read again - pe gets to keep 33% in return for putting into holdings $175M. lenders get 67% for their elimination of $700M of debt. that implies asset value of $525M before the restructuring (which was less than the debts) at holdings level.
as far as the banks are concerned, the security they have are the hedges. the hedges are worth about 80% of what the banks are owed. the banks can not be happy seeing the hedges monetized and parts of the proceeds going towards unsecured, preferred and commons. do not forget that the unsecured have a higher coupon than the secured debt.
if it was not for atls owning 23% of the commons, arp would have bought back a lot of unsecured by now, but atls can not afford the tax result of it...
interesting situation, would you agree?
you should at least diversify with comstock secured at 65. it pays effective 15%.
I have some arp unsecured, but I consider them a wild speculation at the 15c price I got them. I could not resist and got 50 of them. lets see what they do the next interest payment on them. I think the large bank debt will give the banks enough sway to make arp do something so that so much money would not go to unsecured. that is my logic. I would not mind be converted at the right price into equity, but I would never want to be overweight in a place where there could be a lot of sellers of the equity (which is probably what many do today - buy the bond and short the equity...).
fyi - I never short. out of principle. I ignore and walk away, but not short.
if there was not danger, bonds would have traded at above par. the question is if it will survive in tact. it looks like they could.
they have done the right moves so far. they did not distribute money that could be used to buy back bonds at discount.
would there be some damage come tax season? probably, but the advantage is 4:1.
well, it seems the plot thickens: the former texstar owners have a greater incentive to sell (or just continue to be paid 7% pik in more preferred) and the other pe funds do not have that incentive.
the lenders need to recoup their full investment and that will take some appreciation compared to today...
right now the terraform management are people appointed by sunedison. the point of the lawsuit in Delaware is to change the management, so they would go after sunedison. the India projects are ones paid with money for. there were supposed to be contributions on top if that. its not going to be a very short process, but if I am right, it will be a profitable one. in any case glbl is undervalued. the question is if by 50% or 150% (or more if the management change).
the more they buy, the more they could offer to the remaining holders... take it one day at a time. if it goes down, get some more. keep it simple.
lets agree to disagree. they could spend $50M to recap a bad loan. why fix what ain't broken?
most of these guys do not have too much cash right now (lenders - that is real capital...). the cures show they believe there is significant upside. I happen to agree. are we all right? lets hope so...
elbit right now is doing the right thing - they are paying down debt.
the refinancing of the Bucharest complex would enable them to pay down the whole debt to Bank Hapohalim. that debt is in Euro, so it has not increased with the nis going up against the Euro.
they have bought close to 17% of the bonds of serie H (believe payable in 2019 at 110) at less than 90. hope they have enough liquidity to do more of that.
I wish they would have bought some of the serie I bond (which trades at 60 and accumulates inflation + 6% per year and is payable at 2020 - if my memory is right).
Insightec is finally getting out of the GE grip and could soon start selling their devices through Siemens (for Siemens customers). that is a big expansion of the market and a totally new virgin part of the market, while the visibility of MR guided Focused Ultrasound is climbing fast. elbit has 26%.
Gamida Cell should start a final phase 3 for Nicord this year. that is big. elbit owns 20%.
Plaza is finally getting to a point where the way out of debt is visible. at this point elbit owns 44% of its equity. that is an option to a valuable asset (if everything goes well).
they need to finish selling their Bangalore land and do something with their Chennai one. that is one key.
they need to see what to do with their Tiberius land. that is a question mark in my mind. it should be worth more than something and they cut their expenses in a big way.
overall, steady as it goes. if insightec or gamida cell hit a home run (insightec, I believe, will become a more visible company in 2016-2017), elbit equity will start moving. so far they just showed enough value to payoff bonds and debt. next values go straight to equity.
good luck to them.
one more question - in order to make the sub units "real", do they need to make the dividends to commons? that could add more to the potential price in case of a sale.
I hope so too... I try to do the best homework I can before I invest and continue it after. I am right more than wrong, but when I am wrong it hurts more...
remember a lot of the preferred belong to texstar. I doubt the pe companies will fight for the investors in texstar (who loaded them with debt which caused the all thing).
I do not know their liquidation value. if it is equal to the common share price, it could take us down to $7 in case of sale. I do not know the answer to that. I doubt that is the case, but I do not know.
why is sxe finished as an mlp? one year of paying down old debt, doing more growth capex (increasing ebitda and increased debt...) and the ratios will be much better. this is not a one week game plan. its probably beyond 12 month.
by the way, if they could sell in 12 month with a better profile, they would without buying us. they are looking to make $300M, not arbitrage on us for another $40M. its not worth for them to pay cash first and then sell. a good finish would give them good pr for their next deals. when energy comes back, they will need public markets for their exit out of many other investments.
they probably had to increase the value at holdings in order for the pe funds feel they are getting their money worth when they add $175M. in the entire bk story, the only real cash was the one coming from the pe. the rest was money that was lent a long time ago.
the preferred have no economic value at these prices, so to retain the value of holdings they did this dilution. at the all scheme of things, they had 61% (before the effect of pik on the preferred) and now they will have about the same. they paid $50M to maintain their holding. oh, and the idr is now almost worthless (good luck paying $1.44/year on a much increased sharecount plus preferred interest... not much will be left for idr...).
anyway, I was not saying sxe will get to $10 or $15. what I said is that the holding's transaction implies a high value to sxe.
the market is much smarter than me (or even you...).
you have to make an offer to be deemed fair by third party (which could be liable for your estimates) and accepted by large majority of common share holders. outside of that, you are right.
there are laws and those funds have other deals and partners and if you screw the shareholders here, the lawsuits will be a problem to their reputation.