What roads are open for AAPT.
Debt restructuring is a process that allows a private or public company, facing cash flow problems and financial distress, to reduce and renegotiate this delinquent debts in order to improve or restore liquidity and rehabilitate so that it can continue its operations.
In Europe but now as well in the USA, out-of court restructurings, also known as workouts, are increasingly becoming a global reality.
In the case of AAPT what would this mean:
AAPT has total liabilities of $ 5.8 Mio as of September 2013. Based on my experience and based on cases I have seen here and over the Atlantic, there would be a good chance to get this debt of the balance sheet with a payment of 20 % or in $’s 1.2 Mio.
The reason for this is rather simple: Better getting 20 % than nothing and AAPT being re-financed without reducing and renegotiate the debts with be so dilutive that a survival could not be guaranteed.
To start new, the debt equity ratio has to change, means those doing the financing and cleaning out the balance sheet would present on the liability side a position of 1.2 Mio which at a certain point could be converted into equity.
The accumulated deficit of course would stay in the balance sheet as if and when AAPT should become profitable, this amount would roughly present a tax-discount of 25 % of the total amount or $ 7.25 Mio. In short: For years to come, AAPT would not have to pay any taxes.
Having said that, what would then be needed to get the company back on track.
1.) An agreement on debt reducing or eliminating the debt versus payment of $ 1.2 Mio
2.) Infusion of capital for a new production line
3.) Infusion of capital for raw-material
4.) Infusion of capital for marketing
5.) Infusion of capital to cover Administration Costs for at least 2 years based on new business plan
6.) Implementation of a watch-dog that observes and guarantees strict discipline on the observance of the budget.
As a matter of fact it would be like creating a new company. So the question is then: Why taking all this trouble if one could start from the bottom new?
Attractive certainly is:
a) The name All American Brand – has some sex-appeals to producers from outside the USA.
b) The listed body (Value $ 350.000) The new ones would not have to go this process new
c) Certainly existing links to top retailers that could be re-activated
d) A tested product line but not well executed due to short of funds
e) A very attractive tax-loss carry-forward amount of roughly $ 7.25 Mio (25 % of 29 Mio)
People tend to forget, that infusion of money is not a social work it is all business. There are 3points to watch as signals, that a company could be attractive to be taken out.
1. A stock trading with a deep discount versus the book value
2. A company is cash-rich and has significant growth potential or a low debt/equity ratio
3. The company has incurred since inception continuous operating losses and has a tax-loss carry forward that makes it an attractive takeover candidate (THIS CERTAINLY FITS WITH APPT)
4. The purchaser (investor) may be seeking to offset the operating loss of the target company against its own profits, thereby achieving considerable tax savings. (THIS CERTAINLY FITS WITH AAPT)
I could add many more points to this list, however it would go too far.
Now it goes without saying that those who would go through this kind of process would actually get everything for free if one takes the tax benefits into consideration and to this they would even get equity if and when they would convert their infusion from debt into equity.
As a matter of fact, the present management would only have to negotiate with the right people, signalling that they would go this road and I would say there are plenty of addresses in the USA specialised in restructuring companies without going through Chapter 11 and then bring in the people for pre-packaged financing. Where a will there is a way. IMHO
AI
