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Not much more needs to be said. The engagement letter with Lazard pretty much speaks for itself.
Good DD by the way, JAX. You get a Person Mark from me for all of your efforts. Please keep up the good work. You are an asset to the board.
I think you make a very good point.
The 2 articles I have posted won't apply to any official committees that might be formed. It is just FYI type info for sick people like me who do this kind of stuff for a hobby. The main point I wanted to make was that the 2019 rule requires significant disclosures that would be interesting for us to pay attention to.
I am one of the ones who submitted a letter to the court but am only a post petition stakeholder. I don't expect pre or post petition to be treated any differently, although I have heard of cases where a distinction is made.
GLTA
Here is another article on the subject...
http://www.bracewellgiuliani.com/dir_docs/news_publication/cb32e6c9-3ec7-4e56-8219-072183355326_pdfupload.pdf
It is from 2007, but especially applicable in today's environment.
Interesting bankruptcy article written by our attorneys
http://www.kirkland.com/sitecontent.cfm?contentID=223&itemId=2242
This 2007 article discusses Bankruptcy rule 2019(a). It is worth the read because it provides a history of how the influence of unofficial and “ad hoc” committees has ebbed and flowed. The rule is old but the current interpretation of the rule is relatively new and was designed to thwart hedge funds and private equity groups from banding together and buying up all of the equity and debt post petition and exerting significant influence over the restructuring process. Although it does not prevent this activity (there are other rules that address this), it requires significant disclosure about it. The information required in the disclosure basicly exposes their activity to the world at large. If they fail to provide the disclosures in a timely fashion they will most likely be shut out and disallowed from exerting any influence over the process.
It shows whether they were pre or post petition owners. The prices at which they bought in would be important if they tried to cry "woe is me" before the court when, in fact, they may have bought in just days before forming such a committee.
Bankruptcy Rule 2019(a)
I was looking into this issue as there have been a few court submissions pursuant to this rule. The rule requires that all "ad hoc" committees that represent the interests of more than one equity holder, debt holder or other party in interest and attempt to influence the reorganization in some way have to file a statement with the court describing the nature of the committee, names of the participants, what and how many securities they hold, when they bought them and at what prices they bought them. The rule does not apply to official committees approved by the court.
Will be interesting, going forward, to watch for these submissions to see who is posturing.
No problem. I have my share of moments as well. Keep doing your DD and that will serve you well.
Lazard has basically been on board since day one. BLS has been on board since March 30, 2009. To the best of my knowledge they actually retain their services before it gets approved by the court. Like with KCCLLC, they were already submitting court docs for our viewing well before they were officially approved by the Judge as the claims agent.
That document refers to the unsecured creditors. If we get a committee it will reference "Official Committee of Equity Security Holders" or something to that effect.
I got all excited there for a minute :)
http://pacer.psc.uscourts.gov/
PACER is Public Access to Court Electronic Records. It is a pay as you go system that charges 8 cents per page, but signup is free. If you look at too many documents the charges really start to rack up. I prefer to look at documents on KCCLLC Since it is paid for by the debtor, but it is not updated as often. In the middle of the day it can give you a nice heads up as to what is coming.
There are documents on PACER that have not been uploaded to KCCLLC yet. They currently run through #0646. One of the big issues of the day is the Temporary Restraining Order in the Diacetyl litigation and that decision has not been posted. Based on a quick rundown it appears as if all of Chemtura's other motions were upheld. I do not see anything related to the equity committee.
Well said!
A straight liquidation, in this case, is almost certainly out of the question. Nothing to this point has given any indication that that would happen. In fact the overtures from the company itself have all along been quite the opposite. They went into bankruptcy to renegotiate debt and restructure the balance sheet not to liquidate it. If they went to a straight liquidation after turning down a $9 per share whole company buyout then the lawsuits would likely keep them tied up in civil litigation for many years to come.
GLTA
Lyondell & Chemtura in Bloomberg Article
http://www.bloomberg.com/apps/news?pid=conewsstory&tkr=MSFT:US&sid=amz1WOLP3Wyc
Article was written on May 14, 2009. Scroll about halfway down the page.
Lyondell and Chemtura, Sharing Judge, Face Off Over Contract
Lyondell Chemical Co. and Chemtura Corp. are both chemical producers and are both undergoing bankruptcy reorganization in New York in front of the same bankruptcy judge.
Lyondell closed a plant in Lake Charles, Louisiana, where a portion of the premises is leased to Chemtura. In connection with the lease, Lyondell is obligated to provide services to Chemtura. Lyondell says it loses $6.5 million a year on the arrangement.
