved above our previous 12-month target price of $16.We see increased downside
risk from the trust's investment in mortgages backed by entertainment and retail properties reliant on
improved economic activity.We also expect only modest '09 earnings contributions from investments in
new projects, including a Kansas City waterpark.We lower our '09 forecast of funds from operations per
share by $0.10 to $3.95, and see risk to EPR's current dividend payout.We cut our target price by $1 to $15,
3.8X our FFO forcast, and our opinion is sell.
BTW, there is no secondary in the works, as I assume you know. As least offically none filed.
They look to have the cash flow at this point unless they want to do some purchases.
This firm is a triple net lease firm, the last thing retailers cut out is not paying their lease and when they happens it is really bad since the tenant is heading to court.
It is why looking at the tenants' credit is more improtant. AMC (I watch their bond prices)is low grade but not junk. Their paper is in the 11-12% range. You can see their financials at their web site. They have tipped to a lose even though revenue has held up. But I don't see them being a problem at THIS point.
I agree the stock is scary up here. But I own the preferred and the AMC leases are the most important for that class. The water parks, etc..effect more the common since THEY take the first hit in book value.
What does concern me is Brain never talks about many problems. We know they are out they and I am worried they will hit all at once.
Preferred shares are "senior equity". It must be paid first before the common can get paid, if that is what you mean. This one is cumulative which means if they cut the dividend it will be owed in the future. These have no maturity. The 7.35% you ask about is "at face value" or $25. EPR pref D sells for 1/2 that now so twice the yield.
Historically the preferred does yield less since it is first for dividends and first for asset claims in bankruptcy court. It is equity still so debt has first claim over that.
EPR is contracting somewhat these days, not expanding much. So the dividend on the lower yielding common is much less secure than the preferreds as the recent common dividend cut showed. It also is possible they might need to sell new common shares to secure their balance sheet as REIT's must pay out most of the income. They have little retained earnings.
For EPR to grow they need to sell commmon shares. But since the common is below book value, the market is not going to be happy about a "dilutive" offering. This means if you have a $40 asset and one share that share has a $40 book value or asset value. Sell another share at $20 and the value of the first share's asset drops to $30. So if EPR is to grow they would have to sell dilutve shares now. Also watch out for releases at lower values, this prompts assets to be revalued too and asset write-downs.
probably more than you ever wanted here.. buy the preferred instead IMHO.
Entertainment Properties Trust, 7.375% Series D Cumul Redeem Preferred Shares
Ticker Symbol: EPR-D CUSIP: 29380T501 Exchange: NYSE
Security Type: Traditional Preferred Stock
SECURITY DESCRIPTION: Entertainment Properties Trust, 7.375% Series D Cumulative Redeemable Preferred Shares, liquidation preference $25 per share, redeemable at the issuer's option on or after 5/25/2012 at $25 per share plus accrued and unpaid dividends, with no stated maturity, and with distributions of 7.375% ($1.84375) per annum paid quarterly on 1/15, 4/15, 7/15 & 10/15 to holders of record on the record date fixed by the board, not more than 30 days or less than 10 days prior to the payment date (NOTE: the ex-dividend date is at least 2 business days prior to the record date). In the event that the shares are no longer listed on the NYSE, the AMEX or the Nasdaq exchanges and are also not subject to SEC reporting requirements, the dividend rate will be increased to 8.375% per annum. Dividends paid by preferreds issued by REITs are NOT eligible for the 15% tax rate on dividends and are also NOT eligible for the dividend received deduction for corporate holders. In regards to payment of dividends and upon liquidation, the preferred shares rank equally with other preferreds and senior to the common shares of the company. See the IPO prospectus for further information on the preferred stock by clicking on the ‘Link to IPO Prospectus’ provided below.
Exchange Cpn Rate
Ann Amt LiqPref
CallPrice Call Date
Matur Date Moodys/S&P
Dated Distribution Dates 15%
None NF / NF
1/25/09 1/15, 4/15, 7/15 & 10/15
Click for Ex-Div Date
ERP has $1.2b in equity of which the preferred class has the first $10/shr. of htat $38/ book value. They are $416m of the total equity. Add $1.3b of debt in front of the equity adn it puts the common in a difficult spot.
A 15% drop in EPR's asset value drops the asset value of the common in half from $28 to $14. Is it realistic that EPR's portfolio has dropped 15% in the last year and more further? You bet it is. Rewriting these leases is not going to be easy in the next year or 2.
At $24 the common is way over-valued but the preferred offer a decent value. People are crazy to hold the common I feel. Lets put it this way, the common dividend is vastly lower than the preferred and who here thinks the common dividend is going UP in the next year? There is a reason the preferred are selling at 50% of their full value of $208m value.
Just my opinion.
We see how the results from the tender come in. They were not overly promising 1/2 way. The $4.88b convert is $80 plus 108 shares or 527m if converted. The other $4b tendered would be also 470m shares. This is 1/3 dilution to take that debt off the books.
The more debt off the books the harder it gets to take more off though. The stakes get higher.
But they will be adding more debt on as they burn thru another $2-$4b in cash. Honestly it is hard to run a business like this. Loss estimates running $7.5b this year alone. Even with $8b in debt swapped to equity the net worth is negative $10b and growing.
They are not out of the woods and any means.
""Isn't Ford simply buying back preferred stock that pays a dividend and replacing it with common stock that doesn't pay a dividend. The net result is that you have the same number of shares left outstanding when its all over. ""
Read the news. It will tell you, instead of relying on these idiots to give you crap info. Do have money in Ford, or a worker? You should know more about the firm if you have money in it.
Does anyone have the UBS report on Ford from Friday??