look at what happened to the former auditors. you think anyone else
wants to go that route? what you do not know is the conditions
before they paid their debts. how much should have been recognized
as potential loss provisions (even if reversed later) and those
things have huge implications on the financial conditions. what
were supposed to be the disclosures etc.? its not rocket science,
but its safe to assume that much ammunition would have been
provided to mr Bass if a proper annual would have been done.

What auditor do you think will be stupid enough to sign off on the
books knowing that a 7 years back review is needed and knowing
that an parties to litigation are watching over them with
magnifying glasses.
Would you put your career on the line at that situation for a $2M
initial review job?

The problem is that it seems you have two thieves fighting over a prey.
Nextpoint was claimed by the current udf people to be connected to
Kyle Bass. to that end, Nextpoint only said they were never part of
the short and distort scheme. they never said in that legal letter
they published that they are not connected to Mr. Bass.
I am pretty certain that due to the litigation the management has no
real incentive to go ahead and publish the results. one of the
reasons for that is that any auditor insane enough to stick his/her
head to this matter will need to be ultra conservative in their
approach and that would be in the interest of current managers.
One thing that puzzles me about this entire saga is that nowhere do
the managers here talk about helping a class action lawsuit against
Mr Bass by the unit holders here. they say there were over $500M
of damages created to the value of their units, but they have no
interest in helping such a lawsuit? one might suspect that lawsuit
might go after the managers too at some point and that is the reason
they do nothing about that.
Regarding publicly traded - its still sec supervised and the sec still
has an obligation to enforce the regulations on them.

Needless to say this is one side to the story, but it sure sounds
like a very solid approach that they are taking to the lawsuit.
This story is truly disturbing. if you do not have $5M or more for
legal expenses, you can not really go after these guys. that is
the problem.

I am now curious how come nobody is talking about a class action lawsuit
against Bass. there are two things here that are quite separate:
1. the damage that was done to the business of the fund. that is
covered in current lawsuit.
2. the damage to the unit holders by the short and distort. that is
where the real large number of dollars of damages was really
created. since UDF and its auditors are not innocent here, I
can see why the managers here are not pushing for it. if I
were them - I would be. that is the biggest lever to pull here.
designed correctly, based on same evidence, you can really
squeeze Bass. again, the biggest lever is the one that would
make Bass fold. the higher the risk, the more times he would
have to think about not just cutting. he did things here that
there are no excuses for and he got caught red handed.
In life, you need to know when to fold them.

I hear mr Bass is raising a fund dedicated to a bet against the
Hong Kong currency. that is a 1:60 leverage in the bet and he
would get a percentage of the winnings. wish him luck...
FYI, I think he might be right about the HK and USD peg, but the
timing is impossible to predict and his option will only have a
finite time of life.

Lawsuits are moving very slowly even without one party dragging their
feet as a negotiation tool.

There are more reasons for the fund people to not publish audited
financials than to do so:
1. As ironic - if you do not file with the sec you can not be sued
for filing anything wrong (intentionally or not).
2. Kyle Bass lawyers can not use anything that is not certified in
court (they could try and bring expert opinions about numbers,
but there are no filed numbers to explain).
3. Kyle Bass can claim that no filed financials are a sign that he
was right, but the fund can also claim that no respected auditor
would sign off on any numbers that are going to be so heavily
scrutinized by Kyle Bass. we do not know which auditors were
offered the assignment and said no. surely the fund have those
replies and will submit them to court in response and as part of
the damages caused by the short attack.

It does not matter how the equity is purchased. the duties are between
the directors, officers (fiduciaries) and the equity holders.
My guess is that as long as the lawsuit is going on, the annual reports
will not be signed off by any auditor. it is just too risky for an
audit firm and management also would not want to supply Bass with any
tools (I am assuming the loans to an almost single body are not all
that is hidden here).
All that being said, the price over here should reflect a much higher
recovery percentage of the loans than it does now.
I am ignoring the merits of the Bass lawsuit as it is impossible to
quantify any result at this stage.

The only problem is that if they try to buyout the unit holders they
will be breaking their fiduciary duties. other than that, stalemate
can continue in theory forever.

MIC is not in any position to take any bullets for its management.
Shareholders have finally figure out how much management was milking
them for and they have way too much debt. they will sell assets.

totally agree about the potential.

