I have received a number of requests to share my thoughts on the POR, so here goes…
Here is my attempt to value the effects of the first iteration of Chemtura’s plan of reorganization. Assume you have 100,000 shares of CEMJQ and there are 243 million outstanding, you own approximately .0004 of the current o/s. Current CEMJQ holders get 5% of Newco which will have 100,000,000 shares. So .0004 x .05 x 100,000,000 is approx 2,000 shares in Newco. This works out to approx 98% dilution. The midpoint estimate of the Newco equity value is $1.354 billion as disclosed in Schedule F of the Disclosure Statement so the Newco shares are assumed to be worth $13.54 per share. Applying a 98% dilutive effect would yield a value to current CEMJQ of $0.27 before the additional dilutive effect from the Management Incentive Plan (MIP). However, there are additional dilutive effects of failing to participate in the rights offering. Theoretically, if you do not participate in the rights offering, your relative ownership of the Newco will decrease but how much will depend on the subscription rate. I am not certain if participation in the rights offering is limited to accredited investors.
I would like to get my arms around the additional dilutive effects of the MIP and failing to participate in the rights offering but I believe these will be based on future events (actual financial performance under the MIP & subscription price and rate from the rights offering) so it is difficult to nail down the exact dilutive effect of these events right now.
This is all IMO. I encourage everyone to read the disclosure statement and plan of reorganization in their entirety before making any investment decisions. Based on the entry points of SVP and Canyon, I have to believe that they will not be particularly thrilled with this POR. Judging from their comments in their court filing last Friday and the additional information released in today’s Debtwire article, it would appear that if the EC is not happy with this POR then they will try to convince the Debtor to incorporate portions of the EC’s own plan or in the alternative they may motion the court to terminate exclusivity and put forth their own plan.
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