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SunLink Health Systems Inc. Message Board

peristentone 5247 posts  |  Last Activity: Feb 18, 2015 10:58 PM Member since: Nov 14, 1999
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  • Reply to

    This Is What Happened At JOEZ

    by peristentone Feb 12, 2015 6:17 PM
    peristentone peristentone Feb 18, 2015 10:58 PM Flag

    If they are forced into Chapter 11, what can Dahan do in court? He is a common shareholder.

    The leverage that a manager has in a bankruptcy is they can threaten the lender by saying "Give me enough of the reorganized company to make it worth my staying or else I am gone." But can he effectively make that bluff in this case, when there might be a better manager in Kim able to take over?

    The right framework for thinking about what is happening here is that Joe's is about to be owned by the lenders. The lenders do not particularly want to own the equity. Are they going to go with a reorganization proposal made by existing management, whose strategies look pretty awful and got them into this position in the first place? Or will someone like Kim step in, offer a different vision about where the company should go, and offer to head up the reorganized entity? I don't know Kim, or his resume, and I am not saying he is a better choice. I am saying that what we may see is a competing group of managers offering the lender a reorganization strategy. If you were in the lender's shoes, wouldn't you be tempted to go with a fresh management team if you had a key manager like Kim who had a very strong vested interest in seeing the company turnaround?

    Having seen this play out so many times now, common shareholders are not likely to see a recovery no matter which management team wins. And - if you really want to invest in a reorganized JOEZ - I think you can wait to hear the new management team's vision and first quarter results before jumping in. You don't want to buy equity before the company reorganizes, and even then it's unlikely that the common rises substantially until there are results proving a turnaround.

  • Reply to

    This Is What Happened At JOEZ

    by peristentone Feb 12, 2015 6:17 PM
    peristentone peristentone Feb 18, 2015 10:45 PM Flag

    Yes, that was my point.

  • Reply to

    This Is What Happened At JOEZ

    by peristentone Feb 12, 2015 6:17 PM
    peristentone peristentone Feb 18, 2015 7:02 PM Flag

    I'm still following JOEZ. I am interested in the news release that the CEO of Hudson is quitting the board and looking at his strategic alternatives. Apparently as part of the Hudson transaction, he took back about $23M of convertible bonds from JOEZ. Can someone explain to me what was the total compensation received by Hudson shareholders? How much of that was cash on closing of the sale, and how much of that was either equity or convertible bonds?

    And now the million dollar question: where do those convertible bonds sit on the hierarchy of debt? I assume they will NOT have seniority to bank loans? So if JOEZ does do a Chapter 11 those convertible bonds might be worthless? Has someone done the math? Given a large negative tangible equity, it's hard to imagine that even the bank debt would see a complete recovery? Is the convertible bond to Hudson part of the short term or long term debt on the balance sheet?

    What I am trying to figure out from all of this is what is the Hudson's CEOs incentive regarding a Chapter 11. My guess would be that he tries to do an out of court leveraged buyout that gives the banks most of the equity, preserves a more management amount of bank debt on the balance sheet, and gives him some equity in exchange for his convertible bonds and his agreement to manage the reorganized entity as the new CEO. I think shareholders will get effectively zero (less than 5%) of the reorganized entity.

    BUT, after terms or reorganization are made public and all sides sign off on it, it might be interesting to see if the new CEO could launch a turnaround. I'm not sure you need to get in early to see the benefit of that, but it would be a stock to watch.

  • peristentone by peristentone Feb 18, 2015 1:06 AM Flag

    Can someone summarize the case for and against investment in BFC?

    Some positives I see: selling near tangible book, good return on equity, and paying back debt. Over time that should transfer enterprise value into equity.

    What is the case against investing?

  • peristentone by peristentone Feb 12, 2015 6:17 PM Flag

    I have done pretty well in distressed debt investing, usually buying bonds in Chapter 11 and seeing my return after the company goes public again. I have seen at least 20 situations similar to what is happening at JOEZ, and the pattern is very familiar to me. I think the messages I am reading here completely miss the underlying dynamic.

    This is pure *speculation* as I have no inside knowledge. But the events of the last week suggest to me that JOEZ had reason to believe that they had some agreement with the bank, and based on that announced a conference call date. The contract was not signed, and on the way to the closing the bank raised new conditions. JOEZ cancelled the call, and the comments that they are consulting an outside group about their options is a clear flag to me that if the company cannot reach agreement with the bank they will either: a) declare chapter 11; or b) pursue a private equity deal that buys the debt and equity avoiding a formal chapter 11 (i.e., an out of court reorganization).

    Either a) or b) will effectively wipe out shareholders. This company has no tangible equity on their balance sheet. We can argue about whether the intangible assets have value, but the point people need to understand is that in a crisis like this, the private equity firms will give very little value to the intangible assets.

