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Chemtura and Solvay Reach Proposed Settlement
http://chemturaresearch.blogspot.com/2009/07/chemtura-and-solvay-reach-proposed.html
Motions that will not be heard tomorrow...
Debtors’ Motion to Reject Base Contract with BP - Adjourned to August 17, 2009;
Occidental Pretrial Conference - Adjourned to September 29, 2009
Tricor Refining, LLC’s Motion for Relief From Stay;
Precision Medical, Inc.’s Motion to Compel; and
Prudential Relocation’s Motion to Compel Rejection or Termination;
http://www.kccllc.net/documents/0911233/0911233090727000000000016.pdf
Tomorrow's Court Agenda
Here is a link to a PDF of Judge Gerber's docket for this week. It includes all matters scheduled to be heard at tomorrow's Omnibus Hearing.
http://www.nysb.uscourts.gov/calendars/reg.pdf
GLTA
No big deal. It can happen to anyone. Thanks for keeping us updated. You have consistently provided valuable content to this board, so you will get no complaints from me. It reminded me that it was time to update my own charts. Some of the companies on the list have not released Q2 earnings yet so these will need to be updated again in the near future.
GLTA
I think what has happened is that Ray's chart has the "BV" and "Multiplier" columns reversed. Let's take DOW for example, their price is $20.19 and their book value per share is actually 14.21 so it is the "Price/Book Multiplier" that is 1.42 times.
There are a few companies that I need to add to the chart that Ray had included. There is also one company, Celanese, (CE) that was left out of the equation because it has a price/book multiple of 81.05. Obviously there is something very abnormal going on there.
Chemical Industry Price/Book Comparison Updated 07/25/09
http://chemturaresearch.blogspot.com/2009/07/chemical-industry-pricebook-comparison.html
I have added links to the "Insider Transactions" and "Insider Roster" in the "Financial Information" section of the blogsite for future reference. If something more updated is found I will link that but the Yahoo links should be recent and comprehensive.
Don't forget that Edward Garden (former director) who stepped down in February 2009 is Vice Chairman of Nelson Peltz's Trian Fund Management and was Peltz's proxy on the board of Chemtura. Trian's 10 million shares were purchased at about $12/share. Trian rode it all the way down and has not sold any shares to date as far as I can tell which signals that either Peltz thinks it has the potential to rebound or he thinks it is completely worthless and is not worth his time to have someone execute the trade to close the position. Everyone wil have to come to their own conclusion about that one.
Here is a link to what I wrote up a while back. It is probably time to update it. I will do so if enough of these entities have gone through earnings season.
http://chemturaresearch.blogspot.com/2009/07/chemtura-pricebook-value-of-equity.html
I am not sure what the SEC rules are on that subject. As we would expect, the company didn't specify whether it would be new or old stock. Frankly, they may not know for 100% sure themselves as they are not in total control of their own destiny anymore. Under their KEIP, the options and stock grants would not be paid until after a successful emergence from BK, which leaves the door open for either new or old common shares.
It is also hard to argue this statement made by the Trustee in reference to the Company's request for a KEIP:
"Moreover, to suggest, as the Debtors have, that the proposed bonuses pass statutory scrutiny because they induce superior job performance would be to imply that without them, the eligible participants will not staunchly exercise their pre existing contractual and fiduciary duties."
The Trustee isn't having any of it. She said in her response that she "objects to the entire relief sought in the motion."
Chemtura Bonds Trading at Post-Bankruptcy Petition Highs
http://chemturaresearch.blogspot.com/2009/07/chemtura-bonds-trading-at-post.html
Here is an article published today that briefly mentions the lawsuits filed by Chemtura (Great Lakes Chemical) and DOW against Canada. Scroll down near the middle of the article. If the company can prevail it could be a windfall. They are suing for $100 Million.
http://www.embassymag.ca/page/view/glamis_gold-7-22-2009
Chemtura Calendar of Events Updated 07/20/2009
http://chemturaresearch.blogspot.com/2009/07/chemtura-calendar-of-events-updated_20.html
This could pay down some debt...