Ordinarily, Lyondell could eliminate the loss by filing a motion in bankruptcy court asking for authorization to terminate the contracts to provide services. With Chemtura in bankruptcy, the so-called automatic stay precludes Lyondell from filing the motion to reject the contracts.
To remedy the situation, Lyondell filed a motion this week in Chemtura’s case seeking a modification of the automatic stay so it could file a motion in its case to end the services contract. The so-called lift stay motion will come up for hearing in the Chemtura case on June 2.
Lyondell said it is reserving its right at a later time to attempt to terminate the lease.
To read other Bloomberg coverage, click here.
The Lyondell case is Lyondell Chemical Co., 09-10023, U.S. Bankruptcy Court, Southern District of New York (Manhattan), and the Chemtura case is In re Chemtura Corp., 09-11233, in the same court.
It is after the currently scheduled date for the Reorg plan. I would not be surprised to see that date pushed back as well though. The decisions on OxyChem, Lyondell and BP are all scheduled after July 16th. I would think that those are loose ends that would need to be tied up before a plan is submitted. However, as we saw with VanDeMark, negotiations can be reached in the interim that would make July 21 and 28 mere formalities, if they aren't already.
Thanks for taking the time to post this for all to see.
Could be related to Biolab. The relief from stay motion filed by Lyondell which has been adjourned to July 21, 2009 centers around a lease agreement that Biolab currently has with them. Part of Biolab's operations are housed in a facility owned by Lyondell who also used to operate out of the same facility but shut down their own operations some time ago. Lyondell is itself in bankruptcy in the same court as Chemtura. That is what is interesting about that issue. Lynodell stands to benefit to the tune of $6.5 million if they are able to reject our lease with them because it is costing them money to provide utilities and railcar services to Chemtura.
Chemtura has been working amicably with them regarding this issue and thusfar has not filed any objections to the motion. I am not sure what implications it has for us financially but if Shapiro is a specialty site selection firm, then the retention of their services could be regarding selection of a new site for Biolab. Just guessing.
I have been awaiting BP's response for some time. The original motion was filed on May 20, 2009. It is curious that they didn't respond. My only conjecture would be that they did a cost benefit analysis and decided that they would be fighting an uphill battle in trying to force assumption of the contract going forward. I don't like that the hearing on the matter was delayed again because I would like to get that $800,000 per month savings reflected in our financials immediately. However, if the ruling goes our way the delay is not that detrimental because the relief we are requesting is "nunc pro tunc," which would effectively make the decision retroactive to May 20, 2009.
Thanks for sharing that info! Here are a couple of different links in support of your post:
http://www.hktdc.com/info/mi/a/cbn/en/1X04ANEP/1/China-Business-News/ChemChina-to-bid-for-LyondellBasell-plastic-plants.htm
http://www.flexpack.org/INDUST/PRESS_RELEASES/2009/200903/ChemChina_to_bid_for_LyondellBasell_palstic_plants.pdf
Just thinking this through, if the bidding for this one particular business line exceeded $1 Billion then it is no wonder why the BOD rejected the $9 per share total buyout. $9 per share times 243 million shares is roughly $2.2 Billion… and yet, here we are trading at a current market cap of $63 million...
Happy Father’s Day to all the proud fathers out there!
Thanks for sharing that. Keep up the good work!
Thanks again Ray! You are a real asset to the board.
Thanks for the great DD you've shared here. I am also one who is equally, if not more, interested in WHY a stock makes a huge move up or down. I hope you're on to something here. Time will tell.
GLTA
OxyChem Adversary Proceedings
I just wanted to throw a few ideas out there to generate some discussion. In the OxyChem adversary proceeding # 09-01266 we basically have Chemtura alleging that OxyChem refuses to supply all of the necessary product (Dichlor 60) in accordance with the outstanding contract. They also contend that OxyChem has shifted production capacity to produce different chemicals (Dichlor 56) instead of Dichlor 60 and has begun filling orders to other customers when it has the ability to fulfill it obligations to Chemtura. Chemtura further alleges that if they fail to receive the full amount of their orders by June 9, 2009 then they will be in violation of their agreements with WalMart, Lowes and Home Depot and will likely lose those customers (ouch). They even went so far as to say “Simply put, without the ability to purchase raw materials, the Debtors will be forced to stop production and begin liquidation.” (see paragraph 10 of docket #2). The products we buy from OxyChem are critical components in generating about 15% of our revenues.
