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I see the judge has scheduled hearing for 2/21 on plan confirmation - don't know if this means more likely to give it the yay or the nay.
I'll still be posting on anything else - first time on an EC - if one is granted - and looking forward to it - I love the process of bk so I think getting to take a step closer into it will be interesting and rewarding for understanding how future cases work out - and hopefully can make a postive different for NRVH - but its my first time so don't pin any hopes on me - and the thing doesn't exist yet anyway.
Just got back from afternoon with the kids and haven't yet checked closing prices - saw bid at .08 before I left. Certainly the Dec mor doens't help with valuation issues - though even just two months of good numbers may not have helped too much anyway - too easy for the creditors to say that 2 months a trend does not make. Dec pretty much makes Nov irrelevent. But there can still be other things to rely on to potentially save the day. I mostly agree with Cowboy - this is a lotto ticket with better odds, still long odds, but considerably less than an actual lotto ticket.
yeah, I've seen that. I'm on the ad hoc EC now, along with coo from the IV board, so we won't really be able to discuss on the boards anymore. I'll do my best.
my read is the the pension liablities are not included there on the liablity side - basically there is no place for them to be based on the line items presented - so the hurdle to overcome is more like 400mm, with 800 mm of book value (I think without going back to double check) currently fully reserved against and thats already after some writeoffs have been properly taken, and with some of the asset value that is not reserved against like GE SEACO undervalued. Seems like it would be hard for that much to disappear.
>>i don't think the majority of institutions would have a stomach for this and so I don't find it so unreasonable that not many are interested
you are correct that the majority do not play down here, but at the same time, there are several dozen very large firms who do, and I guess the point being made is that we'd expect, of of that group of usual suspects, more than just 2. I've lightened my own load from last week as well. Still interested, but more wanting to risk missing a bit of a runup than taking a hit. Need more details to come out before making more decisions.
if the valuation comes in low - it doesn't matter where the shareprice is - I think Northwest was close to 4 when their valuation came in below the magic number - but I may be off on that by a little. The only thing a low share price does is make it harder to get an EC - because the creditor committee can point to the market price and say - see the 'efficient' markets put very little faith in this solvency argument.
getting back to cowboys suggestion, why not start compiling a list of assets and then start trying to plug in numbers:
1)cash
2)GeSeaco JV
3)container fleet
4)ferries
5)misc & sundry (ie grape vineyards, nightclubs, etc)
cut and paste - add what you want or split into add'l categories - everybody takes turns and see what sort of list we can group think.
checking out sopris and marathon a bit more - marathon has to file its quarterly holdings with SEC - as of 9/30/07 they did not appear to be holding any Sea Container debt - but I think this debt doesn't publicly trade so maybe they don't have to list it - ah more questions. Sopris doesn't even have to file these. I do see where Sopris played Movie gallery from the debt side of the table, so they definitely do that sort of work, which some funds don't. But they also show up purely on the equity side. I'd forgotten, but they were part of that ad hoc EC for Allied Holdings I mentioned yesterday - where half the committee was bot out - they were part of that side that left the other two - Virtus and Hawk - out in the cold; but in Sorpis defense it was a losing battle against Yucaipa (interesting fund - Bill Clinton was 'gifted' a huge % of that fund for his connections to J Hoffa - so Yucaipa now backdoors a lot of these bk plays by tying up the union and getting the union to say they won't work with anyone but Yucaipa - scares everybody else off and hogties the debtor - they tried it more recently with Interstate Bakeries - when those guys show up I now head straight for the exits). If you look at Sorpri's recent transactions they also bot the crap out of Hancock Fabrics in the high 2s - so they do make some big mistakes. I hate it when one small question only leads to more.
>>There is a possibility that the hedge funds bought to make their debt holdings more valuable
Its a good point. I've been trying to think through if it could act as some sort of hedge against something else for them, but I keep coming up rather empty on that. But your angle is possible. I recall DE Shaw doing this same thing on two occasions - I think one was Oneida and the other Boyds Bears. I guess the question then becomes do Sopris and Marathon hold debt as well. I heard yesterday that the last time the debt traded it was in the 50 to 60 cent range - which is not the best omen for shareholders. What was the carrying value of GNER on the books when it was still a running franchise - was trying to figure out yesterday how much of the currently discounted sub value is definitely up in smoke due to GNER.
Was that Ali?
