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All you need to know is that when volume increases, price explodes to the upside and when the stock retraces it typically does so on anemic volume until it finds its equilibrium between supply and demand. Usually an uptick in all 3 bond issuances to new highs or successive days of new highs has been followed by a delayed explosion in the stock. This has happened time and time again.
I must also say that it has been nice to not have to wade through post after post of doomsday scenarios on good and bad days. It is a tribute to this board and to the way IHUB is structured. That's why I hang out here and why I don't mind paying to do so.
GLTA
From Twitter Madclown_333 said: 2 of 3 Chemtura Bonds reach new highs again . Equity is finally waking up to smell the coffee that the Bonds have been brewing for weeks.
Grinning ear to ear right now. 500k shares! If only they had listened to us months ago ;)
Welcome Back, Javed.
Thanks for the kind thoughts. We would all appeciate any info you can pass along concerning the Judge. Based on the rulings thusfar, I would say he is fair and equitable to the Company. I have no doubts that he will also be fair and equitable when it comes to overseeing the plan of reorganization.
That would be very valuable information, especially if you knew the presiding judge had overseen a disproportionate number of plans of reorganization that treated the shareholders or bondholders positively/negatively. Since we don't have that data, you can at least go to the link below and see what Judge Gerber's written opinions have been on various topics from April 2005 to present. Just click on "opinions" and then "Judge Gerber" in the left hand column.
http://www.nysb.uscourts.gov/
Thanks for your input. Hopefully all is well with the Rogerson family.
It could also be that investors are positioning themselves in the company's debt to have a big stake in the restructured Chemtura. One group (Dish Network) tried that with Sirius XM several months ago, hoping to force BK, and ended up bidding the bonds up over par value to $105 and then another investor (DirecTV) came in riding on a white horse and lent Sirius XM enough to pay those bonds off and avoid BK altogether. So the vulture capitalist paid more than face value ($105) but only got paid back at face ($100). Something to watch for as we await a potential asset sale. Gotta be careful out there ;)
Thanks for the kind thoughts. It is best to keep some powder dry, just in case the price comes in closer than you thought it might.
I thought we were really on to something when the bonds got into the $70's. Now that we are in the $90 range it just doesn't leave much wiggle room for the folks buying those securities, so someone with money likes what they see. The yield spread between Chemtura's 2016 bond and a comparable maturity Treasury (risk free) is shrinking with each passing day/week. Right now the spread is about 580 basis points. The folks who are buying those securities, at this point, probably aren't chasing yield as much as they are principal appreciation, but at some point, that starts getting real thin and yield is the only remaining component for return on capital.
You beat me to it CMM. I tried to add a little color to my post and it slowed me down ;)
Chemtura's 2016 Bond (HTRA.GA) last trade $90.00
2009 Bond (GLK.GA) last trade: $84
If anyone else knows of any other bankrupt companies whose bonds trade at 90 cents on the dollar with a yield of 8.87% please pass the names along. I'm guessing it is a short list.
Bullish...
This kind of reporting annoys me..
Here's the scoop...
Chemtura recently was ordered to pay about $14.3 million in connection with an old legacy price fixing lawsuit from 2004-2006 to "Bridgestone Bandag" who had sought $17.3 million in attorneys fees, refunds and treble damages. The wrongful activity occurred during 1995 thru 1991, long before the company was called Chemtura. In years past, the company had previously paid a U.S. fine of $50 million (2005), $62 million in class action suits, and its share of a $91 million fine levied on the company and its conspirators by a European Commission.
Here's the annoying part..
Chemtura actually disclosed the newest $14 million settlement in its June 30, 2009 10-Q and even gave the arbitration panel's decision date as July 28, 2009. This 10-Q was released on August 10, 2009 but the writeup in Law 360 is reporting it as "News" on August 24, 2009 (2 weeks later).
End of Rant
Just thought i'd pass the story along in case someone else brings it up. Just goes to show that if you read the court docs, SEC reports, message boards, blogs, etc. on a regular (daily) basis you are well ahead of the portion of the market that is waiting on a headline or news wire report.
