LG would be a hero for both long shareholders and for saving an american company. EASILY done and the alternative is going through BK. Equity wiped out, salaries cut, bond holders taking 10-20% on the dollar.
All of this would have to be done inside of one quarter, to be between reporting of quarterly results.
You're going to have to start thinking outside the box my friend.
Martin Shkreli bought up 70% of the shares stock...made the announcement and then said he would STOP lending the shares to the shorts.
In CLF, this would be incredibly easy to do. There are 56 million shares short. 150 million shares. ERGO, all tradable stock is 98 million shares. At today's prices that amounts to 200 million dollars, less than Casablanca Capital put in last year.
This would have to be done through multiple brokerage houses, in several different countries NOT to tip off wall street. 50-60 million shares directly purchased, after those shares were purchased you'll have to buy the rest in the options market (announcing after the fact that you intend on exercising those options). You will have effectively bought ALL the outstanding STOCK (even including insiders and long term holders). Then have a public offering off 3 million shares for 1000 dollars per share. That's your 3 billion dollars.
trading at 50 cents on the dollar. Albeit, this may be a good test on how/if CLF can buy the bonds at less than face value. I still have no idea how they pay the first and second lien bonds (1.1 Billion worth) in 2020. That's almost game over.
there is a hole in the bond value that will suck up all the 500 million. As soon, and if, CLF get's 500 million from the BL fund the bond prices (over 2 Billion) will raise in value. The equity value is ZERO, even if bloom Lake is sold for 1 Billion.
The only reason I didn't say the 2018 bonds is because they are trading at 50 cents on the dollar and that is the first risk of default. Lets say the company default on the 1/15/2018 bonds.
In the 2018 bonds you would 40 cents on the dollar to break even counting the current coupon out of chapter 11
Counting the coupons on the 2040 bonds (there are 3 payments before 2018 bonds do.... ergo roughly 38% of the 23 cent on the dollar) meaning your "break even" going though chapter 11 in 2018 is around 15 cents on the dollar.
IF chapter 11 in 2018, then the 2018 bonds are break even at 40 cents on the dollar, the 2040's are a 300% gain at that same 40%. Both are senior. BUT I'd bet going through chapter 11 the bond holders are taking less than 20 cents on the dollar and equity completely wiped out.
Albeit.... if CLF can pay off the 2018, you double your money plus 3 interest payments, and can roll into the 2040's which probably won't be much improved since the 20/21 bonds are the big hurdle.... and probably insurmountable. BUT if they can make the 2018 payment.... your looking at 7 coupon payments, and you're playing with house money going into the 2020 chapter 11.
Maybe a 25% 2018 bonds, 75% 2040 bonds make sense since they have a good shot imho of making the 2018 payment. Which at this point is only 150 million worth of debt. Then roll those gains into the 2040 bonds which will probably be trading sub 20 cents on the dollar.
Because they are so tied to the people (via fundraising) who are benefiting and making Billions from scalping the wages off displacing American workers. This has led to the top S & P companies making billions, the top 1% getting even richer... and spread poverty, divorce, latch key children all across the country. Don't think for a second our politicians vote in our best interest, they vote in theirs, and that means pleasing their backers.
The bonds are putting a 50/50 odds on BK in 2018. That is why the 2040 bonds are trading at 23%. Discounting the interest payments until 2018.... They trade at 12 percent of par for a 2018 chapter 11. Whereby, that is where WS believes the bonds should be trading at chapter 11 in 2018. EX all the equity and placing an 88-90 percent cram down on bondholders into 50/50 new stock/bonds. The company would have 200 million market cap in equity and 200 million in bonds. MUCH more manageable for CLF.
nah....LG has my vote. Top notch. He cannot get RIO/BHP to stop over producing and china to stop dumping steel. He is navigating a very tough environment.... and even the best laid plans may not be enough to save CLF from chapter 11. If you wanna blame ANYONE, blame the previous management. They BLEW money on BL, and buried the company in debt. LG was the turn around play, but IO prices continues to collapse. Even the best cannot save a terminal injury. And the mistake which lead to the terminal injury was solely the responsibility of the previous management.