The question isn't simple and its the only one that matters. But its the hardest one to answer - in most cases I'd guess the people who know most - those on the inside closest to it - aren't even sure all the time. If you think about it - just any company on the market - sometimes they are worth a lot and then they are worth a little and vice versa - what is the current status of the values of SCRA's subs? I honestly don't know the answer to that question - which is why the smaller questions have to be poked at - like why did Sopris and Marathon buy in like they did? Are they making a big mistake which plenty of funds do? Take a look at ISHM - I don't own it but have watched it - there is a fund that I'm familiar with from other bk cases that just keeps on buying more and more and more - but to me the business looks like a piece of crap - can't figure it out. But if you looked at Foamex and saw the fund activity - I think it was BlackHorse buying in first - well they were dead on. All getting back to the point that its the one question you can't answer to the end so you have to work with the smaller ones that help to zero in on probable answers to the big one. I think in SCRAs case if you look at the BS, they are 200 mm in the whole for equity without counting the pension costs - which I think we can plug in as a liability of around 200 as well - so they need to come up with 400 over and above what they show in assets. GE SEACo no doubt undervalued via GAAP accounting. And all but 145 of sub value is discounted completely. Amongst what they are discounting till they figure out what its worth - is there 400mm? I don't know.
>>However, since there are Holdings, does not that help the shareholder, seeing that there are valued assets that can be sold-off first, and thus give some cushion for the shareholders
thats the nut - how much can they sell them for - or to the extent they are retained as core assets - what value will be placed on them when it comes to making the creditors 'whole'
why no committee request is puzzling - a EC not only protects the shares of its members - it carries a fiduciary responsibility to protect all shares - so having one is a big deal. First step to get one is to informally go to the US Trustee's office and request. I've only ever seen the US Trustee say yes once - its just kneejerk reaction of 'no' which means you have to go and ask the judge. In order to ask the judge and not be tossed out, you have to be able to present a credible argument about why the company is not 'hopelessly insolvent' and why mgmt is not already adequately representing shareholders. The latter one is not a big deal, the former one is - and you can't really go in there with a back of envelope calculation. Obviously the creditor committee doesn't want this to happen and usually the debtor as well, even if they care about equity, because the EC has to be at the table, which means more lawyer bills and more people to sign off on any decision - its already tough and an EC makes it tougher - so most don't want to see it happen - but if a case can be made then you get it. So why haven't they? My only guess is that they lack enough hard data to make a credible trip in front of the judge. You can always have an ad hoc committee - but these committees don't have an official seat at the table, and they have to pay their own way - and these atty's charge 400 to 700 an hour. Ad hoc committees are usually formed just to motion for official status - they disband if they fail just due to cost. I remember Allied Holdings had an ad hoc that stayed in tact for a while - but at the end they gave up when the fees got out of control and the main creditor who was stealing the company offered to reimb the cost of half the members - they took the deal and disappeared leaving the other half looking stupid. An ad hoc committee, btw, only has to repesent its own members best interest - which is usually aligned with the rest but not always. I think Enesco also had an ad hoc committee that basically manuevered to buy out assets on the cheap for itself - the rest of got the old empty bag.
because the only shares that exist in the hands of the public are in those companies that are in bk. We have stock in Holdings - Holdings has stock in the non-debtor subs. If Holdings can't pay off its creditors, then the creditors get Holdings assets in one form or another, ie they get the stock that Holdings has in its subs, whether they are in bk or out. No different than the guy down the street who files for bk and has a portfolio of stock - maybe GE - GE is not in bk but that GE stock will be re-allocated based on bk rules - its a little different obviously but basically the same principal.
well nothing substantial is for sale, so overbidding is not an issue in this case. the one thing you have to hope for is that the assets like GE Seaco and the rest are truly valuable enough such that the inevitable downward pressure on valuation still leaves equity in the money. Also hope that mgmt has integrity and does the right thing instead of caving into the pressure and promised fringe benefits. This is not really unusual - this is really the more normal path for big companies - like Solutia, Delphi, Dana, etc in recent past. You really want Sopris and Marathon sticking their nose as far as possible into the middle of the process once it gets started.