I was reading the filing linked below and noticed that Chemtura has an ongoing lawsuit against Canada and its Pest Regulatory Management Agency relating to the ban of "Lindale Based Products." The next hearing is scheduled take place in Ottawa, Canada in September 2009.
http://www.kccllc.net/documents/0911233/0911233090720000000000019.pdf
Based on the article below it appears that Chemtura is seeking $100 million in damages. The company alleges that the ban is a breach of the NAFTA. Negotiations are still ongoing behind closed doors.
http://www.digitaljournal.com/article/261683?tp=1
Thanks for keeping us updated. Bloomberg is keeping up with the Chapter 11 proceedings as this is the 5th such article (since the BK filing) in which they have mentioned some event from the court docs.
The BP contract issue centers around the fact that Great Lakes Chemical is paying around $800,000 per month in excess of market value on its natural gas it buys from British Petroleum. In 2003, Great Lakes Chemical entered into forward contracts with BP at a fixed rate and a fixed volume. The fixed rate is well in excess of market value and the fixed volume is in excess of what the company now needs to the tune of $800k per month. Based on the motion (linked below) to reject the contract the total savings anticipated from June 2009 thru the end of the year is about $5 million.
I am not sure of the length of the contract so I don't know if any benefits will be realized beyond 2009. The contract was supposed to be attached to the filing as "Exhibit B" but it never was attached. The placeholder for exhibit B says "To Be provided." It is interesting that BP never objected (in a court filing) to the motion within the required timeframe but the hearing was postponed twice from the original hearing date of June 2, 2009 ultimately to July 28, 2009.
The potential unwinding of a "bad" contract like this one is a demonstration of the power of the Chapter 11 Bankruptcy process.
http://www.kccllc.net/documents/0911233/0911233090520000000000006.pdf
Nice find! Thanks for sharing.
I can't really speculate as to the ultimate timeframe but realize that this is a complicated BK case so be prepared to wait patiently for whatever the final outcome may be.
As far as funding sources for addressing the debt, the options you mentioned are all possible but there has been little evidence to suggest that a takeover or complete buyout is in the offing. Just watch the court filings for any evidence of an asset sale. If that were to occur you would see it in the court docs because any divestiture (outside the normal course of business) while in BK would require the approval of the Court and Creditors Committee and there will likely be a bidding process that would occur over some period of time.
See PDF pages 8-10 from the June MOR for a chart and description of the outstanding debt. The MOR provides a better and more thorough description than what I could come up with.
http://www.kccllc.net/documents/0911233/0911233090715000000000013.pdf
“As of the Petition Date, in addition to the Prepetition Credit Facility, the Debtors
had the following funded debt obligations: (i) $370 million in respect of certain 7% unsecured notes due 2009 issued by Great Lakes Chemical Corporation and guaranteed by Chemtura (the “2009 Notes”); (ii) $500 million in respect of certain 6.875% unsecured notes due 2016 issued by Chemtura and guaranteed by all or substantially all of the other Debtors (the “2016 Notes”); and (iii) $150 million in certain 6.875% debentures due 2026 issued by Chemtura…”
See PDF page 43 of the link below.
http://www.kccllc.net/documents/0911233/0911233090716000000000005.pdf
Chemtura’s Official Committee of Unsecured Creditors Seeks Authority to Pursue Cause of Action Against Prepetition Agent
http://chemturaresearch.blogspot.com/2009/07/chemturas-official-committee-of.html
I can't really tell for sure but the filing seems to indicate that the SPV was a revenue generating entity and may have some equity value. I figure that when the attorneys are using terms like "allegedly" and "purportedly" and have doubts in their own mind as to what has transpired, I don't feel so bad to admit I don't fully understand what is going on. One of the big issues in the filing is that the unsecured creditors believe that the Prepetition agent received a $6 million dollar payment (not in the ordinary course of principal and interest payments) that is deemed "preferential" and should be returned to the debtor's estate. The bigger issue is that they also believe that the prepetition lenders have taken collateral (inventory & subsidiary stock) in excess of what they were entitled, to the tune of "tens of millions" that would be available for the benefit of the unsecured creditors.