New ICIS Article Today on Chemtura
Sometimes There Is No One Strategy
By Joseph Chang on August 25, 2009 8:54 PM
In today's age of restructuring, companies are seeking cost savings and synergies left and right. A global and more competitive chemical industry dictates calls for a well-oiled organization that can compete on a cost and technical basis to serve demanding customer needs.
However, simply mashing disparate businesses together into operating units does not generate any real value.
This is especially true for specialty chemical companies, which tend to serve a variety of end markets.
Craig Rogerson, chairman and CEO of US-based specialty chemical firm Chemtura, drove the point home in an interview last week at our New York office.
Rogerson is striving to take the company out of Chapter 11 bankruptcy by March 2010 - a year after its filing.
"In the past, a lot of time was spent force-feeding a common strategy for all the businesses. But the fact is, there isn't one," he said. "There is no one strategy that covers crop protection, petroleum additives, urethanes and pool and spa." And that's OK, he said. The businesses can make decisions separately, as well as take advantage of certain shared services such as IT (information technology) systems.
Chemtura has submitted a 5-year long-range business plan to the unsecured creditors committee and set an October 30 deadline for all claims against it - the first steps in valuing the company's assets and liabilities so it can emerge from bankruptcy.
The plan recognizes the differences between Chemtura's many businesses. The strategies in the plan are business-specific and driven by the analysis of each one's competitive advantages, he said.
If employees are force-fed a strategy that doesn't apply, there is inevitably going to be that lack of belief that the strategy can be executed.
http://www.icis.com/blogs/editorscommentary/2009/08/sometimes-there-is-no-one-strategy.html
That is correct. $1.31 book value per share is calculated from the June 30, 2009 Consolidated balance sheet presented in the most recent 10-Q. Book value of equity shown is $319 million and outstanding shares are approximately 243 million. It is true that the $1.31 is only book value and the actual market value may be more or less than that amount.
If we get news and actual numbers (offer prices or term sheets) of these potential asset sales it will go a long way to aid in determining the current market value of those business segments. The company has been on a mission since 2008 to write down all of its Goodwill and PP&E to Fair value. I believe, based on the aggressive impairments that have been taken over the last year, and the language used in the latest 10-Q we will see a few more impairments (consumer segment) in the third quarter but after that they should be done writing down assets and there will be nowhere to go but up.
Here's another way to look at the bonds. Now that the 2016 bonds are trading at $88, the yield is 9.3%. If I remember correctly some or all of the DIP financing is at 18%. That is how far we have come in terms of the markets willingness to accept risk and the premium required to take on risk as it relates to Chemtura.
Thanks for the outpouring of support. I am humbled by it and it is truly appreciated. I will check back in when we get home. Meanwhile we are waiting on our discharge papers. Also waiting patiently for the equity market to take notice of what the bond market has been saying for some time now. Just takes patience.
Just checking in from the hospital, via the iPhone and I noticed that the 2016 and 2026 bonds are at new highs. Guess Someone like Rogerson's interview.
For anyone interested, my wife and I have a new baby girl that is happy and healthy.
Good luck to you all.
Chemtura on Twitter
Chemtura has a Twitter page (Link Below). I found it on a Google search string for "Chemtura" and last 24 hours setting. I look at this search string daily and tonight is the first time I have seen it in the search results. For those of you who use Twitter, consider following them and maybe whomever is operating it will see fit to provide us some additional information and updates. It has very few followers right now.
http://twitter.com/Chemtura
Just wanted to let the board know that I will be out of pocket for several days as my wife and I are expecting our 3rd child any day now. I would expect that the bulk of my attention will be focused on family for a while. I will be keeping up with the case as time allows but may not post as much or update the blog for several days. I say all this so you will know my absence will have nothing to do with my conviction for this stock. In fact, as events have unfolded over the past month my comfort level has done nothing but steadily increase. Please keep up the good work that has been done here.