In a liq where you normally auction off all the assets, its simple - the assets are reduced to cash, the creditors get paid and if paid in full whatever is left goes to shareholders. In a reorg, esp. one that occurred because of too much debt load (sometimes bk happens for reasons other than debt like long term fixed price contracts or leases etc), the debt must be converted to equity upon exit - otherwise the company would just land right back in bk a year later. In order to do this, an enterprise value for the company has to be agreed to by the parties. Just like with appraising a house, there is a range and one number needs to be picked at the end - but unlike a house there are many more moving parts. So lets take an example of a company with 500 in debt that cannot be paid with cash because there isn't enough and cannot remain as debt because the company still wouldn't be fixed. When they go to value the company, if it gets valued at 400 - then debt holders get the whole thing. If it gets valued at 600, then debtholders get 83% and shareholders keep 17%. Now obviously, from the debtholders view, this number is the difference between getting it all, and getting something less than all, so they have every incentive to push for a low number - to argue about the discount rates and the profit assumptions, and they usually play a big role in picking the investment bank that performs the appraisal, and the investment bank knows this and knows they wont' get picked again if they don't deliver a number that makes these hedge funds happy. The debtors mgmt also plays a role, but since the creditors are always careful to throw them 10% of the new shares IF they cooperate, mgmt is usually in cahoots with the creditors. So its a largely rigged system - never a question of who gets the fairer side of the coin, but a question of how extreme will the bias against shareholders be. To make an example - say Kmart was truly worth 100 when it exited (the true measure is probably close to where it got 6 months to 1 year after). Creditors are owed 75. If they value it correctly, then creditors get stock worth 75 and equity gets 25. But if you rig the valuation to show 50 - and these things are so complicated its not that difficult - then creditors get stock stated to be worth 50 but its really worth 100, and they don't have to hold on too long after emergence to sell with a 25 mm profit - when as creditors they were really just supposed to get their principal/interest back.
In the vast majority of cases none remain - I don't have a scientific number but I'd guess at least 90%+. But bear in mind that with the vast majority of those, its pretty clear from the outset that they are FUBAR - so you don't wind up paying any attention to those. If there are 100 public company filings in a year, you probably only consider 20 as having potential. Out of that group maybe 5 pan out to some degree (because of the 10% that might make it - you probably miss the potential in 5 of em). As long as you don't get too attached, you can usually avoid losing 100% of your capital in the ones that don't work out. But sometimes, you basically have to say go into the auction where you know its make or break - the stalking horse bid won't cover the claims but you are hoping for earnest overbidding. The day after the auction, it either goes close to zero so fast you can't hit the bid to get out, or the auction results were good and you have your big winner for the year. SCRA won't go that way since there won't be any major core asset auctions. If SCRA goes bad, chart will look more like Northwest - the initial valuation numbers would hit the docket and leave nothing for shareholders (I'm assuming worst case here for sake of example), and the stock would take a hit to probably 5 cents - it wouldn't go to zero because someone will pipe up and object to the valuation numbers - just like in N.W. - it then hangs there until the objection is sustained - you get a pop - or denied - it then goes to .005 until you just wind up with a cusip number in your account where the ticker used to be. But you are right - they are all different - some drag out forever - up and down - and sometimes when it looks like its over its not. Look at tdfxq - don't buy it - but it spent the first few years in bk under a buck, then went to a 30 cents, then came back to a dime, then went to 50 cents and last I saw was back at a qtr - and I think it will go to zero in the end - SCRA has to some extent done this but tdfx a little different in that its sat there for 5+ years and has looked like a big fat zero and a homerun and switched back and forth between the two a couple of times.
I've never spent much time on I.hub - only other stock I followed with an Ihub board was/is BESV. It all comes down to what site has a good board in place since following bk companies tends to put you into all kinds of disparate businesses - I see the yahoo scra board is fairly well degraded into stupid name calling. I used to prefer the yahoo boards for posting, especially since they hid the link to bk stocks and you had to use the backdoor to find it - that usually kept the noise to a minimum - but then yahoo changed their format and I hate the way it works now - I'm sure they did it just to increase the advertising space but I think they've driven away a lot of eyes. On Inv Village I post under bshaw7360, same on yahoo. On RB I think I use finbar. All just depends on whether any of the sites has a decent board going - if not we sorta default back to the IV DGEN board. One thing I have found is that amongst the lurkers on a good board, there will be more than a few of what would be considered big players - analysts at these boutique funds that play the deep value stuff, the atty's on a case, mgmt - they are all reading I know for a fact - maybe not on every case but various of those groups on most, especially a good board. You guys are quite ambitious to tackle a big case like SCRA right off the bat - if you get into it you will find that the smaller cases tend to be a bit eaiser to handle - like a biotech that maybe has 1 mm in cash and 3 mm in debt but has a drug in trials they've dropped 100 mm on. If the IP gets sold, you know you only need 2 mm to get even, and sometimes its a little bit easier to bet that something will be worth more or less than 2 mm than it is to guess if it will be more or less than say 600 mm, especially when you don't have hedge funds holding the debt and pushing way down on the appraiser - like they did in Kmart and Northwest and AAIPharma. I totally agree that you can't make real money with the blue chips - there are just too many funds out there with the resources to channel check a company way before the avg retail guy gets a shot at it, unless its in your field of work. But when you drop down into OTC and OTCBB land, you have to worry about the legitmacy of the company and even when you find one, then you have to worry about their lack of funds landing them in the crosshairs of a Congress Financial or Laurus Master fund - loaning them money on terms that gaurantee they will own it in the end and you can't even see the damn terms of the loan most of the time. With Bk companies, you know they were more toward the legitimate end of the spectrum if they came off the Nas or NYSE, and you get to see the terms of the financings and get the benefit of seeing all the various constituents argure about why its a good or bad deal. On SCRA, I'm anxious at this point to see the actual terms of the settlement with the pension funds - which should pop to the docket soon. I won't be too worried about the size of the settlement if the deal allows SCRA to fund it over time like they would otherwise be doing rather than pay in lump sum now. That language about an add'l reserve has me hoping that that may in fact be the case - because why else would the debtor settle for a potentially larger amount when they could otherwise keep fighting for less.
