Evaluation Hearing, Day One, pt 8of8
by: shallow_explorer 04/18/05 10:59 pm
Msg: 56106 of 56342
Now we move to Mr. Rosner, Phoenix’s attorney. He provides a nice complement to Mr. W. Phoenix used MIR’s #’s and attempted to adjust them to fair market value. Other analysts did not do this. BS specifically states in their evaluation that it is not an asset appraisal, nor does it provide the value if the company is sold. Mr. Ying (or Yang) in deposition said he hadn’t done a sales evaluation analysis. Underevaluation has significant detrimental effects. If company true value is $12B vs. $8B and creditors are being paid based on 80% recovery using $8B EV, then creditors actually getting a premium – 120% not 80% of their note value. Discussed 3 professors' debt for equity swab report(Hotchkiss from BC and 2 professors from Harvard). Their analysis suggests bankrupt companies where debtors get equity are undervalued 20-250% historically.
Mr. R stated that while Mr. Dahlberg may have bought stock for his grandkids, that Mirant management’s motivation is similar to senior creditors. POR provides 5% of company in options or warrants to management. Assuming $12B company this is $600M (my comment: not bad compensation for incompetence, heck with the grandkids).
With respect to bias. Mirant/debtholders experts in EVERY SINGLE case when a judgment call was required, chose the option that minimized EV. Gave examples of Mr. Coleman's incorrect EBITDA multiplier.
With respect to not using Calpine as a comp, noted that Mirant had no problem using Calpine as a comp in its 2001, 2002 and 2003 proxies. Likewise Calpine uses Mirant as a comp in their proxies.
In comparison to Mr. Coleman’s and Mr. Ying’s tendency to ALWAYS make judgement calls in favor of the senior creditor/debtor. Mr Scheket’s analysis reduced assumed EV in four out of five cases.
Okay, I’m done. I think today was the most important day. Everyone showed their cards, rest of the hearing should just provide the backup. Overall, I was very impressed by our legal team. There’s no doubt that the shareholder’s committee is prepared.
Shallow
