Sabines lenders:
Either negotiate terms or Sabine files Chapter 11.
The creditors will lose millions.
Sabine:
Do we offer debt/equity swaps? (This option is dilutive to shareholders and frankly, with the share price this low {try to remember that debt/equity swaps involve discounted shares, sometimes up to 50%, so when you do the math on this, price the conversion at up to $0.04 per share and do not use current stock price} I don't really find that option too attractive because it would take billions of shares to pay off just $200 million in debt).
Sell assets?
Sure... They could...but it's one of those things where you sell an old painting in your garage sale at garage sale prices only to find out its a Rembrandt etching later.
If SOGC sells an asset now, while in distress and everyone knowing their distressed, they'll see later, when oil rebounds, that the asset was worth 10X or more than what they sold it for.
Their best bet is to get new terms on their debt and to offer up Senior Convertible Notes/Warrants to sweeten the deal.
Maybe they raise the interest on the debt... They keep the Credit facility in place...and they offer SCN's or Warrants up to sweeten the pot.
But a technical default hurts SOGC, their creditors, and clearly their investors...
We all know that common share holders come last in a default/bk scenario but here is the thing:
Common share holders have already been crushed with the collapse of the stock price so in a sense, they remain the one group who has the least left to lose.
It's the creditors who would be the biggest loser in a bk scenario because the shareholders have already lost 90-95% and ultimately, a judge would approve creditor protections for SOGC and they would ultimately emerge from BK with a cleaner balance sheet.
The creditors will lose the most in BK...and that is their motivation to negotiate...
It's also the reason SOGC is worth buying here on a gamble that the creditors recognize exactly what's at risk if they don't negotiate mutually beneficial terms to existing credit facilities and debt agreements.