Items of note from Docket #780
It appears that the Unsecured Creditors Committee may have discovered some unrecorded assets/equity in a Special Purpose Vehicle (SPV) that is a 100% owned non-debtor subsidiary of Chemtura that is named “Chemtura Receivables LLC.”
Here is an excerpt from PDF pages 18 & 19 of the link below:
“As noted above, pursuant to the terms of the Receivables Sale Agreement, the
Receivables SPV purchased receivables from the Prepetition Receivables Sellers at a discount, and, upon information and belief, the Receivables SPV also collected more money for the receivables than was required to repay the Receivables Facility Lenders. Moreover, upon information and belief, the Receivables SPV exercised the Deferred Payment Option in connection with its purchase of receivables from the Receivables Facility Sellers until the Petition Date. None of the Receivables Facility Sellers, however, have SPV Subordinated Notes listed as assets in their respective Schedules of Assets and Liabilities filed with this Court on June 11, 2009. See Debtors’ Schedules of Assets and Liabilities (June 11, 2009) [D.E.# 536, 551, 561, 563].15 Thus, the Receivables SPV, as opposed to being a pass-through, special purpose vehicle, appears to have accumulated equity value and operated in essence as a revenue generating entity. The value accumulated at the Receivables SPV was ostensibly owned by Chemtura, on account of Chemtura’s 100% ownership interest in the Receivables SPV. See Forsyth Declaration at ¶ 53.”
The related footnote #15 reads as follows:
“The failure of the Debtors to schedule SPV Subordinated Notes as assets of the applicable Debtors should not be deemed an admission or acknowledgment by the Committee that such notes do not exist.”
I never have liked the Off balance sheet activity in SPVs and SPEs because they complicate the accounting framework(remember Enron.)Other items of note in the filing include: paragraph #3 on PDF page 39 and paragraph #5 on PDF page 40.
To keep this post balanced, paragraph #’s 40-43 on PDF pages 27 and 28 will serve to remind us of the risks of which I am sure most are already aware. Although these paragraphs are not specifically referring to the February 2026 bonds, they offer some insight as to why those debentures trade at 36 cents on the dollar. These are the most important bonds to watch because they are unsecured, carry no guarantees and are the only issuance that Chemtura (parent company) alone is responsible for. Words cannot express how huge it would be for that bond to return to near face value. It is the true litmus test for the bond markets' expectations of a meaningful recovery of the people who stand in line IN FRONT of equity. If the Creditor’s Committee can successfully pursue a cause of action against the prepetition agent then we could see some action in all bond issuances. If the expectation of recovery improves in the bond market then it would be reasonable to assume that the expectations of the equity markets would improve as well.
http://www.kccllc.net/documents/0911233/0911233090716000000000005.pdf
The cause of action is defined in the motion as follows:
“The Official Committee of Unsecured Creditors (the “Committee”) of Chemtura Corporation, et al. (collectively, the “Debtors”), by and through its undersigned counsel,
hereby files this motion (the “Motion”) for entry of an order, pursuant to sections 105(a),
1103(c) and 1109(b) of title 11 of the United States Code (the “Bankruptcy Code”),
authorizing the Committee to pursue and, if appropriate, settle certain causes of action
against Citibank, N.A., as administrative agent under the Debtors’ prepetition credit
facility (the “Prepetition Agent”), on behalf of the Debtors’ estates.”
It would have been more accurate if I had replaced “DIP Lenders” with “Prepetition Agent” but they are, in fact, the same entity (Citibank). The collateral securing both credit facilities and who has rights to it is the main issue at hand. Thanks for pointing it out. I want to be as accurate as possible.
That's a nice find OB. Thanks for sharing. I added a link on the blogsite for this. With every passing day we are able to dig up a little more useful DD. That's what makes the IHUB CEMJQ board a cut above the rest!