I am always looking for what I do not know. a small recession can surprise us.
I am an observer and long, but lets remember that this is an insurance company responsible for >$100B of par. baseline assumptions are great, but once in a while we all get the unexpected.

you are right that this is the potential. I believe a reasonable outcome
of this process will be between 1 and 10 per share. probably at the higher side of the range, but only time will tell.

quite the math... the conversion is not 1 to 1, but 0.3 shares per $1 of par (including accumulated interest). there will be dilution, but the freeing up of the business to belongs only to shareholders (old and new) is worth it. at some point the business will be able to return capital.
when will this happen? good question. that is the only question.
it seems some of the bond holders think that point is very far away, so they are will to exchange for shares at $3/share (give or take).
management is doing the smart thing. they stop the bleeding of the interest accumulation while the reserves are making very little in investments.

if you look at a similar future conversion for all securities, you are talking 0.3 shares * $800M = 240M new shares. now there are about 60M.
total will be 300M shares with > $1B of book value and growing as contract finish (assuming not too many old mines left to surprise us).
This is a marathon and the company is at the 15 kilometer out of 42 finish line.

The resources for payments have not changed. what has changed is that the holders of the notes understand now that unless they convert, only NY knows when they will be paid for their bonds.
What you will end up having is a company with a very simple capital structure and a lower book value per share (dilution). overall it should be a net positive.
How large is the remaining risk in their portfolio? I am not sure. everyone here keeps tabs on what and when finishes its contract, but nobody knows what other bombs are waiting to explode, but that is the case in any insurance company. the problem is that here we know the company did quite a few unfortunate and ill timed transactions in the past and there is no ongoing business to make up for it.

Bucharest Park Inn launch - so far so good -
http://www.romania-insider.com/park-inn-hotel-managers-unveil-expansion-plans-in-romania/157716/
Last year the compound had ebitda of over 10M euros. having a new
second hotel and addition of 46 rooms should increase cash flow.
For now, this asset is the most liquid of the Elbit portfolio and
could over a decent size of the H serie payout in less than 2
years.

link to what? judge sets the rules for the bondholders to vote
yes or no. that is why it is a suggested plan.

All you say is right if bondholders vote yes -
If bondholders vote no, the sides would have to come up with a new
plan. this plan (as written currently) does not give even a 10%
recovery for the bondholders.
I think the voting is by 11/12/15.
All you are saying is based on that assumption. bankruptcies are
a weird thing. especially when they offer no recovery for the
only debtor of the company and the other asset (the turbines) is
going to be sold in order to make up for the shortfall (in other
words - Z-1 had a recovery of less than zero...).
Lets see what happens next, but its not a done deal yet.

The answer is yes, he is trying to do just that -
will he succeed? I doubt very much.
Hope I am right - I am a bond holder (and to smaller degree own
some shares).

I do not think you are right - very little capex right now.
The Z-1 is doing mostly cheap recompletions right now. the large
items were already done. I doubt PRE is just paying for everything.

Read again - assets have increased (oil sales) -
If you do not recognize the revenues on a monthly basis, it
does not mean the money is not coming in. the cash have
increased over the last few month and so has the equity
(despite the high expenses for bk professionals).
The expenses over here do not show the operating expenses as
well as the expenses, as the joint venture Z-1 is being treated
as if it was an holding on the equity method only.
The question is how much capex will be spent (this would be
coming straight out of the cash).

The liabilities you are mentioning are the bonds.
If the bondholders do not end up holding the ownership of the
purchasers, the entire sales proceeds will be $9.5M (which will
be paid to the lawyers, consultants etc.).

Last year the operating expenses were less than $30/bbl. that was
including injecting back the ng and dividing all the opex by
oil only.
BK cost is a different item that will need to be reviewed and
approved later by the judge before it will get paid.

As you are aware, I was saying all along that the value here should
have been with the bonds. I still think that the bondholders are
getting very close to no recovery and that is where the trustee can
get into trouble. I tried to hedge myself between the bonds and the
shares, but the shares were and are a long shot.
I believe bondholders would have been much better off by converting into
shares (becoming, lets say, 80% holders) and replacing management
(which was always the problem). the company had decent assets, but the
worst capital allocation (capex into onshore blocks with no ng customers
... really?) I have seen in a long time.
Priority one, two and three should have been to finish the power plant.
The onshore adventure was not needed. utilizing 5000 boe of gas (30m
cf / day) and generating extra $15M-$20M revenue (with only cost being
a ten mile pipeline to shore) plus $20M generation margin would have
made this company survive through this downturn, but instead the money
went to pipe dreams.
If bondholders do not get to hold equity in the buyers (as I suspect is
going on), the trustee (wells fargo) will probably be sued and the $9.5M
in expenses related to the bk they forced (with the committee) will
not look very good for them.

