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I'm not saying the market makers are cooking the books, but if it's really 5000 up, .0399 bid .04 asked, somebody is haggling over 50 cents.
So how do you pronounce ABKFQ?
I hope as you do, but I think we will find that our hopes are in vain. Probably the arguments Gerber gave will be shot down in a later ruling involving some other bankruptcy. Because of the wary and crafty way Gerber approached the issue about the bonds, I think that even Gerber is anticipating that his view will ultimately not prevail. He does say that the make-whole provisions would not obtain if Chemtura were bankrupt. He does NOT say that it is his view or the view of established law that since Chemtura has residual value after emerging from bankruptcy , it is fair uphold the make-whole provision of the 2016 bonds or that he or established law agrees with the "impliedly" held view that the 2026 bondholders are entitled to more than what they lent with interest. No, he says that because he or some appellate judge might hold these views, it was reasonable for Chemtura to enter in to the settlement, which you and I think is unfair. Thus, when it is established later that these views don't obtain, Gerber will say that he never said they did.
NEW TOPIC (what is just rather than what is legal)
1) The owners of the 2009 bonds are entitled per bond to $1000 face value plus $35 interest not paid at maturity plus statutory interest on this sum.
2) My view and the view of some court decisions including the most recent decision in Gerber's district is that the make-whole provisions of the 2016 should not be enforceable.
3) The question concerning the 2026 bonds is whether or not these bondholders are entitled to compensation for having their bonds paid off early. I think not. At least when it suits his purposes, Gerber pays attention to market responses and the market is saying that it does not expect the value of the dollar in 2026 to match its present value. Consider, for example, the price action of gold or TIPS. So the 2026 bondholder may be very lucky to get his money back in the near future. Anyway the fair and just way to settle this issue is to take a page from Gerber's voluminous decision and duck the question by letting the bondholder decide for himself whether he wants his bonds reinstated or paid off with applicable interest.Just don't pay him extra for what is likely already a good deal.
Here's a little quiz to see if you should be a judge:
It's Friday and you are about to announce a decision that, right or wrong, is certain to send the price of bonds soaring and the price of stock plunging. You announce the decision
a) midday (The lawyers in court will pounce first, but many others will get to act ahead of workers who don't get to watch their computers constantly)
b) just before the markets close (Again the lawyers will act, and a few lucky people will find out what's up in time to act ahead of the close)
c) After the markets close (Nearly everyone learns of the decision over the weekend and the bonds and stock open on Monday at prices that reflect the common knowledge of your decision)
Gerber got it right. How did you do?
The market thinks the valuation is unfair, as you can determine with simple arithmetic. Consider the 2009 bonds, which have no issue about reinstatement or present value of future monies. Here is what a 2009 bond should be worth: $1000 + $35 interest , which should have been paid in June 2009, plus interest on $1035 for roughly 1.5 years. But the bond closed today at slightly more than $1250. May be the market is pricing the bond to high, but in choosing between trusting a lawyer and trusting the market, I will go with the market any day.
A company like CE could pay off the 2009 bonds in cash and pay the existing stockholders in stock. BTW those 2009 bonds last traded at 112.55 according to FINRA. That price reflects the belief by the buyer of some sweetheart deal. These bondholders are owed 103.5 plus 1 1/3 year's accrued interest, which ought not add 9 points.
I'm not a lawyer. Here's how I see it. There was a time when management could responsibly put the interests of claim holders above the interests of stockholders, but now that it is evident that there is residual equity, management has a fiduciary obligation to try to maximize the residual value for the owners of the company. That is, it's more dangerous for management to put forth phony estimates than it was before. That said, I am an owner of some 2009 bonds and believe I should be owed 103.5 plus some statutory interest, say at the outside 2 points. So it's alarming to see recent purchases of these bonds at 109.5.
Off topic (a lawyer joke). God and Satan get in an altercation over a line fence. Finally, God says, "Wait a minute, I want to talk to my lawyers." Satan says, "you ain't got any."
You have said that the value will fall in the closed interval [a,b]. Actually it will fall in the range [c,d], where a<c<b<d. Thus technically your statement is correct.
The 2009 bondholders have no stake in the company other than getting paid what they are owed. If the other bonds are reinstated the interests of those holders are realigned with the interests of the equity owners. This is one of the reasons these other bonds should be reinstated.
I hope everyone is right that the rights are meaningless; what I fear is that they are going to be one of the crumbs thrown to equity to placate us when the POR is approved.
I think anyone who owns equity in CEMJQ owes a debt of gratitude to those who worked to form the EC, to those who worked to get the EC approved by the court, and to those who served on the EC for any period of time. Of course these peoples' interests were aligned with ours; you didn't expect a group of bondholders to fight for an EC, did you?