Thankyou for the kind words. I have found in the past that the more one shares their dd, the more money gets made. Maybe its proof of karmic forces, but really for me it mostly gets back to something I mentioned yesterday - on a stock like Foamex, to really hit it, you not only had to buy in at the right time, but you also needed that big second set of cahonies to ride it out to 6 - since noone really has a 2nd set, the only way to keep your nerves under control is to have a good board where many eyes and minds can be running over the same data with their own insights. If you find a great little nugget of dd you can either keep it for yourself - but you run the risk of misinterpreting or not realizing its full implications - but if you share it (if you have a good place to share it) with a diverse group, you inevitably get much closer to the true significance, or lack of significance as it sometimes turns out - but thats just as valuable to keep you from making a poor trade on something misunderstood. I absolutely love bk investing - and you are right, the fear and doubt of the uniniated makes it more profitbably - but that mostly occurs at the onset where the stock takes a 90% haircut going into court as people flee, and then keeping it at that low price as others are fearful to even look at a pinksheet penny stock with a q on it. I've found if I am out and folks get to talking about what they do, and I mention bk penny stocks as my sole focus, if there is a broker in the room, I get the most smug condescending look - and the irony of the morons who couldn't trade their way out of a wet paper bag dismissing something they know nothing about because they never bothered to investigate is just endlessly amusing. I only wound up here down at the bottom after a few years of playing it the old fashioned way - buying Mike Murphy's frontloader rag and George Gilders stuff. Needless to say I lost my arse royally. I believed all the hype and crap and had bot amongst other pos's Comdisco - 200 shares at $30. Comdisco went to .001 eventually - never was worse selling and I already had all the realized losses I would need for years to come. So it sat there in my account as reminder of what a dumb sh1t I had been - but over time it creeped back up to .20 - on my 200 shares it didn't really matter, but struck me - what if I had dumped my 6k in there at .001 instead of $30 - the same stock would have provided one of the most unbelievable returns in a market that at that time was still in the crapper. I have no idea why, but most people would still see Comdisco only as a money pit, when quite the opposite was true. While I still think Mike Murphy is and was a schlock, I don't regret having 'invested' like I used to because I never would have stumbled into this fascinating area otherwise.
It feels like 24/7 sometimes. But the info is there and very few are looking - so burn it at both ends for as short a time as you have to and then be done. Personally, I love the rush of catching a run up when you had the oppty to load up cheap, but man I can also dig just having enough in cds not to worry about a damn thing. As I think I posted earlier, there is some discussion on the IV Dgen board and the residents there just love bks and are familiar with how dozens of cases have panned out and what can happen - which reminds me I need to post a link on that board over to here - because most stock boards are amazingly crappy but this one is amzingly good - and there are also some yahoo groups of RV owners who sometimes come up with some insights that only a real customer could have.
link to the free site for monitoring docket - just like BMC for SCRA
http://www.omnimgt.com/files/frmDocsGen.aspx?cboclient=820&tagID=64
go to the NRVH Holdings docket button on the left as all the motion practice happens under that case #. The EC motion request is a good read but that case actually has quite a bit of data throughout. To monitor the Crane Composites case you actually need pacer access - but its free to get the logon and password - you just have to pay 8 cents per page to actually look at stuff - 8 cents adds up surprisingly quick but its mostly priceless.