GLTA
It doesn't cost me any money to operate the blog but I do incur some cost (fairly negligible) for using PACER. I didn't feel comfortable taking donations from merely posting messages on a message board because there are many others who contribute here. I put the PayPal donation link on the blog site because its contents are mine alone but I put it there more for compensation of time than for any costs incurred. I have received a few donations so far but I wouldn't quit my day job, lol. When I started getting around 400 to 500 visits per day I figured "what the heck" and put the link out there.
I looked at the blog site as an opportunity to address a need that was not being met but that I would do it for free and anyone who wanted to or could contribute was free to do so without me beating everyone over the head with it. Anyone who does not contribute because either they cannot afford to, or they find no value in the content or are just somehow opposed to the idea will get no hard feelings from me. It is basically on the honor system.
I felt the need to address this issue publicly on this board since there have been a number of posts about it. I don't want this issue to continue clog up the boards and get in the way of the DD that is being shared here. If anyone wants to get in touch with me on the issue please do so via Private message or through my email at rdmcfadden@gmail.com, from now on. I do apreciate the interest that has been shown in the blog site. It makes it worth doing it to know that others are using it and find some value in it.
Good Luck to All
Rodney McFadden (Madclown)
http://chemturaresearch.blogspot.com/
Sklauble, I am not ignoring you. I have sent you a couple of PMs but I am not sure if you can receive them or not. I don't remember what the different functionality levels are for the subscriber vs non-subscriber.
If you haven't received the PMs just let me know and I will post to the main board. If you want to email me, I can be reached at rdmcfadden@gmail.com
Chemtura Historical Bond Price Charts
http://chemturaresearch.blogspot.com/2009/08/chemtura-historical-bond-price-charts.html
Here is a link to some graphs I put together to show the recent historical trends of the bond prices. Within the Word document that contains the graphs you will find a link to the excel document on Scribd that has all the source data from FINRA. Feel free to take the excel data and make nicer or more meaningful charts or graphs if you like. All I ask is that if you use the data or make it better, please share it with the group because putting this information together from the FINRA site, in a useable format,was very time consuming.
The charts in the Word document use filtered data to remove all par value trades less than $50,000 so that the violent price fluctuations of the small or odd lot trades don't skew the data.
HFI, thanks again for your input. I agree that it will be great to cleanse the legacy liabilities, contracts and litigation through the bankruptcy process. Chapter 11 bankruptcy is a very powerful institution within the United States. Personally, I was relieved at the Judge's Bar Date ruling today (now set for October 30, 2009) which, in essence, looks like it has forced all holders of pre-petition litigation claims to come forward by the bar date or forever hold their peace.
The litigation claimants had tried to get an extended bar date and in some cases had argued for an indefinite time to come forward. They reasoned that some current or future potential claimants may not "discover" that Chemtura is responsible for their misfortunes until some time down the road. Upholding their motion would have forever clouded the residual value attributable to all stakeholders and would likely have required, from an accounting standpoint, some form of accrued liability for any claims that were reasonably estimable for which losses were probable.
As it stands now, from a financial accounting standpoint, the balance sheets will be much easier to assign value to if most or all liabilities are known and accounted for. Of course, there may still be some unliquidated claims but at least the total number of claimants will now be known.
Link to Bar Date Approval:
http://www.kccllc.net/documents/0911233/0911233090821000000000007.pdf
Court Sets Chemtura’s Claims Bar Date
http://chemturaresearch.blogspot.com/2009/08/court-approves-chemutras-claims-bar.html
Repost From Yahoo Board:
Credit for the post goes to Scratdaddy from the Yahoo CEMJQ Board. Thought you might find it interesting.
"Hello, I am a CEMJQ stockholder, in at $0.04 and very happy to have the stake I have, always adding when I can afford, and advise friends and relatives to buy this, as it has treated me very well and it aint done nuthin' yet. WHY?
I work in the oil industry, one of a number if engineers completing the wells that produce a large proportion of our domestic Oil & Gas from the Deepwater Gulf of Mexico. I've been at this for only about 30 years, and a few people think I know a little about it and am good at it. So, when we started getting our oil and gas out there, it was relatively easy from shallower normally geopressured sands that required a lot of great engineering, but not terribly difficult or expensive, or at least not much more than your typical moonshot at NASA. This has been great for our employers, the economy, our family...etc..but guess what?
