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Jax, Thanks for all of your DD on the invoices. Tracking the spikes in price in volume and attempting to tie them into significant items from the invoices is a parallel I didn't think about drawing. Thanks for your insight.
If I could give you another person mark I would. Keep up the good work!
Not sure where he fits into the ownership structure but The Most Interesting Man In The World was once quoted as saying:
"I don't often invest in bankrupt companies, but when I do, I prefer Chemtura."
Stay thirsty my friends ;)
Welcome to the board. I have tried to answer a few of these.
1) What is "steady state" EBITDA for this company? CapEx? I'm sure this varies from asset to asset in the portfolio.
As far as EBITDA goes I think it is a moving target. There is no assurance that past performance is indicative of future results because of the current economic environment. If you want to know what the company has set for its EBITDA targets, going forward, for determining bonuses for executives and key employees read the KEIP linked below:
http://www.kccllc.net/documents/0911233/0911233090714000000000029.pdf
As far as Cap EX goes, I am not sure what the targets are. Any capex would have to be immaterial at this point. Chemtura is in bankruptcy and needs to focus its attention on reducing its debt to improve its capital structure. As you probably know, capex is largely about establishing an investment in the future. This company has to focus on the here and now. As a common stakeholder I would not be too happy if they went on a spending spree that would benefit future periods if my stake were to be impaired because of it or worse yet my stake was wiped out because they loaded up for the future only to have it inure to the benefit of some new common stock issuance. Any material capex would probably be enumerated in the plan of reorganization.
2) Liabilities subject to compromise: Can anyone reconcile this to pre-petition debt plus other liabilities? (Meaning a breakout between the two)
Have not performed a reconciliation of the two and haven’t felt a need to at this point. As far as this goes, the interests of equity holders and the Unsecured Creditor’s Committee are aligned at this time and believe me the UCC has this under control. Just read the following blog post and link to the related court doc to see the results of their efforts thusfar:
http://chemturaresearch.blogspot.com/2009/07/chemturas-official-committee-of.html
3) I'm sure every asset it up for sale... anyone have a sense of valuation or sum of the parts valuation?
This article is from January but was in reference to the valuations determined by KeyBanc which was one of the institutions providing analyst coverage on Chemtura before bankruptcy.
http://www.streetinsider.com/Downgrades/KeyBanc+Downgrades+Chemtura+(CEM)+to+Hold/3284740.html
On a related note, China National Chemical Corp. (ChemChina) was bidding for parts of Chemtura, but withdrew from the bidding when the price reached US$1 billion. This gives some insight as to what the market was some months ago and the Company felt it wasn’t enough.
http://www.chinaknowledge.com/Newswires/News_Detail.aspx?type=1&NewsID=22159
You have to sign up to read the article
4) Fall off in operating results, I know that volume drop off in all businesses was an issue. Anyone have a sense if this was aberrant or the new level?
Only time will tell on that one. It will totally depend on the economy.
Aside from all of that, all of my DD has been chronicled here:
http://chemturaresearch.blogspot.com/
Here is a short article about Chemtura and Simmons First Bank in El Dorado, AR teaming up for some community involvement. The article itself is not significant. What is significant is that Simmons First Trust Company recently took a small position in the common stock of Chemtura as reported by MFFAIS. I have some familiarity with this institution through my banking circles and know first hand that Simmons First is a very conservative and well run institution.
There has been some discussion on the boards about the locals in Arkansas taking positions in the company and this is just another example that lends further credence to the discussion.
http://www.eldoradonews.com/news/localnews/2009/08/15/free-lunch-42.php
My initial thought was that it might be the unofficial creditor's committee but then kept reading and realized that the references to "UCC" extend well beyond the time they became "Official". Your assumption that it is in reference to the Unsecured Creditor's Committee is along that same line of thinking and is a better assessment than my initial thoughts as it makes the most sense.
Regarding the recent dumping by institutions...
Could it be window dressing time?
Here is an article that may help to explain why we saw so much dumping during the month of June. I did not post the entire article because of its size, just included a couple of paragraphs.