I also see that a company called Mercantile filed I guess after close on Friday - looks halfway interesting but I haven't looked into it much yet. Used car guys - mostly makes me sketchy from the get go.
I guess every little bit helps but the big keys are going to be seeing how that pension settlement worked out, and if its pretty favorable, whether or not the other committee challenges it anyway. If its not good, I hope to hell they do challenge. I see another 13g popped up for a group selling out - but like the one before, they were out by 12/31/07. I'd really like to see another group filing as getting in, or Sopris or Marathon adding. I need to get in touch with a few guys I know at a few private funds that deal in this sort of thing and see what their take is. I don't know if any of you have ever tried, but its usually not too hard to get a conversation going with the debtors atty's - you just tell them your a stockholder and throw your question out - more often than not they give a quick response - why not - they wind up billing for it and a month later you see your name pop up in a fee app with a charge to the estate for a couple hundred bucks.
OT
>>The ownership of institutional firms is huge at over 7 million shares out of 8 million in the float
And I know where another 7%+ of the o/s sits that doesn't show up on that list. On the IV site, 'Coo' is also quite knowledgable on this one, but the rest of the posters have all been following the same bk stocks for 4 or 5 years now - a pretty good board for ideas and leads.
OT -
its being discussed to some extent on the DGEN board on investor village site - DGEN was on old bk that several of us were following but since there isn't much going on with that one we use that board to discuss random bk plays, and we could use some folks to bat ideas around. If you find the one true gem you can retire off one stock - I've seen two that I missed that would have done it for me - Kasper which was a liquidation play and went from a nickel to over 6 bucks in under a year - and at the end if you were lucky enough to be holding you just got 6+ bucks of cash in your brokerage account for every share you owned and Foamex which went from the .03/.04 range to also over 6 bucks in about the same period of time - but there you wound up with a warrant to buy new Foamex which you either had to pony up more cash or sell the warrant to someone who did - but from what I could tell on the outside there was plenty of volume to do that. If you had the balls to put 100k in either one of those and an even bigger, extra set of balls to ride it out - you'd be done if you wanted to be. Thats the one thing about SCRA that I like, if the stars aligned you could potentially be in for a nice long upward ride, which is sometimes different from some of these others where the most you can hope to make is 3, 4 or 5x your money - nothing wrong with that but its the thought of the 10x, 20x, and 30x that keep me plugging away at this. I keep telling myself - if you play for the 10x plus, you can be dead ass wrong and ride the losers all the way into the ground 90% of the time and still make it to the end of the road.
OT:NRVH
If you go back to the initial p/r announcing the filing and some of the court docs (you can access outside of pacer via the notice agent - its omni mgmt or something like that) they repeatedly talk about 'perserverence' leading to a return for shareholders. Much of the upside rests with the NRV v Crane Composites lawsuit which is about 10 days into the jury trial - from the deposition excerpts that have made it to the docket it seems that NRV sent an RFP to Crane for RV sidewall materials in which it was specified they would be painted black/dark. Crane commissioned a test to see how the styrofoam interior of the panel would hold up - the test showed complete failure, but through malfeasance or just stupid ommission, they went ahead and sold NRV the panels anyway without telling them - that much is undisputed. The demand in the case say 8 mm but that is just for the affected RVs. Yesterday, the damage calculation that was used for a failed mediation popped up - they are also claiming lost profits and business failure - to the tune of about 20+ mm total, with possibly punitive damages on top. Supposedly, they have a very top tier law firm prosecuting the case. With 10mm out in the o/s and the rest of the operations more or less at the solvency line, there could be nice upside, especially if their brands and IP/patents could fetch some add'l money. This guy Riley who sits on the board but a huge chunk earlier in 07 well North of a buck, and he has a rep for being a savvy activist investor. Lloyd Miller and Millenium (Grandview) have the same good rep, they bot after the filing. I have a big chunk - just under 5% - would really like to see some upside there. I like SCRA, but I really prefer smaller cases and especially liquidations - it eliminates that nasty valuation business where shareholders run the risk of getting royally screwed - like AHIZQ, AAI Pharma, Northwest, Kmart (Kmart was so bad I've seen it used as a catchphrase in valuation hearings - 'don't let them kmart you') - I can name dozens. Also following PROEQ - the old purchasepro dot com flier - they have a 40 mm lawsuit against Gateway that is close to trial in district court in Nevada - the judge via summary judgement motions has pretty much reduced the trial to a question of how much money does Gateway owe - the sj motions were so damning for Gateways case that they fired their attys and then tried to hire another firm where a partner was a brother in law to the sitting judge to try and force his recusal - it didn't fly and their request for new counsel was denied. Also NEXTCARD, but that can't be bot or sold anymore - they have a 300 mm lawsuit against E&Y for botching their audit (doesn't hurt NXCDs case that the E&Y auditor is resting in his jail cell). SEMIQ has a huge antitrust case against the DRAM manufacturers - 3 have already settled in the last few months - there was a creditor committee plan to steal the potential excess but the judge threw that off the table about 2 weeks back - thank god. All to say, there are some really interesting angles that develop in bk, most much simpler than analyzing SCRA type cases and between them all you can find enough Q tickers to fill up all your time. Canadian bks aren't bad either though they don't have a good pacer equivalent which makes it much more difficult to stay current in real time.
