“'The EPA is a toxic waste dump . . . ,' said Landmark President Mark Levin."
I love Mark Levin. Go, Great One!
As an owner exclusively of Usec's 2014 bonds, I will be very happy if the common is still trading above $5 in early September.
John Kerry seems to be the continuing and latest source of appeasement on the Iranian nuclear enrichment problem. That is, he and the mistake prone IAEA. All they know is what the Iranians are showing them. Who knows what the mullahs have buried deeply in undiscovered sites?
Of course, John Kerry is not totally clueless. Better than I, he married for money (twice). First came the Thorne babe, then the Heinz widow. That's not bad work if you can get it.
Assuming a purchase price of $340, less about $30 in accrued interest payable in cash upon restructuring, I calculate the CURRENT yield on the new bond (possibly payable as PIKs) to be:
[377 / (340 -30)] x 8.0 = 9.73 percent.
The yield to maturity would be higher. And that ignores any possible value for the common shares also to be distributed to the 2014 bond owners.
The new bonds are likely to trade at a discount to par upon emergence from bankruptcy in my view, but the next question is, how high would the current yield need to rise to attract buyers?
Anybody see it differently?
I don't understand it. Other than the fact that it is somewhat clumsy for retail investors to buy them, and the transaction costs are high, it's a mystery to me.
Imbedded in the old bond is something approaching $30 in cash to be distributed upon emergence from bankruptcy in September. Obviously I assume that everything will go as planned, which I think is a safe assumption at this point.
For each old bond, the owner will receive a new bond with a par value of $377 bearing an 8 percent coupon (interest likely to be payable as PIKs for awhile), plus about 30 in cash, plus 145 USU shares.
Assuming that the new bonds are really only worth 80 cents on the dollar, the value of the old bonds should be roughly equal to:
($377 x 80%) + $30 + ($6.35 x 145) = $1,252.
But, since the bonds (CUSIP 90333EAC2) are selling at a mere $340 or so each, there must be something that I don't understand.
Obviously, I am long the bonds in my trivial account. Help!
Here is my calculation.
The facts are:
1. Usec currently has 4.9 million USU shares outstanding.
2. The current USU shareholders will own 5 percent after the restructuring.
3. There are 530,000 old bond to be restructured, with the owners ending up with 79 percent of the outstanding shares after restructuring.
So, my calculation is:
79/5 x 4,900,000/530,000 = 146.1 new shares per 2014 bond, rounded down to 145. (Rounding down partially accounts for the management shares also to be issued. The actual number per old bond may be 135 or such. Nobody but management and its lawyers know how greedy Usec's ham-handed management will be.)
In other words, 79/5 = 15.8, which equals the relative ownership between the bond owners and the current shareholders. That is, the bond owners will own 15.8 times as many shares as the current shareholders.
Since the current shareholders own 4.9 million shares, the bond owners will own 15.8 x 4,900,000 = 77,420,00 shares. And since there are 530,000 bonds, each bond will be allocated 77,420,000/530,000 = 146.1 shares, less what goes to management.
So, assume 145 USU shares per bond, before any possible additional reverse split.
Anybody who can punch a hole in my calculations, please do so!
Oops. My sentences are out of the intended sequence on that last post.
"One question: how did you come up with 145 common shares per old note?" I also recall that there were various posts on this board when Usec filed the pre-packaged POR that addressed the issue.
I did the math long ago and now I'm working from memory as it relates to the number of shares to be issued per 2014 bond. Since you've raised a question, it's worth going back to reconstruct. Later on that.
If I recall correctly, there is also a planned additional reverse split (once again, working from memory since I haven't looked at it in months), so that may be the source of the difference between your and my calculations. At this point, I'm not sure why a reverse split would be necessary since the share price is holding up so well with most of the "known risks" known.
Do you think for a minute that Iranian funded Hamas started its current activities in Gaza as a coincidence with the expiration of the July 20 negotiating deadline. It is a mere diversionary tactic to take the world's minds off the bigger issue with Tehran. John Kerry and his boss don't understand such real politics.