Do we even have a judge in the courtroom today?
A possibility is that the EC has secured funding at a clearly lower cost than the present plan's.
I like to think that as a matter of integrity I would have voted against the POR anyway, (and I have voted that sort of way in the past), but as I have more stock than bonds my vote against the POR was biased.
Based on today's action, my belief is that someone found out something yesterday. BTW although I voted my bonds on the 23rd, as of the 25th I still have not got the ballot for common stock holdings. The mail is delivered later today.
"Rare-earth elements are key components of the green energy technologies and other high-technology applications. Some of the major applications include hybrid automobiles, plug-in electric automobiles, advanced wind turbines, computer hard drives, compact fluorescent light bulbs, metal alloys, additives in ceramics and glass, petroleum cracking catalysts, and a number of critical military applications. China currently produces more than 95% of the 130,000 metric tonnes of rare-earths consumed annually worldwide, and China has been reducing its exports of rare earths each year. The rare-earth market is growing rapidly, and is projected to accelerate if the green technologies are implemented on a broad scale."
I agree with the EC that the current POR is unfair, but the provision that strikes me as most egregious is the proposal to pay the bondholders in full and then pay them again because "arguably" the make-whole- call provisions obtain. The idea behind a make-whole call is this. XYZ is in financial difficulty and needs to issue bonds. They offer an above-average interest rate, but the potential buyer says, wait a minute, if XYZ goes under I'm left holding the bag, and if in a couple of years XYZ recovers, they will call my bonds and issue new bonds at a lower interest rate. To assuage such fears, XYZ agrees to a make-whole call only, essentially saying that they cannot call the bond without paying a penalty for doing so. Have any of Chemtura's bonds been called? No. Indeed, if Chemtura wanted to call a bond it would need the court's permission and presumably the court would not give it exactly because of the make-whole-call provisions. The 2009 bondholders should be paid what they are owed and nothing more, and the other bonds should be reinstated. As I see it the provision in the present POR is simply an attempt to buy bondholders' votes, and the way the ballots are being mailed out is simply an attempt to make sure that the bought votes have a better chance of getting counted than the votes that haven't been paid for.
If you want to know how the Bankruptcy court is trying to disfranchise you, let me count the ways.
1) I am both a bondholder and a stockholder. Today a received my ballot for the bonds but not for the stock. Is there some fine print in the 280 plus pages that I am suppose to peruse that explains why bondholders get to vote earlier than stockholders? You can't blame the post office. If ballots were sent from the same place at the same time to the same address, don't you think they would arrive on the same day?
2) Here is a quote from the front page of the ballot for bondholders:
"If you received a return envelope addressed to your nominee, your completed ballot must be sent to your nominee... or your vote will NOT (underlined) be counted."
Does this quote give you the impression that you cannot submit your vote telephonically or by e-mail?
Your very helpful and informative blog has posted the EC's letter, which says that the debtors' committee "has sent" a ballot that must be returned by September 9th. I have not received this ballot yet and will be out of town from August 18th through August 24th. I plan to vote against the plan. Is there anything I can or should do to insure that I am not disfranchised? Thanks.
Does the EC's POR not ask for reinstatement of the 2023 bonds? If not, can someone explain to me why not? (I am not carping about the EC's plan; indeed I see that without the EC stockholders would certainly have fleeced by Rogerson. I just want to understand the difference between these bonds and the 2016 bonds, because from a market perspective it is even more unreasonable to let the 2023 bonds suddenly get paid off 13 years early).
I'm a bondholder and I agree with you. The bondholders should expect full recovery, but what is that? For the Great Lakes bonds that should be (per 1 thousand dollar bond) $1000 +$35 (or six months' interest that was never paid) + a small amount of Statutory interest for the use of $1035 by the company from June '09 until we exit bankruptcy. The other bonds should be reinstated and these bondholders should also be paid missing interest and statutory interest on missing interest payments; but they are not entitled to be paid their principal until it comes due in 2016 and 2023. Alas the bonds are trading at prices that suggest that the bondholders will get a significant cut in what rightfully belongs to stockholders.
Caveat (Pronounced CAVE=E=OT, not CAV=E=OT): I am not a lawyer. If the POR has nothing for the stockholders all stockholders are presumed to have voted against the plan, but their no vote has little or no clout. I think once equity holders are given a stake they do get a vote, but remember we can vote overwhelmingly against the proposed POR and it can still be aqpproved by the court.
Court document 2927, which details the E.C.'s objection to debtors' motion to shorten the notice period is worth reading. I think it's clear that the E.C. will submit its POR and fight for it.