There is some counter arguments also(below).. on that thread. I think its good debate items.
Clint, this statement is false.
the judge has FIDUCIARY DUTY to keep commons when assets > liabilities in Chapter 11 reorganization.
Assets being greater than liabilities creates shareholder equity. The company can choose to use this equity in different ways. In Chumtura's case, it will probably be awarded to the bondholders as shares in the 'new' post bk company, as payment due for the bonds.
The only way the commons survive in tact is if Rogerson can sell an asset, and use the cash to pay off the bondholders.
This statement is also false:
Did you hear about the Chemtura employees who got stock in their 401K as compensation?
Chemtura stock 'units' were removed as an investment option as soon as the company entered bk. The administrator of the 401k did purchase some units early on. Guys, the 401k plan will stay funded regardless of whether or not the common shares get canceled. See the Solutia exit plan for example. Common shareholders had their shares canceled, but were 'awarded' the option to purchase new shares at a premium. That money was used to fund the 401k plan. Don't fool yourself into believing the commons won't get canceled just because Chemtura wants to preserve their employee's retirement funds. Both can happen.
This statement is true, but not necessarily good for the common shares.
When is the last time you've looked at the 09, 16, or 26 bond prices - they are CLOSE TO PAR (these post-bk highs are higher than when the bonds traded in 2008 when the company was not in Chapter 11)!!!
Bond holders know they are going to get paid, either with cash or shareholder equity. It's a win/win for them, so of course bonds are strong. Don't fall for the 'since bonds are strong, commons should be strong too' line. Most of the time they are they are diametrically opposed. Peltz himself said now is a good time to purchase debt. He could be one of the parties buying the Chemtura bonds as a way to get the equity. If he buys enough bonds, he'll more than make up for the money he spent on the commons, and won't care if they survive or not.
Did you catch Rogerson’s commitment to the stakeholders – employees included?
Again, Chemtura employees will be taken care of either way.
Look, there is no doubt that post bk Chemtura will be strong and growing, but without an asset sale, it's unlikely that the current common shareholders will get a piece of it.
AI