    What you have today with JOEZ is a binary situation. Either:
    1) The company will do a) or b) above, in which case shareholders are wiped out. OR:
    2) The bank will blink at the last moment, realizing that they don't want to own the assets in bankruptcy, and they will refinance. If 2) takes place, JOEZ stock will revalue to 70 cents to $1.10 quickly.

    To my eye, this would be a foolish investment at today's price. It's 35 cents up or 35 cents down, and you cannot game that outcome without inside knowledge. Talking about "hidden value" in a liquidity crisis is absolute nonsense. It's the #1 mistake I see in a crisis.

  • Is there any catalyst for an upside here between now and earnings around 3/2/2015?

    Obviously Puerto Rico will weigh it down.

  • Reply to

    SPCB - What a bargain!

    by commoncentsinvestor Dec 17, 2014 11:29 AM
    peristentone peristentone Dec 23, 2014 9:11 PM Flag

    Except they did a large shelf offering which clearly shows an intent to repeat the same tactic again. Or did they do a large shelf offering so they could avoid ever issuing more shares?

  • Reply to

    LEU stock price

    by vulcanfire18 Dec 19, 2014 4:48 PM
    peristentone peristentone Dec 23, 2014 9:10 PM Flag

    I was not asking if they will be "fine". I want to know what will be sales and EBITDA for next three years under different scenarios.

    The behavior of the stock suggests that both revenues and EBITDA will substantially decline over the next three years in most scenarios.

  • Reply to

    LEU stock price

    by vulcanfire18 Dec 19, 2014 4:48 PM
    peristentone peristentone Dec 22, 2014 8:50 PM Flag

    Assets in a bankruptcy would sell for pennies on the dollar. The question is what is the *secure* income stream that can be generated from those assets. If that income stream is declining, unlikely the market will assign a PE much higher than 2 or 3 to the declining earnings stream.

  • Reply to

    SPCB - What a bargain!

    by commoncentsinvestor Dec 17, 2014 11:29 AM
    peristentone peristentone Dec 22, 2014 8:47 PM Flag

    They periodically have been issuing new shares. That's the reason for the price action. Every time they need more cash the stock tanks into the secondary.

  • Reply to

    LEU stock price

    by vulcanfire18 Dec 19, 2014 4:48 PM
    peristentone peristentone Dec 22, 2014 7:46 PM Flag

    The stock price seems to suggest that the company's business model is not sustainable or has significant risk of collapse going forward. Can someone suggest what are the most probably scenarios for the next two or three years?

  • Reply to

    Where does MILL go from here?

    by hij4eduz Dec 10, 2014 10:58 AM
    peristentone peristentone Dec 10, 2014 4:38 PM Flag

    When will the margin selling be over?

  • Reply to

    Thanks Needham

    by angelinvestor29 Sep 29, 2014 10:32 AM
    peristentone peristentone Sep 29, 2014 5:12 PM Flag

    Has anyone read the Needham note and what does it say?

  • peristentone by peristentone Sep 20, 2014 4:50 PM Flag

    Can someone make an estimate on valuation of this company after restatement? If you assume even 50 cents in earnings for 2013, apply a forward PE of 20, you still only get a $10 stock? That's not an aggressive estimate, but a reasonable one given where peers trade. It doesn't appear to be dramatically undervalued.

  • I'm trying to find market research data for the last 20 years showing:

    1) Pricing of different grades of wholesale distilled spirits like rye whisky

    2) Amount of each type of distilled spirit purchased as well as projected market growth. I'm particularly keen to see when the mega-high-growth of rye whisky is projected to taper off.

    I'm also trying to understand how I can make an approximate calculation of how much forward inventory the industry has of the high growth spirits like whiskey. I'm trying to understand in the future if the demand is going to continue to overwhelm supply.

  • Is there a cutoff date by which you must buy USU in order to receive the new common shares? Assuming that date has gone already, it might account for weakness in USU common now.

  • peristentone by peristentone Sep 18, 2014 3:23 PM Flag

    You can easily calculate a value on this after the sale, after even 40% tax rate on transaction, north of $8. Allowing some discount for possibility that the transaction doesn't close, it might trade around $7. Yet it's near $5. What am I not seeing here? There is no liquidity issue I can detect. Yes, they lose money but losses are mild relative to liquidity.

  • Reply to

    ARLP versus BTU

    by get_on_your_job Jul 28, 2014 4:28 PM
    peristentone peristentone Sep 17, 2014 6:51 PM Flag

    jrad, this is a great overview. But in the bigger picture isn't ARLP simply deferring reality? Coal in this country has peaked and thermal coal utilization should begin a secular decline soon?

  • Reply to

    USEC - REAL information

    by kingedxxxxx Sep 10, 2014 4:45 PM
    peristentone peristentone Sep 16, 2014 1:18 PM Flag

    Is there a cutoff date by which you must buy USU in order to receive the new common shares?

  • Reply to

    news?

    by neoquant Sep 15, 2014 11:05 AM
    peristentone peristentone Sep 15, 2014 3:04 PM Flag

    Ethanol stocks have been getting whacked for a week. This looks like a larger on the sector trend.

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