On October 21,2019 there was a court hearing held regarding claims objections filed by parties to Acceptance Insurance. An audio of that hearing is filed as Docket #629 on Pacer.gov.
A) Mr Myers, the Trustee, gave a background of the case and made some important points which are worthy of discussion.
B) The parent company, AICI, has $84,625,062 in operating tax loss carry forwards available. Under Section 382 of the IRS Code, at least 50.1% of a reorganized company would have to include parties to the bankruptcy as stockholders in order to use the $84,625,062 NOL.
C) The parent company has one remaining subsidiary that is coming out of "Rehabilitation" and will be an active insurance company. That subsidiary is Acceptance Insurance Company (AIC). AIC insures agricultural crops for farmers. Mr Meyers believes he can sell AIC as an active insurance company for approximately $5 million dollars.
Under items B) and C) above, there are opportunities which investors should take a look at before discarding.
Referring to C) The Deutsche Bank, Trust Preferred are owed $119,704,189.92 and as a group could easily bid for the AIC subsidiary but would forgo the $5,000,000 in cash that Mr Meyers anticipates getting.
Referring to B) we could issue new shares of the parent company, reorganized AICI, to both common and trust pref holders. Trust Pref holders would own approximately 90% of the new common. This would be similar to what WMIH (Washington Mutual)and NOVC (Novastar) did in their reorganizations. AICI would be a shell company and would have to have a rights offering to raise money and then buy a business in order to use the NOLs.
Combination of B) and C) would involve keeping AIC the subsidiary and issuing $5,000,000 in debt to the trust pref. Then issuing new common with 90% going to trust pref. Trust Pref would exchange its claim for $119,704,189.92 for the $5,000,000 in debt plus 90% of the common. I believe this would meet the requirements of IRS section 382.
I would like to thank Enterprising Investor for the information he has provided. As a result of his input, I did this further due diligence. We should at least discuss these options before discarding them.
