Has anyone spoken with EOS in the past few days? There were some positive (and very MATERIAL) actions taken by Judge James Peck, the judge handling the LBHI bankruptcy proceedings affecting the future of EOSPN.
I would have expected EOS to have released a Form 8-K, discussing the material impact that Judge Peck's actions will have on our company (and specifically, our EOSPN shares).
Lehman's request to enter into a Capital Maintenance Agreement was granted. LBHI now has the bankruptcy court's permission and blessing to inject close to a Billion Dollars of cash and non-cash assets into Aurora FSB (the old Lehman Brothers Bank FSB). Aurora owns the equity ranking BELOW EOSPN shares. LBHI (and it's creditors) want to sell or wind down Aurora bank.
One of the things that I've seen since last week is that LBHI is committed to either selling Aurora FSB to another bank, or in the alternative, to buy back any/all of Aurora's non-cash assets within the self-imposed 18 month deadline. Obviously, they wouldn't be buying back cash or cash equivalent assets, as those would be valued at 100 cents on the Dollar.
This bank will be sold, one way or another, within 18 months.
Apart from the sure dividend that we'll receive in December, there's a $25.00 pot of gold at the end of this rainbow between now and March 2012. This conservatively assumes no further dividend payments. But with Aurora FSB now super-capitalized, any reason/justification for the OTS to stick its bug nose into our business just disappeared thanks to Judge Peck's granting of the motion - thank you, judge!
So the game as I see it now is that $20 gets you at least $25.53 (if you assume only the one dividend payment in December 2010 and no other dividends thereafter), just to keep things conservative. Not a bad return for an 18 month (or less) wait.
First question: what is the annualized rate of return if you view EOSPN as a Zero-Coupon Bond as described above, including the one dividend for December '10, but assuming no other payments until it is cashed out at $25.00 per share?
Second question: what (if anything) am I missing or over-looking here? I am assuming that Judge Peck, LBHI, and the LBHI creditors want to extract as much equity out of Aurora as they can. They already threw a lot of money into our bank to keep the OTS away. More money is on its way and it appears that we'll be over-capitalized (with an ongoing committment by LBHI to keep Tier 1 and At Risk Capital at/above levels that will keep the OTS far away from us until this company is wound down or sold.
I know that the folks on the bankruptcy side (Judge Peck, LBHI, creditors of LBHI wouldn't be agreeing to throw good money after bad, so it would appear that the 18 month exit strategy is a very high likelihood event. As is our collecting our $25.00 as soon as the company is sold or wound down.
LBHI and it's creditors CANNOT cash out any equity in Aurora FSB until we're made good on our securities.
Again, what am I missing here?
Only genuine comments/opinions, please.
Thank you,
David B.