They will need exit financing somewhere around 175 mm to replace the DIP loan upon exit. But they otherwise seem to be funding day to day without much problem so maybe not too much if any for w/c. Will aslo no doubt hinge on how much actual cash has to be immediately funded into the pension schemes. I'd imagine the hedge funds who own the bonds will want to convert it to equity with a low ball valution of the whole - that will be the key - how low can they push it but even without an EC, Sopris and Marathon should be inclined to force some room for shareholders.
I'm looking at this last MOR, and I hate it when its mostly comprised on the IS of intercompany activity, but getting down to the operating profit of 13 mm for the last roughly 1 year period, if you add back 52 mm in professional fees that would be mostly gone after exit (and valuation is based on post emergent operation) and add back 16 mm in debt forgivenesss, thats 84 mm of operating income before taxes and interest but after depreciation. There is also the 171 mm impairment charge in there, which I'd love to add back but I'm thinking that has somehow to be wrapped up with the 264 mm 'credits against intercompany accounts' - but it doesn't seem like they could be making that much dinero and still be at a dime. I think I need to look at a few more of these.
I see they did 175 mm in DIP middle of 2007 - but thats not a crazy huge number in the grand scheme of things. Your first BK? Honestly I have a really hard time buying anything thats not in bk anymore - I feel naked not have a docket to know whats really going on day to day. On that CEO comment, I remembered it being shares, but it was his parachute - but since that would be an unsecured claim and equity comes next, but he didn't seem too concerned about the cushion.
here was what I was remembering - line towards the end. And it does seem to be the case in my gut - they still have some really good assets in there.
Collapse 'was not my fault', says Sea Containers boss
Independent Online: 22 October 2006
By Danny Fortson
Former chairman of failed group blames Government for the high price of GNER franchise
The former chairman of Sea Containers, the bankrupt transport and shipping group, has refused to take responsibility for the company's collapse, instead hitting out at the high price the Government charged for the GNER rail franchise.
Speaking for the first time since the company filed for bankruptcy protection last Sunday, James Sherwood also said he had no plans to forgo his $2m (£1m) severance payment.
Since stepping down in March from the company he founded, Mr Sherwood has become a lightning rod for criticism by investors. One investor said he had "blood on his hands".
Mr Sherwood built Sea Containers into a conglomerate with disparate businesses. In January, he helped recruit turnaround specialist Bob MacKenzie, who began furiously selling assets, including a ferry line and 14,000 containers, to raise cash, but it was not enough. The company filed for bankruptcy protection after it was unable to make a $115m bond payment. Under the filings, it listed $650m in debts and just $67m of free cash.
Mr Sherwood told The Independent on Sunday that the company was brought down by "factors ... completely beyond my or anyone else's control". Instead, he said, rising fuel prices and the 7 July London terrorist attacks were to blame.
He denied that the company overpaid when it agreed a £1.3bn offer for the GNER franchise, but added: "I should also say the Government required that certain assumptions were used in the franchise bid, like an annual GDP growth of 2.5 per cent. The Government insisted that these assumptions be used to obtain the franchise. It's a bit unfortunate that they may not stand by those assumptions later on."
Sea Containers is currently trying to renegotiate the contract with the Department for Transport. The UK's GDP growth rate would have affected the price of the franchise because it influences the rate of growth of the rail industry.
Mr Sherwood's $2m severance is now a claim in the bankruptcy process. "I'll get paid at the end of the day. The value of the assets of Sea Containers exceed the liabilities of the company."
The group's two pension schemes have a deficit of £133m and could be put into the Pension Protection Fund. Mr Sherwood receives $250,000 annually from his Sea Containers pension in the US.