The easy stuff has been developed, and will decline quicker than we all would like, and there is more, much more, but the catch is-it's in deep high pressure formations that are more difficult and expensive to drill and complete. In order to do it in a manner that produces a really great well that produces the 20000 or 50000 barrels per day that it takes to pay for all of this fun, some very dense, clear brines have to be used in very large quantities. These fluids are Bromide Brines. In the next few years, you will hear stories about huge deep fields that are 30,000'+ deep (Chevron's Jack field is an example has made the news, but there are more like it that will become public knowledge in the future)
As of now, there are only TWO remaining suppliers in the United States of what is really a strategic commodity that hasn't really been recognized as such-but will in due time, especially if oil prices start to really climb again. They are CHEMTURA and ALBERMARLE. Deepwater GOM is not the only oilfield application where these will be needed, many of the prospects in the onshore basins that are being developed and that will be developed in a high-demand market will require them too.
So, this is why I buy this stock,why I haven't sold a single share since I started buying it, and continue to buy it every time I get a little extra spare change.
AND THAT'S THE WAY IT IS. IT IS MY BAIL ME OUT FROM OBAMA PLAN. LUCKY ME THAT I FOUND THIS STOCK WHEN I DID, AND LUCKY YOU IF YOU OWN IT TOO. I'VE ONLY POSTED ONCE ON THIS BOARD, AND HAVE LURKED HERE AND AT IHUB, I WANT TO THANK ALL OF YOU THAT HAVE OFFERED SOME SAVVY ANALYSIS AND DUE DILIGENCE ON BOTH OF THOSE BOARDS, THOSE BOYS ON IHUB...WHAT A TIME THEY WILL HAVE IN CABO WHEN THEY GET RICH (AND THEY WILL, NO DOUBT ABOUT THAT IN MY MIND), WOULD LOVE TO SEE IT, I AM SURE IT WILL BE A REAL HOOT.",
Re: Changes & Redactions
Just realize that Chemtura is not the only chemical company attempting to divest assets during this tight credit environment. Although the corporate debt markets, in general, have had an amazing run lately (23 consecutive day rally ending August 11, 2009) credit remains tight for this type of financing. The decision to change, redact or use code words in the interim fee applications is not an attempt to be coy or to keep those "pesky shareholders" in the dark. It is a sound business decision. If too much information becomes available about a particular divestiture or divestitures, it could put the company at a disadvantage at the negotiation table.
Although the cat is somewhat out of the bag, at this point, with respect to a few business lines, be prepared for the fee applications to become less informative, going forward. The fact that at least two of these fee applications have been removed and replaced on the heels of the recent chemical industry articles would lend some credence to the notion that their contents are/(were) somewhat privileged.
Just enjoy the information we are privy to and know that they are working hard behind the scenes to get things cleaned up.
I update the stock and bonds daily at the blog site below. Just look on the left under the stock quote. If it is trading at a new high or if the price moves on some odd or small block trade I will usually provide some commentary on it.
http://chemturaresearch.blogspot.com/
Nice work Local. This is a demonstration of why it is wise to save a copy of the first document you see before it gets changed or blacked out. These things happen.
The invoice for Katten Muchin, Doc # 988 was originally filed as Doc # 938, which is now missing.
June 2016 Bonds at $86.50, a new Post-BK high. For that matter, it is also trading above where it was 12 months ago, BEFORE the big credit crunch and November market crash. Just hang in there. Back to work for me...
GLTA
Last I checked, the decision on Bar Date motion has not been released. There were a few limited objections so that may be causing the delay.
Much appreciated, Oaps.
Apparently we can add Polyurethane Dispersions to the list of business lines on the selling block. This line is part of the Industrial Performance Products division. You have to be a member to read the full article. I am not a member so if anyone is and can provide more detail, please do so.
http://www.chemweek.com/newsletters/cbd/Chemtura-Explores-Asset-Sales_20850.html
In reply to HedgeFundInvest:
HFI,
You pose some very good questions that have challenged me to look deeper at the information that is currently available to us. I wanted to follow up on one of your questions at this time. I am also looking into the CapEx issue as well, but need to do more digging.