If you want to communicate with anyone - do it with Wells
Wells Fargo is the bond's trustee. it is their responsibility
to prevent this deal from happening.
Since the only debt of the company is to the bondholders, the
ownership of the assets should remain within that group.
They should have a vested interest in the outcome and they have
more than enough resources to fight for it.

if you look for liability - only case is for bond holders vs wells
and the unsecured committee.
bond trustee fell asleep and bond holders got taken for a ride. that is
negligence, if I ever saw one.
That is the chance to have someone interfere in this "deal".
I assume the buyers are not owned by the unsecured creditors, needless
to say.

meant to say unless I am wrong...

I am mostly a bondholer, not a shareholder -
There is a reason why a bond trustee exist. their job is to make sure
this does not happen. that is my point exactly.
A money center bank like wells has more legal resources at their
disposal than any private equity company or a management team of a
couple of hundreds of millions of dollars company.
Unless I am correct, the bond holders are not scheduled to have
holdings in the new company. if they have equity in the new company
and the new company owns the buyers, it is very different.
The recoveries from the turbines are going to be very small compared
to the bond par. that is the cash recovery part for the bond holders.

wells fargo bond trust contact info:
bondholdercommunications
@wellsfargo.com or 1-800-344-5128.

As it stands, the assets were taken for nothing. the assets were the
collateral against the unsecured debt. the bondholders should try to
move the trustee to block the sale of the assets.

Bond Trustee has a responsibility to prevent a case exactly like
this one. their job is to keep the bondholder's value.
The trustee is appointed for this sole purpose. right now it is
not being done.

Here is an idea - wells fargo is the bond trustee
http://www.investopedia.com/terms/b/bond-trustee.asp
they could be liable...

You are confusing totally different situations:
You are talking about companies with both secured and unsecured
debt. in such cases, secured debt is getting fully paid (money
or equivalent equity in new company or combination). unsecured
debt gets whatever is left and equity holders are coming later.
In this company the most senior debt is the bonds. there is
no one else left to pay (except for the cost of doing business).
That is the reason why I was attracted to the company and
thought (and still does) that a deal with the bond holders is
doable.
I hope you understand the difference.

Unsecured debt is still superior to equity holders -
nobody is disputing the validity of the bonds. the fact that the
idiotic management spent the proceeds of this expensive loan on
many things (most did not yield anything as a return so far) is
besides the point. the $52M on the turbines (@10%/year) are
today $80M of the debt. the permitting was another $60M in
today's debt. the amazing thing is that the management is now
trying to enrich themselves due to the situation they created
themselves. the concepts were fine, but the execution was
horrible. if I were the judge, I would have never given them
any kind of exclusivity period. they have not proven their
opinion as worthy. sorry.

Are you talking about shares or bonds?
I have invested some money in the shares, but I believe much more
in the bonds and find it very hard to believe this plan would go
forward without serious revisions.

It does not work like that -
There is a waterfall mechanism in which creditors get paid before
shareholders. the almost unimaginable thing (which makes me
believe this will never actually be executed as it currently is
presented) is that according to this plan the enterprise value of
over 2000 bbl/day + 2 platforms just paid for + many more assets
is basically zero (the cost of the "professionals" who counted
the beans is more than the value of the beans) and the only
creditors left (bondholders) will get close to nothing.
You have to be deaf, blind and stupid to authorize this kind of a
plan if you are the bond holder (or representing them as the
committee with an explicit responsibility to prevent outcomes
which are unfair towards the creditors - such as this one).
When it makes no sense it usually does not happen.

Nothing transferred yet to the buyer -
so far there is an agreement that will be executed only if no other
stakeholder has a better proposal that is deemed to be viable.
no other proposals allowed until management's exclusive period is done
(8/6).
So far, the company is making its structure easier to deal with. this
will be a necessity in any case.

8/6 is the beginning of the real process -
Until 8/6, the only ones to present a vision was management.
They claimed that the company needs to be given as a present...
That is my take.
Starting 8/7, competing plans and visions can be presented.
My take is that this saga should have never reached this point,
and there was no need for the drama. I suspect a lot of the
drama is due to the bond holders and their trustee - wells fargo.
Wells is well known to be very rigid and unimaginative in their
approach. millions of dollars that went to professionals could
have stayed with the estate and preserve value for the
shareholders (as I believe management wanted) or could have
increased the value recovery for the bond holders. either way,
wells at its best.
good job...

The 275 number included (at the time) accounts payable of ~50M.
That portion has been paid by the over 50M they had in cash (which
is why their cash level fell)...
If the company would have been headed to liquidation, there is no
way unsecured ap vendors would have been paid while unsecured
bond holders would not.