I'm not trying to poo-poo the stock - as I said I bot in a few days ago at .13 and I should have waited but I think this one could run far if the stars align. I still recall from back when I first got in shortly after I filed an interview with the old CEO who had left shortly before - toward the end he was asked if he was worried about his shares now that they were in bk - he said he had no worried - can't take that to the bank but it did come across as candid. I need to go back and find that. The extension motion filed with the court mentions the two big hurdles but then adds that once those are cleared, and certainly GE Seaco is mostly cleared, that they would still need to line up exit financing. If they don't need much, it really shouldn't be a big deal even in a tight market - but they didn't indicate how much. I guess I need to go and look if they DIP funding during bk - usually if you get DIP in Chapter 11 you need a bigger exit package.
another article - relating to Solutia but indicative of the gen'l market as well.
Jeffry Quinn, Solutia’s chief executive officer, said in a statement: “The willingness of those banks to offer committed financing that was not subject to a successful syndication was a major factor in deciding to award them this business.”
The Wall Street Journal says the lawsuit, filed Wednesday, is believed to be one of the first of its kind and offers further evidence of how credit woes are making it harder and more expensive for companies to exit from bankruptcy.
The banks told Solutia last month that the tight credit market made them unable to find lenders to back the loan and qualified as a “materially adverse” condition that would allow the banks to terminate their agreement.
Solutia is demanding that the banks complete the deal or pay $2.25bn in damages, claiming fraud and breach of contract, reports the Journal. Solutia argues the banks knew the credit markets had been slowing for months when they agreed to the financing deal in late October. It also charges that on several occasions Citi directors and managing directors admitted the loan-syndication market was “horrible” and said they already knew Citi would not be able to syndicate the exit financing, the Journal adds.
The Solutia suit, and its underlying financing troubles, are “symptomatic of the general malaise in the credit markets,” James Millstein, co-head of restructuring at Lazard, told the Journal. “A number of other exit financings have run into trouble.”
Fed dropped the overnight rate, but thats not the same as commercial lending. Take a look at Solutia - their lenders backed off - same at Dana - companies on the verge of exit are now getting stuck in Chapter 11 for lack of exit financing.
its being written about quite frequently as of late:
http://bankruptcy.law360.com/Members/ViewArticlePortion.aspx?Id=46330&ReturnUrl=..%2fsecure%2fViewArticle.aspx%3fId%3d46330
From what I hear, its the same outside of bk - commercial entities needing to refi expiring debt are finding the banks unwilling to loan - if you think about it, the banks already have adequate capilization issues of their own to deal with. I'm not saying this is a definite problem for SCRA, its a potential problem and alot depends on how much they need to borrow - fortunately for SCRA, they will probably have better access to European and Asian banks than many completely domestic organizations would have.
one concern I have - and it was a question until I read the extension motion - was about exit financing. According to the extension motion, they still need to line that up, though it doesn't indicate how much. The more they need, in this unbelievably tight lending environment, the more pressure that gets put on equity's survival
New here - bot way back at .50 and sold over a buck - but case got to big and I got out for lack of desire to follow. Saw the news yesterday and figured I'd jump back in. Definitely intrigued enough by Sopris and Marathon getting in late in the case. But wondering why, unless I just missed it, none of the larger holders have formed an ad hoc equity committee and then motioned for official status? Do they already have enough access to not be concerned? Lloyd Miller and Millenium Partners have just done this on NRVH - worth watching by the way. Seems like it would be worth the shot, most large atty firms will take the request on spec at the shot at landing the official gig - especially lately. Even without an EC though, the one thing that does encourage me about Sopris and Marathon being in even if they don't have much access to the plan formation is that large sophisticated funds like this can sometimes force the throwing of a bone to equity by threatening protracted objections to plan valuations if they would otherwise cut out shareholders, it becomes far cheaper for the debtor to throw 10 mm worth of warrants out there than spend 3 more months haggling over a plan even if the debtor knows they would prevail over the shareholders in the end. Anyone know if an EC request was attempted earlier in the case?
that rb board never had any decent posting volume by the time I got there. There is a good board on investorvillage - look for DGEN. Was a great bk - got shares as low as .015 - they came out with equity in tact after roughly 3 years - we got our first div in December of 06 - 20 cents. At any rate, several of us who have been following bks post on that IV board for DGEN, but not just about DGEN, pretty much any bk we're looking at - some very smart guys on there, would love to have you join us for general discussions.
Flatsixer - didn't you used to post on that RB bk board?