One of your original questions is restated and addressed below:
2) Liabilities subject to compromise: Can anyone reconcile this to pre-petition debt plus other liabilities? (Meaning a breakout between the two)
I could not pretend to provide a better reconciliation than what was provided by the company in the most recent 10-Q as of and for the quarter ended June 30, 2009. See PDF page 18 of 87 (linked below) for a drill down of the "Liabilities Subject to Compromise" account which includes all classes of pre-petition liabilities. These amount to $1.8 billion.
On the face of the financials (PDF page 7 of 87) as presented on the Consolidated Balance Sheets we find the "Total Liabilities Not Subject to Compromise" which is broken down between current and non current. These accounts amount to $975 million.
Within the 10-Q you will also find the condensed combined balance sheets of the debtors in posession which effectively is the balance sheet shown in the Monthly Operating Reports filed with the court. The balance sheet presented in the 10-Q as of June 30, 2009 differs from that presented in the June 30, 2009 MOR because the one presented in the 10-Q has been updated to reflect the latest impairments which undoubtedly arose upon advice of KPMG. I find the balance sheets provided in the MOR to be considerably less reliable if for no other reason than they are not presented on a consolidated basis and thus, do not reflect items eliminated in consolidation. In addition they are unaudited and are not required to be presented in conformance with GAAP.
http://ccbn.10kwizard.com/xml/download.php?repo=tenk&ipage=6459723&format=PDF
With all that said, I do feel the aforementioned PDF pages 7 and 18 provide the most detailed information available to us, right now, with respect to both liabilities subject to compromise and those not subject to compromise.
I certainly would welcome any feedback you can provide on this or any other Chemtura related issue. Thanks for your interest here and good luck to you.
Rodney McFadden (Madclown)
Industrial Engineered Products Division Summary
Here are some excerpts from the June 30, 2009 10-Q related to the IEP division which includes the PVC additives segment. Based on the following information it would appear that the company is trying to target this division for a turnaround. The IEP division is the only one out of the 4 major divisions that experienced an operating loss during the last quarter and 6 months ended June 30, 2009.
“Industrial Engineered Products are chemical additives designed to improve the performance of polymers in their end-use applications. Industrial Engineered Products include brominated performance products, flame retardants, fumigants, organometallics (polymerization additives and intermediates), PVC additives and surfactants. The products are sold across the entire value chain ranging from direct sales to monomer producers, polymer manufacturers, compounders and fabricators, fine chemical manufacturers and oilfield service companies to industry distributors.”
“The primary economic factors that influence the operations and sales of the Company’s Industrial Performance Products and Industrial Engineered Products segments are industrial production, residential and commercial construction, electronic component production and polymer production. “
“For PVC Additives, a component of the Industrial Engineered Products reporting segment, the long-lived assets were in excess of the undiscounted cash flows. As a result, the Company recorded a pre-tax impairment charge of $60 million to write-down the value of property, plant and equipment, net by $48 million and intangible assets, net by $12 million as of June 30, 2009. The $60 million charge is included within impairment of long lived assets in the consolidated statements of operations.”
“Net sales in the Industrial Engineered Products segment decreased by $136 million to $188 million for the second quarter of 2009 compared with $324 million in the same quarter in 2008. The operating loss of $11 million reflected a reduction of $36 million compared with a $25 million operating profit for the second quarter of 2008.
The decrease in net sales reflects a reduction of $126 million in sales volume, a $6 million reduction in selling prices and $4 million impact of unfavorable foreign currency translation. Products sold to electronic, building and construction, and consumer durable polymer applications continued to show the most dramatic year-over-year reductions from the impact of the global recession. Nevertheless, demand showed modest improvement compared with the first quarter of 2009 as the most significant effects of inventory de-stocking abated.”
Operating loss for the second quarter of 2009 reflected a $22 million impact due to lower volume and unfavorable product mix, a $20 million impact of unfavorable manufacturing costs (primarily due to lower plant utilization) and a $6 million impact from lower selling prices. These decreases in operating profit were partially offset by a $4 million reduction in raw material and energy costs, a $3 million reduction in distribution costs and a $5 million benefit from SGA&R and other cost reductions."
