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I'm not so sure it was manipulation in the bonds as much as it was the bond dealer making someone take a $10 haircut for trading on small/odd size lots. My best guess is that trade was a bond dealer buying a small lot from someone (as an agent) for $10 below current market ($49.60) and charging a commission on top of it. That dealer turned around and sold it to another dealer for $50 which was most likely prearranged. The large trade that fired off an hour or so later reflected the true market value.
I went back and looked at similar situations where a small lot traded and it was almost always the same case but the price didn't look quite as out of sequence as todays small trade.
I also think that BK investing provides a great value opportinity, at least for now. Just look at the sequence of events it took to bring the likes of Chemtura and Pilgrim's Pride into the BK Courts. It took a global economic meltdown. Now I am definitely not saying that all BK plays are value plays. Most of them are chart and momo plays that are ultimately headed for cancellation or extreme dilution. Most companies that file for BK do so because they have no cash and they have no equity. Chemtura is absolutely the exception to the rule.
IMO, people will look back in 2-5 years and say to themselves, "why didn't I think of that" when they hear about the few opportunities that did avail themselves because of the credit crunch.
There was a guy in the Dallas area that was featured on 20/20 or somesuch show that chronicled how he made billions from buying specific credit default swaps on real estate projects he had researched that he new to be fraudulent or completely empty. He did the DD, visited the projects, interviewed the workers, investors, underwriters etc. He operated a hedge fund that attracted investor money and all told he made over $5 Billion. I actually met one of his investors that was thanking his lucky stars that a confluence of events led him to that guy and that hedge fund. Now I look back in retrospect at that story and think, "That was a no brainer, why didn't I think of that."
I can't say with 100% certainty how this will play out, nor can anyone else at this point, but I look upon the current BK landscape as one of the "Why didn't I think of that" investing ideas that resulted from the economic turmoil. I also believe that the window of opportunity is closing for this idea. As the economy stabilizes and credit markets thaw further, we won't see as many, if any, companies with positive equity filing for BK because they will either be able to renegotiate debt or complete a successful stock offering to stem the tide.
These statements are my opinion only. Please consult a financial advisor before making any investment decisions.
The more the merrier! Their questions might even be ones we haven't thought to ask.
There isn't another "maturity date" associated with any of the bond issuances. The BK filing caused the "default event" which would be discussed in the bond indenture. It also caused all bond issuances to be immediately due and payable but since this particular default event was BK and collection efforts have to be stayed then they are all due upon or concurrently with the emergence from BK. The DIP financing is also due upon emergence. All of these debts must be paid in order to have a successful emergence from BK which is why an asset sale is particularly advantageous because it frees up cash to pay them off before emergence.
Any of the bonds/DIP that have not been paid before the end of BK will have to be satisfied in some other way. The usual methods are issuance of preferred stock, shares of current stock or newly created stock. Another option is for a private equity group (some of which have been discussed here) to provide fresh capital to pay off the bonds. In exchange, they will likely want either new bonds/debt instruments, preferred shares, common shares or some combination thereof.
Long story short, the new "due date" for all of the unsecured debt & Bonds is upon and concurrent with emergence from BK. If the July 16 reorganization plan is not delayed we will have the company's proposed answers to these issues in less than 3 weeks. In the weeks that follow we will await the response of the Judge, Trustee and Creditor's Committee (and hopefully equity committee!).
Great question. Here is an article that touches on the economic value of the company if it was broken up (just found it tonight). Figuring out what percentage of total revenue each business component represents is not addressed but is definitely a worthwhile endeavor. Notice that the article was written in January 2009 but it had the following to say…
According to KeyBanc, if Chemtura sold each of its business units to a strategic buyer, the Company would only have about $5.65 per share left over for shareholders.
Only $5.65, I wouldn’t be opposed to that, lol.
http://www.streetinsider.com/Downgrades/KeyBanc+Downgrades+Chemtura+(CEM)+to+Hold/3284740.html
GreenBay, if you have a link to some information about the shareholder's meeting that would be awesome. That is an event that was supposed to occur a few months ago but was postponed. I am not up to speed on when it was rescheduled. Thanks in advance!