It will be interesting to see if those same funds buy back in, later on. Bear in mind that the concepts presented in this article may not be the reason they dumped, but maybe it is... Whatever the case, the amount of buying we saw on our run from $0.20 to $0.78 could not have been IHUB alone. Even if the ones that dumped do not buy back in, someone has taken their place.
http://seekingalpha.com/article/145872-the-deceitful-practice-of-window-dressing-why-has-the-sec-done-nothing-about-it
"Is this an honorable practice? No. Is it a truthful practice? No. Is it a deceitful practice that helps investment firms sell more investment funds to their clients and new prospects? Yes. In fact, Investopedia even defines one example of window dressing as “investing in stocks that don’t meet the style of the mutual fund. For example, a precious metals fund might invest in stocks that are in a hot sector at the time, disguising the fund’s holdings, so clients really have no idea what they are paying for.”
Thus, window dressing theoretically allows a fund manager to simply dump all the stocks that fall outside the fund’s stated objective before each quarter-end to deceive shareholders into believing that the fund is remaining true to its stated objective even if it is not. If this occurs, an investor in such a fund would never know that the fund manager is engaging in considerable style drift."
Nice post! Couldn't have said it better myself.
Wall, good to hear from you. I have been trying to wade through the 1100+ pages that make up the Kirkland and Ellis billing report and they seem to have all of the good stuff redacted. It's not like the WAMU case where Weil and others give us unredacted versions.
One word of advice to all. From time to time an unredacted version will get posted, accidentally, and will subsequently be pulled and replaced by a redacted (Blacked out) version. If you copy them to your hard drive as soon as possible you may just get to see some good stuff. I am not sure why some firms redact and others don't. In other BK cases I have seen names mentioned regarding asset sales and other goodies that were not already part of the public domain.
You're right. Must have had July MOR on the brain ;)
Don't know that there is any direct relationship that you can draw on a bankrupt stock trading on the pinksheets. As you can see over the last few days the bonds remained steady and the stock has been all over the place. You have to take a step back and look at the trends dating back to late March. Just look at the stock chart going back that far comparing where we were then to where we are now. You will see a similar patern on the bonds although you will not see such wild swings in price with the bonds. Their rise has been much steadier but the trend lines are decidedly upward sloping.
When the bonds are trading at $100, basically the expectation is for a 100% recovery. Chemtura has 3 bond issuances one is trading at $85 another at $79.5 and the last at $60. The price differences are largely tied to guarantees or lack thereof, creditworthiness of the issuer, bond rating, maturity dates and coupon rates. By comparison, (although it is not a direct relationship) the stock is trading at a price to book multiple of about .38 or 38% of book value.
For a discussion of the bonds see the link below:
This is an old post but the info about the guarantees is still relevant, as is the historical bond pricing.
http://chemturaresearch.blogspot.com/2009/07/chemtura-bonds-trading-at-post.html
Thanks for your insight and welcome to the Board!
Thanks Alex. That could prove very useful and save some money. I can rack up a nice little bill from time to time on PACER. Good luck to you.
One change was made to the MOR Spread to reflect that the outstanding shares are actually 243 million and not 254.5 million. I forgot to back out treasury shares. This change makes the book value per share go up $.04 to $1.35.
Thanks to our Asst. Mod, Jrdig7, for pointing this out! We're in good hands here, he doesn't miss anything ;)
Calendar of Events Updated 07/14/09
Not much left on the docket for Monday with the adjournments and resolutions. BP contract issue was moved to the September 29, 2009 Omnibus Hearing.
http://chemturaresearch.blogspot.com/2009/08/chemtura-calendar-of-events-updated_12.html
Haven't had a chance to read any of the billings. I am working on updating the financial stuff and the calendar on the blog. I am thrilled that others are working on the monthly billings. There is a lot of stuff to digest from the last few days.
Chemtura MOR Spread July 2009
http://chemturaresearch.blogspot.com/2009/08/chemtura-mor-spread-july-2009.html
MOR has been posted on PACER
Shows 8 million in operating profit and 1 million in net income and stockholder's equity of $327 million.
