Hit the offer price and the seller pulled the offer. Never had that happen before. And the price was significantly higher today than last week as an FYI.
Who cares if it's at a discount? Pay down the line $500M to keep the bank happy, buy back $1B in bonds and 100M shares.
Equity drops $300M but liabilities drop $1.5B
I think that someone was just selling at any price. I had multiple orders in at 11, 10 and $9 and they filled due to the sell volume
If you can sell assets at 50 cents on the dollar but buy debt at 50 cents and equity at 10 cents on the dollar, you do all three.
Since the market doesn't believe in it, I agree. Use it to buy back common stock - it's more effective
Linn has plenty of resources available to it. For the next two years thanks to the hedges and distribution suspension, they will generate $2B in free cash flow. Additionally, they are spending another $1B in capex that they could utilize their drilling partners cash for. There is little doubt in my mind that if they were offered $5B in bonds for $3B that they'd find a way to do it. Their new balance sheet would be $5B in debt, 1B in partnership liability and $6B in equity.. A one to one ratio would be one of the strongest balance sheets out there.
That response makes zero sense since they already have the partnerships in place - all they have to do is utilize them. Too expensive? So what if you're generating a huge return and fixing the balance sheet.
Here's the issue: just like the vast majority of oil being purchased right now is at $80+ pricing due to abundant hedges and only the marginal barrel sells for half of that, only the marginal low quantity bonds are trading at 25 cents on the dollar. Buying back a billion would cost much much more I'm afraid. 50 cents? 60?
So, yes, they could easily buy every little bit of the cheapest offerings but I doubt the quantities are worth their time. The $350k that was just offered at 28 cents last week wouldn't even be on their radar screen - tho it should be!
Cut back capex further and utilize the new partnerships to the full tune of $1.5B. Purchase debt at 30 cents on the dollar with the expense saved. Cost: 15% rate of return to the investment companies or $225M per year. Reward: $3.5B in debt retirement gains and $300M+ per year in interest savings.