That is my understanding as well. When the company files for BK it triggers an "event of default." Even though they may not have been in default at the time of the filing. The BK filing stays all collection efforts and interest payments. The old maturity date for the July 2009 Bonds is no longer relevant.
I made a note to add that for the next update, thanks. The company has been pretty consistent with filing the MOR around the 15th/16th of each month.
CEMJQ Calendar of Events Updated 06/28/2009
There's a pretty fair chance you are correct, Oilbaron. Here is an updated listing of the issues to be addressed between now and the end of July. If these events don't generate some action then nothing will!
Tuesday, June 30, 2009 – Creditor’s response to requests for an Equity Committee due to be filed with the U.S. Trustee’s Office. Debtor's have already submitted their response but it has not been made public.
Wednesday, July 1, 2009 – U.S. Trustee’s decision on the fate of the Equity Committee is expected. Public announcement expected “shortly thereafter.” (Per telephone conversation with Trustees Office. We don't have any particluar date as to when the decision will be made public. Just passing along what I was told. If I get any new info I will pass it along)
Wednesday, July 8, 2009 – Meeting of the Creditors (MOC) and OxyChem’s response to the summons for the July 28 pretrial hearing is due.
Monday, July 13, 2009 – 2015.3(a) report due (basically it is a Report of Financial Information on Entities in Which a Chapter 11 Estate Holds a Controlling or Substantial Interest)
Thursday, July 16, 2009 – Reorganization plan is due (120 day exclusivity period elapses).
Tuesday, July 21, 2009 – Court hearing for the Lyondell leases.
Tuesday, July 28, 2009 – Omnibus Hearing - Pretrial hearing for the OxyChem adversary proceeding, fate of the BP hedging contracts ($800k per month savings) and various other issues.
See FAQ #1
http://www.spectrumbrands.com/communication/pdf/Investor_FAQ_Final.pdf
Wasn't trying to bash Spectrum, just using it as a point of reference.
I think you might have misunderstood my post. The post was in response to some statements I saw that suggested that a court cannot cancel common shares when only part of the company is in BK. I wasn't comparing Chemtura to SPCB. In fact, the only commonality between them is that each had parts of the company in BK and parts not involved. The point I tried to make was that it is positive equity that will protect the common shares not the fact that only 45% is involved in the BK case. SPCB was injected, merely as an example, to illustrate the point.
GLTA
Saw some discussion earlier about the parts of the company not in BK precluding a share cancellation. I don't think it is entirely safe to say that because 55% of the company is not in BK that they cannot wipe out shareholders. Take the Spectrum brands case for example. (Thanks to OAPS222 for bringing this case to my attention.) Their case was another one like ours which involved certain portions of the company in BK and certain portions which were not. In this case equity was completely wiped out, in a plan approved by the court on June 25, 2009. The reason why they were wiped out was because according to their latest 10-Q the assets amounted to about $2 Billion while the debt was right at $3.25 Billion leaving an equity shortfall of $1.25 Billion. In this case, equity was cancelled and new shares were issued to the creditors leaving no distributions for the current shareholders. It would not have mattered if 95% of the company was not involved in BK, that ship was going down because equity was nonexistent.
I do count the fact that 55% of our company is not in BK as a positive but not because it shields us from being wiped out. I believe our positive equity and return to operating profitability will be what protects us on that front. An equity committee will be an important part of our survival and fair treatment as well. What makes the 55% issue important is that 55% of the company can operate without having to receive permission from the court, trustee and creditors for any major decisions made in the normal course of business.
As to the question of who would own the parts of the company not in BK if shares were cancelled, the answer to that would be whomever the new shares were issued to.
I just don't see any reason to keep rehashing the share cancellation issue, at this time. Let's agree to put it to rest until facts and circumstances dictate otherwise. As of now, share cancellation is the furthest thing from my mind. In a worst case scenario we might see some form of dilution, but an outright cancellation would completely ignore the fact that we have positive equity and positive operating income.