In addition there are several monthly/quarterly billing reports that have been released today. We will have to review them tonight or this weekend to get an idea of what has been going on behind the scenes.
Gotta get back to work. See you all later.
GLTA
It is a bit disappointing, but there is no denying that the stock has been able to withstand a lot of selling pressure from a couple months ago and has come roaring back on higher volume and in turn, higher dollar-volume. This is a sign of market conviction as opposed to market manipulation. This thing is much bigger than us IHubbers and our 310 boardmarks. We may collectively hold a really nice portion of the stock but I doubt if we collectively have enough money to move a stock with over 254 million shares and a market cap of $173 million from $.20 to $.78 in just a few weeks on increasing dollar volume. Rest assured there are other big names moving in to fill the void.
Looks like Apollo is no longer with us. According to MFFAIS they had sold all 3.73 million shares as of 06/30/09. It was reported on August 11, 2009. There was a pretty big selloff that occurred as of that 06/30/09 date which explains why it felt like the market just refused to let the lid off of this thing during June. Every day was just one beat down after the next. Now that the proverbial "weak hands" have given way to a fresh set of investors we have volume and rising price action.
Enjoy this ride we are on. These opportunities don't come along very often. The typical person will hear about these stories a lot more than they will ever participate in them. Whether you were directed to Chemtura by someone, by accident, blind luck or just good old fashioned due diligence, congratulations are in order. Keep doing the due diligence like you have been because we are not out of the woods yet. There is still risk but at the same time there are still potential rewards as well.
Good luck to you all.
**Edited** Forgot the link
http://www.mffais.com/cem
No, it is just the last date that Chemtura is the only party that can file a plan of reorganization. After November 13, 2009 any other party in interest can file a plan. It is possible that this date could be moved further out in time, we shall see. This is not the date to look at for emergence from Chapter 11. That date would likely come several months later. It would be difficult to try and speculate as to what the date of emergence might actually be, at this time. There are just too many moving parts.
Chemtura Calendar of Events Updated 08/12/2009
http://chemturaresearch.blogspot.com/2009/08/chemtura-calendar-of-events-updated_12.html
Sorry I had to be the one to pour on the cold water ;)
That will be fun to watch the Boys vs. the G-Men. I am excited about tomorrow night as well. It is the first preseason game for the Cowboys. After months of layoff I am ready for some tackle football!
The documents filed under seal today relate to the order by the court which is linked below:
http://www.kccllc.net/documents/0911233/0911233090623000000000002.pdf
This order was in response to the motion linked below:
http://www.kccllc.net/documents/0911233/0911233090611000000000001.pdf
In the Company's motion they stated the following:
"Specifically, the Debtors seek to file under seal versions of the Schedules and Statements that contain information related to employee compensation data and transfers in settlement of certain litigation claims (the “Confidential Information”)."
On the surface the filing today may look exciting, but in the end it is "much ado about nothing."
Article on Vulture Firms - Chemtura Mentioned
Excerpt from the article:
"New York’s GoldenTree, the largest of the vulture firms, with 200 employees and $10 billion in assets, recently invested in Chemtura Corp., a chemicals company that filed for bankruptcy in March after it ran out of cash to pay its debt obligations (not unlike the situation at Canwest)."
http://www2.macleans.ca/2009/08/10/canwest%E2%80%99s-quiet-coup/
Book value per share stands at $1.25 on a GAAP basis as of June 30, 2009 based on $319 million in equity and 254.5 million outstanding shares. This is down from $1.33 as of March 31, 2009 and $1.92 as of December 31, 2008. A series of “one-time” events such as, goodwill and PP&E impairments, have played a large role in the deterioration of equity. The PP&E impairments arise when the carrying value of the assets exceed the discounted future cash flows associated with those assets.
Hopefully the impairments are about finished. The filing indicated that more impairments may be forthcoming for the 3rd quarter for the consumer performance products division. No others were overtly mentioned or hinted at but time will tell.