The Unsecured Creditors Committee filed a motion today for permission to pursue causes of action against the DIP lenders. They claim that if they prevail it will produce "a substantial recovery source" for the Unsecured Creditors and the Debtors' estates. This is what was alluded to in the article below. This filing will take some time to parse through as it is over 600 pages long. There may be some good stuff in the filing so be sure and take a look.
http://chemturaresearch.blogspot.com/2009/07/chemtura-official-committee-of.html
Link to filing
http://www.kccllc.net/documents/0911233/0911233090716000000000005.pdf
Chemtura MOR Spread March '09-June '09
The comparative spread of the MOR has been updated. Look in the "Financial Information" section.
http://chemturaresearch.blogspot.com/
I can't promise to give updates every day. When my job takes me away from home I tend to have more free time to "dabble." There are plenty of people on this board sharing that it makes it worthwhile. We have a pretty good "day crew" that is constantly scouring for good info. I can't follow things much during the day so I appreciate the play-by-play that the day crew provides. I guess I am on the "night crew." Then there are some that are part of the day and night crews. We have to give a shout out to those that burn it at both ends.
GLTA
It is the "as of and for the three-month period ended June 30, 2009" that tells me that it is referencing the financial statements as a whole. The "as of" is a reference to the balance sheet which is presented as one point in time. The "for the three-month period ended" is a reference to the income statement which presents a range over time.
Look at footnote 1 from the May MOR side-by-side with the June MOR to see the contrast in the final paragraph.
I am certain that the income statement is only presenting one month of activity. It is the only explanation that makes any sense. I just thought the footnote wording might be off.
No big deal.
MOR Footnote Issue
The headings above the Income Statement section on the face of the MOR read “.For the period June 1, 2009 to June 30, 2009.”. This would indicate it is based on one month’s performance. However, the last paragraph of footnote 1 reads as follows:
“These combined financial statements are based on the Debtors' combined financial statements as of and for the three-month period ended June 30, 2009 and will be included in Chemtura Corporation's form 10-Q,. Accordingly, the financial information herein is subject to change and any such change could be material. These statements do not contain all disclosures that would be required for presentation in accordance with U.S. GAAP.”
We need to reconcile those two statements. The distinction is very important. It has been a long day, so I want to make sure I am reading it right. Any thoughts?
Chemtura's Key Employee Incentive Plan
Here is my attempt at a summary of the filing.
http://chemturaresearch.blogspot.com/2009/07/chemtura-submits-motion-for-approval-of.html
The MOR includes Chemtura the parent company and related debtors. The equity of the subs shows up in the assets of the parent as "investment in sbsidiaries." Please remember that these are unaudited numbers. You will see some differences in the next 10-Q filing because of the consolidating and eliminating entries due to the inter-company transactions. We should not be as concerned with the actual numbers as we are the developing trends.
Assets $4,176 Mil
Liabilities $3,760 Mil
Equity $416 Mil
It is futile to predict activity on the Pinksheets but regardless of the market reaction, a very positive trend is developing.
June MOR is out on PACER
Operating profit $8 Million
Net Income $1 Million
Cash provided by operations $9 Million
Equity $416 Million
That document was posted in the wee hours last night. I read it but need to read it carefully tonight to be able to say anything regarding the treatment of equity. There were some interesting references to enhancing the value for "all stakeholders" and "all parties in interest." If you look closely at the footnotes you will see that the KEIP is affected by the divestiture of a business line or the divestiture of a portion of a business line. As far as I know that is the first public confirmation (post BK petition) of an attempted asset sale , although the writing has been on the wall for some time.
I appreciate the gesture, but I couldn’t accept anything like that. I would much prefer that you use any such funds to help out someone around you that is in need, especially someone who would least expect it. I would get much more satisfaction out of hearing a story like that than I would in accepting a gift myself. I guess we are at similar places in our lives. Good luck to you, Sklauble.
I appreciate the kind words. It is not just a one way street, I have learned from the posters on this board as well. I just believe an investor should know as much about their investment as possible, and this board has been a great place to share and learn. I don't see what the big advantage is in doing a bunch of research and hording the information, so I prefer to share what I find. I appreciate the fact that others have also made the same decision. Public investing message boards don't have the best reputations, but this one is an exception to that rule.
I do encourage everyone to verify anything posted on a message board or blog site etc, not only because we don't know one other, but also because it is an important part of the learning process.
GLTA
Chemtura Bankruptcy Case Update – July 14, 2009
http://chemturaresearch.blogspot.com/2009/07/chemtura-chapter-11-bankruptcy-case_14.html