Of course all of this is IMO, do your own DD and consult a financial advisor before making important investment decisions. :)
GLTA
You're right. Tuesday, June 30th and Wednesday,July 1st are the dates that should have been referenced. Thanks for catching that!
You're welcome. Glad to be able to help.
Telephone call to the Trustee’s Office
I talked to Ms. Golden at the U.S. trustee’s office this afternoon to inquire about the status of the Equity Committee requests. She told me that the Judge has reviewed all of our requests and that we have not heard a decision yet because the Creditor’s Committee had requested an extension until Tuesday, July 2, 2009. The company has already submitted its response. I asked about whether or not we would get to see their responses and she said that she would have to ask the Trustee. She indicated that the responses might not be made public in a court filing but that there was a chance that the individuals who submitted a formal request for an equity committee might be provided a copy of their responses. I asked about the timetable going forward and she said that the Creditor’s committee would have to respond by Tuesday and that the Trustee would weigh all opinions by Wednesday, July 3, 2009 and a decision would be made “shortly thereafter.” She also indicated that the Trustee’s final decision would be made public in a court filing with PACER and KCCLLC. Since there were a few unanswered questions she told me that she would email me the answers as soon as she could get an answer from the Trustee. I will pass along any other info I receive in the coming days.
GLTA
I hope you can find a way around it. The transactional detail lets you know if it was a sale from a broker to a client (buyer) or vice versa or whether it was an inter-institutional trade. The volume over the last couple of days has been overwhelmingly composed of sales from institutions to clients. The days when we see price declines are usually characterized by lots of sales from clients to institutions. With this detail you can see how they create their "spread" just like the bid/ask spread for stocks.
Thanks for that info! Saved me some reasearch. That was one of the issues that I was going to tackle this weekend.
Go to the link below for the July 2009 Bond detail as an example. Then scroll to the bottom to "search for bond trade activity" and put in a date range to see all of the individual transactions for a range over time. It is interesting to see the bond activity in and around periods of volume and price spikes in the stock.
There is a glossary at the top of the transactions page to tell you how to interpret the symbols.
http://cxa.marketwatch.com/finra/BondCenter/BondDetail.aspx?ID=MzkwNTY4QUEx
I watch the price and volume in the bonds daily. It is just another tool in the investor's toolkit. I would be worried if the stock was on fire and the bonds were in the tank. Lately we have had the opposite and it does help to take some of the sting out of the recent decline.
I didn't follow the PGPDQ story so I am not sure what caused it to go from the low teens into the dollar range. I just used it as an example of what the filing would look like because I knew they sold off some assets. It would be a good study to go back and look at similar plays to see what events unfolded that moved the price. Maybe someone here could shed some light.
There just aren't that many cases like PGPDQ or CEMJQ to go study because it took some pretty wicked economic events to get to this point. In a normal economic environment Chemtura would have raised capital or borrowed funds elsewhere to renegotiate that July 2009 debt and BK might have been avoided. Historically the BK stocks weren't a place to go looking for "value." They were for wild speculation. We are getting to witness some unprecedented events and opportunities and we may not see situations like this arise for quite some time down the road.
Watching the bonds would be another good indicator. Many who have bought and will continue to buy the bonds are doing so at pennies on the dollar in anticipation of being paid out at face value. When they see developments occur that give the company the available cash to pay them out it increases the likelihood of full recovery and the price goes up accordingly.
I would think that we would see volume and price movement ahead of any court filings. Markets are very efficient (cough, cough) in that way. It would be hard to keep a lid on something like that. We also have to remember that this potential sale is no secret and has been in the works for many months. We are just looking for confirmation in whatever form it may present itself.
Asset Sale Issue
I saw some discussion this morning regarding the court’s final approval of the sale of the “Bradford Site.” Some were thinking that this particular approval gave the company a blanket approval for the asset sale we are waiting on. I do not believe that to be the case because the “Bradford Site” approval was related to the “Sale or Abandonment of Non-Core Assets.” That approval was up to and including $5 million without further approval. The potential sale we await is certainly a core asset and would seem to be in the billion dollar range.
