Bankrupt and Distressed (BAD) Research and Due Diligence

[Madclown]

PlanMaestro, I'll try to answer your question on Tronox as to whether it looks cheap right now. As it stands, the equity is to be given warrants struck at an implied EV of $1.5 billion while the plan value has the EV at $1.05 or $1.06 illion so these warrants are about $450 million out of the money. The Debtors financial advisors have estimated the value per share of current Tronox to be worth in a range from $0.02 to $0.10 using Black Scholes. If the EC attorneys can negotiate a better deal I would expect that they will try and get the warrants struck at their plan valuation which was $1.25 Billion (6.5 turns of 2010E Ebitda @ $192 million). I would like to see those warrants struck closer to $1.15 Billion to get the number down to 6 turns of Plan Ebitda. This company can trade at either of those multiples and such an outcome would bring the warrants into the money provided the financial world doesn't fall off a cliff.

Whether the stock is over or under priced hinges entirely on the implied EV at which the warrants are struck and what the lifespan is for those warrants. 5 to 7 year warrants at $1.15 EV would be nice but probably not a reality.

For more enthralling reading on the subject, search thru my prior IHUB and blog posts and you can see some of my recent diatribes regarding any number of the players and developments surrounding this whole mess. I only wish I could post what I really think about all of them but there may be women and children following along. I'll just have to save some of my battles for later. The distressed world is a relatively small world and the folks who are your enemy in one case may be your representatives in the next one. Dan Loeb can get away with it, but I can't. Yet.