IDK about the stock outperforming with the bonds trading at 23 cents on the dollar. At least before 2021. Until then, the stock will be trending towards zero, and the 2040 bonds will be trending lower too. My bet is the effective interest rate over over 25% is enough to cover the depreciation in bond value and puts you first in line in Chapter 11.
i.e. Stock in 2019 is .05 cents per share, 2040 bonds are trading at 10 percent of par. BUT the 75-90% earning in interest outweighs the 50% decline.
Isn't that my point though? You think they can make it to 2019. That's 4 years from now, and with the 2040 bonds interest rate north of 25%, you should have house money in the chapter 11 swap in 2019.
there is NO way Cliffs Iron Ore production will end in the US. Either Chapter 11 or someone will buy them out. If you wiped out the equity and forced a cram down of 15 cents on the dollar (less than Detroit bondholders received) you would still make money.
I think this is the dilemma stock holders are in now. Bond holders are going to take precedence, and they (some) are going to want 100% of their money back. CLF has 4 years to convince bond holders that they are NOT going to be able to pay it back, and attempt to buy the debt back piecemeal.
The BEST scenario for CLF stock holders would be a dark horse who owns a ton of stock also buying 75% plus of the 2020/2021 debt under 25 cents on the dollar AND be willing to take less than par in order to boost the stock. I just don't think that is possible AND if CLFs does get 500-700 million from BL, ALL those 2020/2021 bond holders are going to want PAR.
For this to work out CLF is going to have to pull a rabbit out of it#$%$.... otherwise it's chapter 11 in 2019.
Got a question for all the long stock holders.... Why not just buy the 2040 bonds? They trade at 23 cents of face value yielding an effective interest rate of over 25% AND if Cliff's survives and those bonds get back to par almost 500% upside in value. If Cliff's survives until 2019.... you have zero skin in the game (as interest paid for the Bonds). If they manage to survive past 2021, the 2040 bonds will certainly be trading higher than 23 cents per.
AND in the worst case scenario ( Chapter 11 )... all the stock equity wiped out, all bond holders are cramed down to taking 15 cents on the dollar in a mix of stock and bonds, You'd have a company with a enterprise value of 400 million dollars ( 200 million in debt and 200 million in stock). In the Third Quarter CLF earned 99 million in EBITA and could easily support such a valuation.
Hopefully France can surround all their so called "no-go-zones" with tanks, arrest, and deport EVERYONE inside. Then the west needs to stop affording ISLAM, our freedom of religion status.
and hopefully a few deep pocketed 13/g types that are in the debt market buying below 30%, who could be willing to take SOME, not back to par and refinance into the future.
Honestly long shareholders should setup a gofundme account.... at 2 dollars per share WE could buy ALL the debt.... retire it permanently, and make out like bandits on a 30 dollar stock rise.
Those bonds need to get into friendly hands, and retire them with newly issued debt at 1/3 the debt load. Seems like there should be a way financially engineer that.
Seems everyone is fed up with China's state own steel industries:
"More than 2,000 jobs at risk after Caparo, which has 20 sites in the Midlands, files for administration and Tata Steel braces for redundancies"
"“This is yet another hammer blow for steel and manufacturing communities already reeling from the closure of Redcar and job losses at Tata,” said Tony Burke, the union’s general secretary. “Ministers need to ask themselves how many more steel firms need to go to the wall before they step in. Failure to act could lead to a 'domino effect’ taking hold across the industry"
hahaha! So CLF dropped from 4.5 to 2.5 based on the fact that Essar was wanting to renegotiate price .... Now Essar is in court begging CLFs to provide pellets under the original contract Essar refused to honor. Seriously, these India's don't know English law very well... time to bend over Essar, pay the full and fair amount you originally agreed too...plus what you didn't fulfill the first go around.
1) LG's play on Essar, now Essar want CLF's pellets
2) BL, CLF is assuming deal accepted by JAN 29th
3) US Trade tariffs on Chinese steel
4) BHP/Vale disaster
Feels like the light at the tunnel.