I believe the motion or document we are waiting for will look something like what we see in the link below which comes from the Pilgrim’s pride case. From what I have seen, the procedures for the approval of the sale of a core asset begins with a motion before the court. The process also involves setting out parameters for how the sale will be conducted and how the bidding process works. The sale process would have to be approved by the trustee, judge and creditors committee (…and the equity committee if we get one). The original motion would look like the one below.
http://www.kccllc.net/documents/0845664/0845664090504000000000021.pdf
Below is a link to the text of Bankruptcy rule 6004 which requires the notice referenced above.
http://www.law.cornell.edu/rules/frbp/rules.htm
This would all be applicable to the sale of an asset that is currently involved in bankruptcy. As I said last night, since 55% of the company is not in bankruptcy, I am not sure about the need for court approval of anything included in that 55% as that is beyond the scope of my experience.
Let me know if you disagree or have knowledge otherwise. This process is all about learning and sharing ideas.
We need posts that keep us grounded as much as we need the ones that are designed to uplift. I have a deep appreciation for opinions from both sides of any issue as long as they are presented in constructive way. Best of luck to you.
Unfortunately I don't get to watch much during the day. I check in now and again and will usually get a good look during lunch. That darn job keeps getting in the way! I don't remember the exact circumstance, but I did manage to have the day off during that run from .11 to .16. That was a thing of beauty! I missed seeing the run from .145 to .48 because I was at a conference. I just about dropped my phone when I checked in at the end of that second day!
There enlies my dilemma with this current situation. I would love for this thing to have one of its patented parabolic Fridays tomorrow but another part of me is greeting the pullback with open arms. As long as nothing has fundamentally changed I am not opposed to seeing low to mid teens or even single digits again because I have a "special reserve" waiting for such an occasion ;)
That may not be a popular statement but for me I won't let short term technical breakdowns affect my long term view of the company's prospects.
GLTA
I appreciate the acknowledgement. I like the way this board has come together to share their thoughts and ideas in a meaningful way with meaningful content. We don't all have to agree all the time and certainly it is difficult to get that many people to get along but the overall tone of the board is refreshing and might I say, very rare, among stock related message boards. This one is very clean and I am glad to be a part of it.
I agree JR. The only negative about this stock is the exchange upon which it trades. We get these low volume takedowns that don't seem to be based on anything we can corroborate. We currently trade at 15% of total book value and 24% of tangible book value. Either metric one wants to use shows this as a great value play.
That would be a good price target, IMO. If you look at post 20541 I posted a chart of price/book ratios going back a few quarters/years. In that span of time, CEM traded somewhere between 75% to 100% of book value per share. If we got anywhere in that range before the reorg plan is announced that would be ideal. Since there seem to be other forces besides technicals and fundamentals that move or suppress BK stocks I don't know if we get there before then. I certainly hope we do and this stock has shown that it can move on air. Knowing that, the decision as to when to take money off the table has to be made on a personal level. Good luck to you.
Glad you're here. In the end, both of those purchases should prove to be very good ones. That is, of course, just my opinion but it is an opinion based on months of DD. I used to swing trade 10 to 12 stocks/options at any given time but have reduced my holdings down to two, with Chemtura representing an overwhelming portion of my non retirement investments. That absolutely flies in the face of my original thesis when I began holding individual securities but I just have not found a better valuation play out there. Eventually I will recoup my original investment in Chemtura (plus a little vacation money!) but, for me, it does not make sense to do so at these price levels. My goal will be to go into the reorganization announcement riding free shares because you just don't know for a 100% certainty what the proposed plan will look like.
GLTA
No problem. We're all in this together and things are starting to look up again. Although, IMO, the fundamentals of the situation didn't deteriorate over the last few weeks, just the stock price. Not being one to see the glass as half empty, I chose to do a little more averaging up during the decline!
Nice to see you here as well. After I get some dinner I will start nosing aroud and see if I can dig up anything tonight. I was sure hoping to be able to digest the responses to the request for an equity committee. Maybe we will hear something tomorrow.