I'd say Laurus loaned the money in the first place knowing the rigs were solid collateral if it ever came to this - and with most of the folks they loan to it does come to this. They get the rigs at a discount or they get their cash back - pretty good original deal for them either way.
maybe it depends on how you measure the 'loss' ;)
nope, a CPA by trade - but like stocks more than tax returns, and like the edge one gets with bk stocks - pacer, noone really looking for the most part, and insanely discounted prices in certain circumstances. There are a few 'retail' folks who mainly do this, and most of us correspond regulary. Don't have a bk attorney as part of the group yet but we've always wanted to find someone with more formal training - what we know about bk we've pretty much learned following a lot of cases for the last 4 years. The most regular hangout is the DGEN board on investorvillage site. Stop on in.
you can google for the article - some paper wrote it up a few months back - I think from memory it was around 3 or 4 mm
In bk, the irs measures change in control by the number of folks who have more than 5% and go under 5% and by the number who have less than 5% and go over - if there is a more than 50% change then you have a change of control - its the reason that a lot of large bk firms request trading restrictions from the judge - see GEGQQ last week - basically the judge rules that 5% owners cannot sell their stock and less than 5% owners cannot buy if the selling or buying would cross them over the threshold. Since 5% of WHAIQ stock runs about 4k, I'm guessing there probably been enough transactions to trigger that for whaiq. I've probably followed 50 bks in the last 3 years - only seen the shell sold in 2. For one the SEC always chimes in against it as trafficking in shells is considered counter to public policy. Plus shell buyers only want shells that have gotten a technical discharge from the court and liquidations, esp. chapter 7s rarely get a discharge and without a discharge creditors can go back after the shell for any unpaid claims - its never an issue absent an attempt to sell the shell becuase in a liquidation the shell is empty if creditors haven't been paid 100%. I suppose if Whaiq did recover enough to pay out to equity though via the lawsuits, the shell could get a discharge, but the mechanism to buy the shell would still be to buy the unissued shares - its the only way to get 90% without driving the price through the roof, and no one wants a shell where they don't have 90% because otherwise you are taking too great a % along for the ride. If a company doesn't have enough unissued to do such a deal and can't increase the authorized number in bk, then the shell just doesn't get sold. I did have a shell last year that come off the Millbrook bankruptcy - creditors got paid in full there plus equity got 47 cents - the shell was then sold for I think 250k but everyone got to keep their shares - though they were diluted by 90% - nevertheless, the empty shell continued to trade and got as high as 30 cents - not sure who was buying an empty shell at that point but I was happy to let them have some of my shares. That shell has now been filled via R/M just last week (though its back to 10 cents now). Still have some shares - mostly just out of a keen interest to see how it goes. This shell was taken over by Trinad Capital who has an impressive record with some of their prior deals like US Wireless and the shell that came out of Eb2b, though I can't remember what that shell was renamed.
as for the shell - they're never 'sold' by the buyer acquiring the shares - the buyer of the shell will usually give the estate a few hundred k in exchange for the authorized but unissued shares - they thereby get control of 90% - and they have to keep the other 10% (previously the 100%) on board so that they meet the min shareholder rules for continued trading, which applies even on the pinks. Usually kills off the NOLS vs attempting to acquire 50% of shares but NOLs are probably already dead due to change of control rules that apply in bk under IRC 382.
Keep in mind the D&O policy would be used to collect on any damages from the Directors/Officers/CEO - on top of any thing that would come out of pocket for them - but usually nothing out of pocket for the D&O's - but in this case the CEO would be a different story - I remember an article that after he left a personal brokerage statement was found in his office with 40 mm in assets (though I think half was whaiq stock) - still 20 mm which hopefully has been frozen through some law enforcement mechanism. But on top of the D&O and anything left with the CEO, they would attempt to recover separately from the E&O of the auditors, and possibly the former legal counsel who has also been mentioned as a target. The class action has recently been settled - the trustee attempted to intervene and step into the shoes of the plaintiffs but the judge did not allow as they were sueing as on a 3rd party basis under Ultra Mares type doctrine - there was one part of that consolidated suit that was derivative in action but the derivative part was dropped in the settlement (the derivative part would have precluded the trustee from making the same claim - but I read the judges opinion on denying intervention and he specifically cited the dropping of the derivitive claim as the basis for denying the trustee's motion). Contract law between the company and its auditors, legal advisors and D&Os is far stronger legal basis for larger damages. I think it will be in interesting ride once the cases start being filed and I think that will be sooner than later based on detail in the fee app