Oxychem contends that Chemtura’s order quantities are much lighter than originally forecasted (several months ago) and are, in fact, outside of the terms of the agreement (on the short side). The premise of their defense is that they are not responsible for Chemtura’s failure to properly forecast its demand and order adequate quantities to ensure that they are able to fill the orders of Walmart, Lowes etc. Their specific claim was that they could possibly meet the June 9 deadline but would definitely have the requested product by June 19 and in either case a 10 day delay should not trigger immediate liquidation of the business line if it has been managed properly.
In reading all of the documents in this adversary proceeding it became clear to me that OxyChem has the upper hand because without them it would take about 12 weeks (Chemtura’s estimate) for us to order the chemicals from China and retool the packaging, etc. IMO, they also have the upper hand in that their position appears to have more merit. The court apparently agreed as they denied Chemtura’s motion for a temporary restraining order but the court will convene pretrial hearings on July 28, 2009 if they do not settle first. With all that being said, in this type of litigation it is in Chemtura’s best interest to paint as dire a picture as they possibly can and it is in OxyChem’s best interest to minimize the issue so try and take all of the doomsday scenarios in stride.
The point of discussion I wanted to get to (finally, lol) was that if we look at a timeline which includes the beginning date of these adversary proceedings (Saturday, June 6) up to and including the latest date that we were expected to begin receiving shipment of Dichlor 60, yesterday, June 19 it coincides exactly with our recent PPS descent from $0.37 down to $0.26. Considering that the products we buy from OxyChem are critical components in generating about 15% of our revenues (per Chemtura) it stands to reason that the market may have been reacting to this issue. If we get confirmation of some sort of settlement or accord in this case it will be interesting to see if the PPS reacts favorably. To my knowledge, we do not have confirmation of any settlement similar to the one with VanDeMark nor do we know if OxyChem actually met the June 9th or 19th shipment dates. Normally I would attribute this recent decline to MM shenanigans, profit taking, etc. but we also had a really nice run in the Bonds over the last month that also retraced during this time period and that got me to wondering if something else was at play since the bond market is not subject to the same manipulation we see on the pinksheets and the players in that market are typically not looking to flip their investment as quickly as a pinksheet trader.
If anyone has any thoughts on this, especially anyone with any insight as to whether the pool chemicals line is running again, it would be much appreciated.
Thanks for the update. I now remember you bringing this subject up in the past. I can now add one more thing to the long list of reasons why I like Chemtura.
Antitrust settlement agreement
http://www.kccllc.net/documents/0911233/0911233090619000000000004.pdf
Based on the above link it would appear that Chemtura is in line to receive $150,000 (Chemtura’s share of the $10 million class-action settlement) plus other non-monetary consideration in the hydrogen peroxide price fixing anti-trust litigation. The creditors committee has agreed to let us take the settlement in 2 of the 3 cases and agreed that we will not accept the settlement in another ongoing case against Solvay, Inc.
I know $150,000 may not sound like much, but it was the “other non-monetary consideration” that intrigued me. The document further stated that,
“WHEREAS, the Arkema Settlement Agreement provides that Arkema will assist class plaintiffs in assuring the admissibility of certain relevant records at summary judgment and trial, and will produce and assist in qualifying for admissibility at trial additional relevant documents and witnesses, including certain witnesses that would not have been otherwise available to the MDL Plaintiffs without costly international proceedings under the Hague Convention;”
I don’t know anything else about this case other than what was stated in the court docs. One might speculate that the smaller players agreed to roll over on the bigger fish and maybe Solvay has the deeper pockets. If anyone has any insight into the case I would be interested in hearing more.
Thanks for the update. You are a great asset to this board. Keep up the good work!
I am not 100% certain because I am not intimately familiar with this report. This is the first BK case I have followed where only a portion of the company is involved and my guess would be that you are correct. It makes sense because the portions of the company that are in BK each have an individual schedule of assets and liabilities and related statement of financial affairs. The 2015.3(a) is a requirement that is tied to the meeting of creditors. It must be submitted within 5 days of that meeting.
Agreed. Equity shareholders generally are treated like the proverbial redheaded stepchild in bankruptcy. If we are granted our request to form an equity committee our chances of survival and otherwise fair treatment improve dramatically. An equity committee is absolutely a moot point when liabilities exceed assets. Fortunately for us, assets are comfortably in excess of liabilities (as long as we stay profitable) and that is why i believe a committee is reasonable, justified and ultimately necessary.