“Net sales in the Industrial Engineered Products segment decreased by $306 million to $345 million for the six month period ended June 30, 2009 compared with $651 million in the same six month period in 2008. The operating loss of $32 million for the six month period ended June 30, 2009 reflected a deterioration of $60 million compared with the $28 million operating profit for the same six month period of 2008.
The decrease in net sales reflects a decline in sales volume of $268 million, a $31 million reduction due to the divestiture of the oleochemicals business in February 2008 and $7 million impact from unfavorable foreign currency translation. Operating loss for the six month period ended June 30, 2009 reflected a $55 million reduction due to lower volume and unfavorable product mix, $38 million in unfavorable manufacturing costs (primarily due to lower plant utilization), $2 million from unfavorable foreign currency translation and a $2 million decrease in equity income. These decreases in operating profit were partially offset by a $14 million reduction in accelerated depreciation of certain assets, a $5 million reduction in distribution costs, a $3 million decrease in raw material and energy costs and a $15 million benefit from SGA&R and other cost reductions.”
“Factors that could cause our actual results to differ materially from those expressed or implied in such forward-looking statements include, but are not limited to…
The ability to successfully complete the turnaround of our Industrial Engineered Products segment…”
Just to clarify, the PVC Additives line is actually the division that took the largest impairment in the most recent quarter. This doesn't mean it lacks value, it just means that the value recorded on the books was in excess of its fair value. This is from the June 30, 2009 10-Q report:
"For PVC Additives, a component of the Industrial Engineered Products reporting segment, the long-lived assets were in excess of the undiscounted cash flows. As a result, the Company recorded a pre-tax impairment charge of $60 million to write-down the value of property, plant and equipment, net by $48 million and intangible assets, net by $12 million as of June 30, 2009. The $60 million charge is included within impairment of long lived assets in the consolidated statements of operations.
Due to the factors cited above, the Company also concluded it was appropriate to perform a goodwill impairment review as of June 30, 2009. The Company used the updated projections in their long-range plan to compute estimated fair values of its reporting units. These projections indicated that the estimated fair value of the Consumer Performance Products reporting unit was less than its carrying value. Based on the Company’s preliminary analysis, an estimated goodwill impairment charge of $37 million was recorded for this reporting unit in the second quarter of 2009 (representing the remaining goodwill in this reporting unit). Due to the complexity of the analysis which involves completion of fair value analyses and the resolution of certain significant assumptions, the Company will finalize this goodwill impairment charge in the third quarter of 2009. Refer to Note 11 “Goodwill and Intangible Assets” for further information.
The impact of these two impairments totaled $97 million in the second quarter of 2009. In the second quarter of 2008, the Company incurred a $320 million goodwill impairment charge relating to Consumer Performance Products."
See PDF page 22 of 87 at the following link to the 10-Q:
http://ccbn.10kwizard.com/xml/download.php?repo=tenk&ipage=6459723&format=PDF
The only goodwill remaining on the consolidated balance sheet as of June 30, 2009 is that of the Industrial Performance Products ($177 million) and Crop protection ($57 million) divisions.
You got a boardmark from me for your contributions here, Clint. Keep up the good work.
Omnibus Hearing Update – August 17, 2009
Here is the update for today's Omnibus Hearing. We are still waiting on news of the motion to set the bar date. I didn't see it on PACER or KCCLLC. I will update that info as it becomes available. I also added a blog post which is just a reprint of the ICIS story about the PVC additives business being on the sale block. Hopefully it will help get the word out.
I'm off to catch up on today's posts.
http://chemturaresearch.blogspot.com/2009/08/omnibus-hearing-update-august-17-2009.html
Hedge, those are excellent points and very strong contributions. Now I'm extra glad you're here. I hope you will like it here and will choose to stick around. Thanks and Good luck to you
You are correct. I updated the content. Thanks for letting me know.
Nova, just wanted to acknowledge the work you've done here in just a short period of time. Thanks for your efforts.