In the 10-Q there is a chart presented that is the condensed combined balance sheet of the debtors (PDF page 16 of 87). This is essentially the revised MOR for June 2009. There was some language in the 2015.3(a) filing last Friday that hinted that this was coming. This new version of the June MOR reflects the asset impairments from the second quarter. Use the "revised MOR" for June when attempting to make comparisons to the July MOR when it is released. Use caution in placing too much reliance on the MORs (as a stand alone financial report) because they are not consolidated to reflect eliminating entries. As you can clearly see, the variations between GAAP and bankruptcy required filings (MORs) can be substantial. The MORs are more useful when used as a tool to compare one MOR to another versus trying to reconcile back to any 10-K or 10-Q.
I have posted a summary of the latest 10-Q on the blog site, linked below, but is very brief compared to the 87 pages of information in the full 10-Q.
http://chemturaresearch.blogspot.com/2009/08/chemtura-corp-releases-q2-2009.html
Chemtura's 2015.3(a) Report Summary
http://chemturaresearch.blogspot.com/2009/08/chemturas-20153a-report-summary.html
Thanks for the DD, Wall. I've been looking over the 2015.3(a) report of the non debtor subs and will hopefully have a detailed post about it this weekend. I'm trying to run a few things down as far as tying in some numbers but will probably hit a brick wall. The report even says that it may not reconcile to any of the consolidated SEC filings.
If anyone feels like one post a day from Wall_Street is not enough, you can click on his profile and look for the gift box icon on the right hand side at the top of the page. Using that icon, one could give him a gift subscription to IHUB. I'm pretty sure that would unlock the chains that bind ;)
I truly do not know, with any degree of certainty, what the future holds. The fate of the common shareholder is tied to the equity remaining in the company. If you have read the blog posts and looked at all of the links provided on the site, you have seen everything that I have. I do believe we have a shot at a meaningful recovery or I would not be maintaining a blogsite entirely dedicated to the company. However, I do want to caution anyone using the site to verify the information for themselves and to use it as an investment tool and resource and not the sole basis to form an investment decision. My suggestion would be to stay tuned and don't invest any money you cannot afford to lose. If you hold to that philosophy, you can sleep well at night. Absent any news, we can continue to take our cues from the bond markets.
For a discussion on the portion of the company that is not in bankruptcy and how that factors into the equation, see the post below and the responses made to the post as well.
http://investorshub.advfn.com/boards/read_msg.aspx?message_id=39105973
Good luck to you.
No problem. Just get back from those swamps safely!
Monthly Share Volume Report - From OTCBB
http://www.otcbb.com/asp/tradeact_mv.asp?SearchBy=issue&Issue=CEMJQ&SortBy=volume&Month=7-1-2009&IMAGE1.x=20&IMAGE1.y=12
Take a look at the action of market maker MITR - Miller Tabak Roberts. They are definitely not retail. They handled 2.37 million shares in July versus 52,000 shares in June. They ranked #5 in total volume for July. Here is some info about them from their homepage.
"Miller Tabak + Co., LLC (MT) is a twenty-six year old institutional trading firm specializing in the discrete handling of stock purchases and sales, portfolio rebalancings and listed options. We act as agent on behalf of sophisticated institutional investors (hedge funds to large institutions) executing trading and hedging strategies imaginatively and aggressively."
I would say that the information in the filing is positive. Just a few weeks ago there was language in one of the previous filings that suggested that their plan of reorganization was in the infancy stages. This filing reveals that progress is being made toward that end.
Establishing the bar date just allows the company to determine what all of the liabilites are so that it can finalize its plan. Toward that end, we are still a few months away.
The "unknown" claims referenced in the filing stem from potential legacy claims that might be outstanding due to previous litigation or other claims arising from past mergers and acquisitions. They are acknowledging that there may be old claims still out there that have nothing to do with their current operations as opposed to inferring that they have no idea what they owe. The company that is now Chemtura was formed from several different companies like Crompton and Great Lakes Chemical that were old and well established companies so they are covering their bases by establishing a process whereby old claimants must "speak now or forever hold their peace."