Document # 642 is merely the transcript of the court proceedings for April 13, 2009. For whatever reason they keep it from being accessed remotely for several months. They aren't trying to hide anything. You can view the documents in person if you go to the court or you can contact a court transcription service to have one mailed to you but I believe it is fairly expensive maybe a few hundrded dollars if memory serves me correctly.
Here is the text that is in the placeholder for Doc # 642
Transcript regarding Hearing Held on 4/13/09 9:49 AM Remote electronic access to the transcript is restricted until 9/17/2009. The transcript may be viewed at the Bankruptcy Court Clerks Office. [Transcription Service Agency: Veritext, LLC.]. (See the Courts Website for contact information for the Transcription Service Agency.). Notice of Intent to Request Redaction Deadline Due By 6/26/2009. Statement of Redaction Request Due By 7/10/2009. Redacted Transcript Submission Due By 7/20/2009. Transcript access will be restricted through 9/17/2009. (Richards, Beverly) (Entered: 06/23/2009)
That is a valid question, Jax. Although it seems that the big leverage plays tend to happen before BK with the intent to force BK and end up with a large stake in the company. The most recent case that comes to mind is the Sirius/XM situation and the battle that went on between Dish network and Directv.
Both of them are in fresh new post BK high territory. As another poster pointed out the volume over the last few days is impressive as well. It is interesting that Bonds have recovered into new territory while we are still 47% below our post BK high. The big money either knows something or strongly senses something.
Email sent to the Trustee
Below is an email I sent to the BK Trustee today.
Ms. Golden,
This message is in reference to the bankruptcy filing of Chemtura and its affiliated debtors which is Bankruptcy Petition #: 09-11233-reg. I was one of the individuals who submitted a letter requesting an equity committee. It is my understanding that counsel for both the debtors and creditors were asked to respond to the inquiry by providing their opinion as to whether they feel it is a justified request. My questions are as such:
a) Will their responses be made public?;
b) If so, where might we find this information (PACER?, press release? etc.);
c) How soon might we expect to see these responses? and
d) If an equity committee is allowed to be formed how soon might that final decision be made?
Thank you very much for taking the time to consider my questions. Have a great day!
If I get a response I will pass it along to the board.
GLTA
Now that I have gone back and looked at the SOFA I don't see anywhere that they have redacted any shareholder information. The portion of the "under seal" motion just listed "statement of equity security holders" as one of several documents where they might choose to protect the privacy of certain individuals. It certainly wouldn't apply to insiders since they have to file a form 4 with the SEC for all of their purchases and sales. The inclusion of the equity security holder schedule is probably much ado about nothing.
The request to "file under seal motion" specifically mentioned the desire to keep certain employee salaries, names and settlement amounts in litigation matters and certain shareholder information private. I guess it would not preclude their attempts to hide any potential asset sale under the guise of "commercial information."
However, in looking through the Pilgrims Pride Case it appears that all potential sales would have to be approved by the court and a bidding process would also have to go through the court. Just do a search for "Sale" in their court docs on KCCLLC to see the voluminous filings related to the bidding process, objections, and eventual sales they've conducted thusfar. i think what we are looking for is not an announcement of a "sale" that has been consummated but a court doc or press release related to the "notice of proposed sale".
What complicates this matter is that if a sale of some business line or particular assets that are NOT involved in the BK process is at hand then I am not certain whether the BK court has to be notified because that 55% of the company is operating in business as usual mode.
This is one interesting case! By the end of all of this we will have learned a lot.
Very nice action in the bonds today. Between the three outstanding bond issuances there were 15 transactions of $1 Million+ and 14 of the 15 were sales transactions from broker/dealer to client. All three have been working their way back to near their post BK highs.
Thanks for your hard work and due diligence done here on this board. I have enjoyed reading your posts. Seems we have common interests in digging through court docs. I am just glad that yourself and others are willing to share and that is why I am willing to share my findings. Keep up the good work.
You've earned a person mark from me!
Madclown