You can file Chapter 11 anytime you want.
For example... an event occurred or a product was delivered that you knew you couldn't pay for and or created a liability that would never be satisfied many like (john's mansfield) filed chapter 11 ahead of time.
For Linn if they can project no end in sight and they are in default on loan convenants; with no ability to pay or restructure (pay debts off for less than face value) etc. or get additional credit, etc. then, sure they could file tomorrow. But, more than likely, they'll pre-negotiate terms with a lender or such and put in place things in anticipation of filing.
I would believe, that the whole sector is suffering, and with no bottom to oil prices and no ability to do much, no one is going to want the property at any price - in the current circumstances... thus it pays to wait and see.
Would expect some lenders to work with Linn before pulling the plug. No reason not to try.
It would appear that 3rd Q CFlow from operations translated into the4th Q would be around $200M It would further seem that Qrtly debt service is around $135M. Since the canceled the divy and hopefully cut operating costs as quickly as possible... the decrease in unhedged sales should equate into the 4th Q of 2015. Next they likely curtailed Capex in a sizeable way.
Looking into the 1st Q i'd project similar results considering further decreases in operating costs, hedges in place, not buying furhter hedges into 2017 as it may not make sense; also capex should also be decreasing. Considering this i'd suggest the outlook for 2016 hedged should be similar. Likely the cash draws were meant to take the cash available prior to some technical loan default - which should be waived by a bank or bondsman.
Ultimately, the goals is to recover 100% on the dollar not fractional so no rush to capsize the boat when everyone is already drowning. Well managed... we should get to next year... i'd be wanting them to be buyers of discounted debt. Perhaps, they are looking at buying up debt privately with an orchestrated effort to retire some? If the debt is trading at 10C on the dollar... the $900M borrowed recently could be used to buy out 1/2 of it or more.
Its a long shot... but who knows. Stranger things have happened.
If true and oil rests at $35 for all of 2017 then the average price for Line is $51 which should be adequate to get us to 2018.
Exactly, Chapter 11 fixes nothing. There is no win to a filing. Going through an 11 filing is a horrible experience on the people - lots of unknowns. Bigger picture is unless oil trades higher the operating costs are too high. Good thing is if the hedging is true... they should be good for 18 months to repurchase and retire debt at favorable terms.
Because the cratering of the company is commodities priced driven and not company driven a Chapter 11 filing really solves nothing. As an experienced CRO I can attest that the only winners in a filing will be the lawyers and so called "consultants". Secured creditors get whacked, bondholders, unsecured holders and equity holders get nothing. There is no Win here. The best thing to do is to weather the storm. Doing so - thru the cycle - and it will be elongated and painful is the only viable solution. What the industry needs is a government "bail out" - like TARP did for banks.
Ya know... i'd like to argue this ... but i can't. Only thing is the price of oil is going no where in the next 9 months. No reason to rush into this - better to pare operating costs and reduce overhead and try and limp thru it. No way banks want to push LInn into 11 since there is no management of the assets once its in. I certainly would do everything to avoid 11 as everyone loses including the banks and creditors. oil will recover... just not next week. I would put the kabash on all unnecessary spending... and extend the balance sheet. Otherwise ... yep ... they are toast. Expect share price to trade in the 30c a share tomorrow.
There must be those liquidating shares associated with the purchase; such as IFLC... perhaps the shares are flooding the market? From a business perspective, the sell off is nuts. AER has long term non-cancelable leases staged out for many years. They are recovering more in lease payments future value than the planes are worth, with the benefit of the planes being worth millions upon expiration of the lease terms. Now, some argue, the price of fuel, makes economical planes worth less since incremental difference in running a plane that is just 15% less efficient is only a few million. That's like saying my 4c Rav4 is worth less today than my 6c Rav4 because the cost of fuel is less. Oh, and my 4c is 5 years newer.... really? NO. AER, on cash flow alone should be $60 stock.
Been a long time. Can't understand what the heck is going on; You'd think that low oil prices would make airlines that have leased the planes MORE likely to make payments timely and reduced credit risk associated with the third world credit exposure. But, NOOOOOO they want to focus on value of long lived assets.... really? How stupified!
This overall market is very irrational. There is no reason AER should be anywhere near this low; on a fundamental basis, it should easily by significantly higher. Thus I wait.
Tmm38 - the $25 per is / was BS on my part; i know that. But, i would "take" $25 (Gladly). Factually, post market crash... about the last 3 years... management here has "lost" it. Selling 11M shares at $4 under book (net of mindless) costs. Just to then buy back 1/2 of them three years later and again incurring massive fees - is DUMB.
What crazy things are next?
Not that my opinion counts.... it certainly doesn't. But I passed on their "offer". I figure; at some point they'll probably figure it out and my shares will be worth fair value.
I am prepared to accept $25 a share.
September BV = $700,680,000 subtract $100M = $600,680,000 BV
Sept issued shares = 41,327,300 subtract 7,692,307 = 33,634,993
Beg BV = $16.95 End BV = $17.85
Its actually a really stupid thing for these people to do.
Instead they should have just reduced the dividend and used the $$ to buy planes. Unless they are saying its not a good market for buying planes. In which case they should just refi debt and return the $$ to shareholders.
But this doing a secondary and then repurchasing the shares you just issued ... is silly, unless its really a scheme to put the shares into a controlled group by selling to friends and using the proceeds of the secondary to buy back open market shares.
Look for Fly to go private?