Chemtura Submits Motion to Establish Bar Date
http://chemturaresearch.blogspot.com/2009/08/chemtura-submits-motion-to-establish.html
Included in the blog post:
"The Company also stated that it anticipates amending some of its previously filed schedules before the hearing on this motion to reflect additional information that has become available to them since June 11, 2009, including, for example, certain invoices, lien notices and payment credits related to the prepetition period that were received and processed by the Company after the original schedules were filed."
Look for these amended schedules before the August 17, 2009 omnibus hearing.
Only one correction, it is possible and quite common for a bond to trade above its face value. Once collectibility is no longer the primary issue and the bond returns to investment grade status, the trading price of the bond will be more closely tied to the rate spread between the coupon on the bond and the risk free rate available in the market. The lower this spread is, the lower the perceived risk gap between corporate bonds and a risk free treasury issuance of comparable maturity.
When the coupon rate on a company's bond is higher than the rate required by the market, you will see the security trade at a premium to face value, all other things being equal. The premium paid lowers the effective rate of return on the security for the purchaser.
Take a look at the link below to see the FINRA quick screener for Chemtura's bonds. The two issuances that have been paid off each traded above the face value.
http://cxa.marketwatch.com/finra/BondCenter/QuickScreener.aspx?ShowResult=true&BondType=Corporate&Symbol=cemjq&YieldMin=&YieldMax=&CouponMin=&CouponMax=&MaturityMin=&MaturityMax=
With respect to Chemtura's Bonds, to have 2 of the 3 issuances trading at post BK highs and the other within $0.50 of its highs at the same time that the equity just reached a new post BK closing high it just speaks volumes.
Chemical Industry Price/Book Comparison 07/31/09
http://chemturaresearch.blogspot.com/2009/08/chemical-industry-pricebook-comparison.html
Chemtura Calendar of Events Updated 08/01/2009
http://chemturaresearch.blogspot.com/2009/08/chemtura-calendar-of-events-updated.html
Today's filing is largely the same information that was available 2 weeks ago and has likely been partially responsible for the recent increase in the bond prices. For the reasons stated in the blog post linked below, if the Committee prevails it has the potential to substantially boost the recovery rate of the unsecured creditors.
http://chemturaresearch.blogspot.com/2009/07/chemturas-official-committee-of.html
I am not exactly sure what all of the reporting requirements are for the firms listed on MFFAIS. The mutual fund companies do have to report their holdings as of the end of a particular quarter for SEC data and for their literature released to fund holders but I don't know if they have to release the transactional detail to the public. Maybe MFFAIS gathered the data late? That is a good question for further research.
According to the court filings, we do know that any acquisitions or divestitures that take the beneficial ownership of a "substanial shareholder" above 11.5 million shares or 4.7% of the outstanding shares would trigger a filing with the court.
I am sure there are others that have more info on the subject.
Chemtura Omnibus Hearing Update 07/28/09
http://chemturaresearch.blogspot.com/2009/07/chemtura-omnibus-hearing-update-july-28.html
The KEIP does not specify whether the equity grants and options refer to existing shares or newly created ones, so farbeit from me to try and speculate. The portion of the plan that deals with equity is not payable until after successful emergence, which leaves open the possibility of either scenario.
In the Debtor's response to the Trustee, the following language was used to describe the potential benefits of the plan,
"Instead, the KEIP, which the Debtors developed through an extensive internal process and deliberation with the Committee, is an incentive-based plan that is tied to substantial performance metrics that, if satisfied, will inure to the benefit of all stakeholders in these chapter 11 cases."
If we take that statement at face value, it would seem to leave open the possibility that every shareholder is hoping for. This is not conclusive, but it is better than a statement that expressly implies otherwise.
Let's just enjoy the positive price movement we have seen the past few trading days. It is safe to say that SOMETHING is occurring or has occurred based on the action in the equity and debt markets. Either there is news we do not know about, or the rest of the market is just now reacting to information already available. Until some confirmation of news is realized we will just have to guess. There aren't many BK stocks out there for which the level of DD is made so readily available as CEMJQ so I am open to the possibility that we may be slightly ahead of the curve. Who knows, we are learning as we go.