It is not that I feel that Chemtura would mistreat us as I believe Rogerson's past would indicate that he is a friend of the shareholder and certainly our CFO who is more than $600,000 invested here is a friend of equity. With that being said, our fate is ultimately no longer in Chemtura's hands alone. We have other parties that have a voice, i.e. creditors, the BK trustee and the Judge.
Thanks for your contributions as well.
All pre-petition bond obligations are automatically stayed, in a Chapter 11 case. Which, in effect, means that they are not due on the original maturity date. They will eventually have to be paid during or at the conclusion of the BK case, either in cash or equity securities. Our hope is that they either become extremely cash flow positive during the reorganization or sell a business line to generate the cash to pay them off. Otherwise, we might be looking at dilution of the common shares. I do also believe that the company has authorized preferred shares that have never been issued, they might elect to go that route if they have to.
CEMJQ Upcoming Calendar of Events
Tuesday, June 23, 2009 – Omnibus hearing to discuss BP hedging contracts and deadline for an order to show cause as to why the debtor’s motion should not be granted with respect to the Diacetyl litigation and future Diacetyl actions.
Wednesday, July 8, 2009 – Meeting of the Creditors (MOC) and OxyChem’s response to the summons for a 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). This one is subject to further delay and most likely will be if the OxyChem adversary proceeding has not been worked out like VanDeMark. Postponing will require permission of the court so we will know in advance if a delay is to occur.
Tuesday, July 28, 2009 – Pretrial hearing for the OxyChem adversary proceeding.
It is good news because without VanDeMark's phosgene, that business line shuts down because we have no readily available substitute. At least, that is what Chemtura alleged in the adversary proceeding. It is a symbiotic relationship because IIRC, Chemtura accounts for 60% of VanDeMark's total phosgene sales.
Hopefully something can be worked out in the OxyChem adversary proceeding as well. We need that business line fully operational during the peak season.
Chemtura and VanDeMark Negotiations
http://www.kccllc.net/documents/0911233/0911233090619000000000006.pdf
Based on the link above it appears as if Chemtura and VanDeMark have come to an agreement to resume their existing supply contract. This stipulated and agreed order between the parties shows their intent to fulfill all postpetition orders no later than Wednesday, June 24, 2009.
Thanks to all who have contributed the great DD that has been shared here. I know it is not pleasant to watch the PPS decline but for those of us who have read about and researched this company for months on end should not be swayed by temporary price fluctuations. Take a deep breath and then go look at the chart to see where we were in March versus where we are now. We have come a long way and still have far to go. IMO, whether your point of entry was in the $0.02s or the $0.30s to $0.40s it still represents a bargain based on where the DD says we might go.
As other have correctly stated, Chemtura is not some pump and dump bk pennystock, although it is trading on the same exchange. Since it trades where it does, it is subject to the same manipulation and does invite the momo players who trade solely based on charts. Congratulations to all who are still holding long-term because you have found a needle in the haystack. Companies like Chemtura with its $1.67 book value per share and positive operating earnings do not find themselves in pinky land very often. It took a perfect storm of frozen credit markets and global economic contraction coupled with the timing of our July bond maturity to bring this $4 billion company into the BK courts. Based on Craig Rogerson’s previous success at Hercules, I am convinced that we are in good hands. With all due respect and empathy for pre-BK stockholders, those of us who bought in post BK should all be thankful that he was not hired sooner and that the asset sale wasn’t consummated before now, otherwise we likely would not have had this opportunity. Hopefully all pre-BK holders were in a position to average down and become whole again as I was fortunate enough to pull off with WAMU.
As I have to remind myself, from time to time, make certain that you find the time that is right for you and observe prudent capital management by pulling some off the table to protect your original investment. After that, enjoy the ride and you will sleep better at night. I look forward to the days when we can all celebrate the parabolic price increases that this stock is famous for. Good luck to all. Have a great day!
I second that motion. What we have to remember here is that the Judge presiding over our case, is also presiding over the GM case which is undoubtedly consuming much of his time and thought. Our case is much smaller in the grand scheme of things, even though we are stakeholders of a much more solvent company. IMO, it can't hurt for us to remind him that we are still here.
This article and the one you previously posted lend credibility to the discussions you had with the Chemtura representative. Thanks for posting.
Taking action is what it is all about. I am 100% certain that if equity shareholders do not ask for representation it will not be granted.
My pleasure. I look forward to performing those comparisons again during the next corporate earnings season. I fully expect that the valuation gap between Chemtura and its competitors will shrink and our price/book valuation will return to more normal levels by that time.
GLTA