If I were going to guess, the new large shareholders will several large U.S. institutional investors, such as PIMCO and its ilk, none of whom will have control.
Presumably the DOE knows the answer to that question, even though the SEC and bankruptcy court apparently do not. A July 7 article by Dow Jones said this:
"Holders of about 66% of USEC's $530 million bond debt have pledged to vote for the Chapter 11 plan. However, who USEC's bondholders are, and who the new owners of the company could be, hasn't been disclosed.
"Nowhere in the Chapter 11 plan voting materials or court record are the bondholders that will control USEC identified. Citing a policy of not commenting on 'ongoing cases,' the DOE declined to say whether it knows who will own USEC.
"A federal bankruptcy rule requires that every group or committee that consists of or represents multiple creditors acting in concert to advance their common interests file a '2019 statement.' Such statements, named for the rule that requires them, are routinely filed in corporate bankruptcy cases, identifying members of groups and the nature and amount of their holdings.
"No 2019 statement was filed by the group that identified itself as the ad hoc group of consenting bondholders in USEC's Chapter 11 case.
"Akin Gump Strauss Hauer & Feld, the law firm that represents USEC's ad hoc committee of bondholders, didn't respond to requests to explain the lack of a filing. USEC spokesman Paul Jacobson said the company's advisers had said the rule means a 'party in interest can demand the names and the holdings of an ad hoc committee.' A 'party in interest' in a bankruptcy case is someone with a stake in the Chapter 11 proceeding."
That is, I bought some 2014 bonds (CUSIP 90333EAC2) for a little less than $340 each. Since I get about 145 common shares per old bond, that works out to $2.34 per USU share. And that ignores the value of the new bond and about $30 in accrued interest to be paid in cash on the old bond (upon emergence).
Why would anybody but a day-trading gambler buy USU shares any other way?
While I am hopeful for the long-term, post-BK future of Usec, I think the only way to buy it is by way of the bonds. Of course, I hope I'm wrong and that buyers of USU will be able to buy at today's share price, hold, and make bundles.
I suspect that a substantial portion of the short selling has been naked. Wall Street is not for the unwary.
I don't think that anybody has mentioned this point, so I will.
Since entering bankruptcy, Usec's bonds have been trading "flat," meaning without accrued interest. So, when one buys a bond, he doesn't have to pay for the accrued-but-unpaid interest to reimburse the seller. In bankruptcy, the bonds trade flat because there's no expectation that the interest will ever be paid to the unsecured creditors.
But that's not Usec's Plan, as I understand it.
Upon emerging from bankruptcy, the old bond owners will be paid accrued interest at 3.0 percent since the last time interest was paid, which was 10/1/13. So, assuming late September emergence, bondholders can expect to be receive something approaching $30 per bond in cash, for nearly a full year of interest.
If some bloke purchases the $1,000 bonds for $335.50 (today's last trade), in addition to the new bond with a par value of about $377/$1,000 and roughly 145 new common shares, he'll receive back about $30 (about 8.9 percent of the purchase price) in cash.
Hmmm. The world wonders (or at least I wonder) why the bonds as selling as such a deep discount. What am I missing, girls?
I'm somewhat amused and puzzled by the thumbs-down on this post. Hmmm. What does that person have in mind?
1. I recommend that you not read this. You're better off uninformed.
2. I disagree that there should be any safe return to the use of nuclear power in Japan. It's better that Japan continues to import LNG at high prices.
3. I'm long natural gas and short USU (naked), so this prospect troubles me.
From Seeking Alpha:
"Japan's nuclear watchdog gives safety clearance for the restarting of two nuclear reactors in southern Japan, recognizing their compliance with stricter regulations created after the 2011 Fukushima nuclear accident."
Two up, 46 more to go, for Usec's major customers in Japan.
What a waste that would be. Think of all the Bordeaux that would be contaminated and undrinkable.