Syncora Holdings Ltd. (fka SYCRF)

[rockraider3]

Denny's point about it being valued at $0 is that whatever value it has, and it has some, is worth more than $0.

I don't particularly want to belabor the NOL discussion, so I'll post this, then let others have the last word. This is all just my opinion after all, having investing in a few NOL heavy companies.

The NOL value is a bit like an hour-glass. Right? Equity holders benefit on the extreme upside, where we are unleashed by the NYID, and get out of run-off and start writing new business again which is income tax shielded by the NOL's. This is the upside case that the folk here want, myself included.

But the NOL's have value in the downside case too. This is where something goes awry and we end up in BK. In the BK scenario, debt is generally wiped out, or the DIP lender prevails in the end with maybe a handful of assets and the NOL's plus a blank slate. This is essentially what Denny is posting about with REALQ. Goldman is the DIP lender and they apparently are going to walk away with the keys to the kingdom -- which is primarily the NOL's. Looks like they are paying $17 million for them... and putting in a $500MM acquisition line for something "down the road". Pretty good deal if you can find a business that generates good taxable income for $500MM. But it's unlikely that Syncora equity holders would benefit in such a downside situation... the NOL's would go to the Surps or the DIP Lender most likely. There is very little chance that as equity holders, we would benefit from the NOL's in a downside case.

But pretty much everything between those two upside/downside scenarios results in the NOL's generally being without much value. And only one of those scenarios really benefits equity holders. Which is why I don't assign any real value to the NOL's. I certainly wouldn't dismiss them or forget about them, but they will be difficult to monetize. And I think there is only about ~10 more years until they expire.

However, if we are to use the NOL's... it does seem to me that Management is making a lot of headway these past few months and doing the things that they need to do in order to get to a point where we could exit run-off. And that's exactly what we need to start thinking about the NOL value.