Because there is no other choice. Do you really think that these negotiations were done on the basis of face value?
Face value means little. The bondholders are making a reasonable decision to take a haircut or lose much more in a forced bankruptcy. I am willing to be that under a regular bankruptcy, bondholders would be lucky to get 10 cents on the dollar.
The savior for this company will be the DOE loan, and that will not happen if the company is liquidated. Chances for a DOE loan improve after the proposed packaged BK.
Disclaimer: I do not own the stock. I have some of the bonds.
The value of Yahoo stock message boards is very low with most of the comments here having little to none in the form of information. If you are going to invest in this stock, you are going to have to do some due diligence of your own. The first thing you should do is take a look at the 12/16/13 8-K filing. In that filing there is an exhibit 99.2 that has company prepared projections for the next five years.
If you read the projections, you will see that even if you take the high end of the EBITDA projections, the average over the next five years is less than $50 million a year. Using this number and applying a 6.00X multiplier you will get a value estimate of $300 million. Deduct the $240 million in outstanding debt after the bankruptcy and you get an estimated value of $60 million. As a shareholder, you get to claim 5% of that or $3 million.
Just a different way to look at the equity. Personally, I think that I am being a bit optimistic in that scenario, but you can make your own analysis using the information.
At the end of the day, the bankruptcy is a good move that will make it easier for the company to get the Govt. backed loan needed to finalize the new plant. I especially like the fact that you get additional commitments from the two main stockholders that will put in a bit more money if they get the loan.
Do not have any suggestions other than to say that buying at this level might be a bit premature. I expect the stock to continue to drift down below $2.50 or possibly lower in the next few weeks/months.
Since a lot of the appeal of the stock is the dividend, I would think those dividend investors would want a sustained 10%+ return from this type of risk. That means there is some room for the stock to fall.
By the way, I sold 2/3 of my holdings last week at $3.10 a share.