I was wondering when this was going to start to pop a little bit. As I posted last week, the case appears to have taken a major turn with the retention of KPMG and Roth Capital to independently canvass for an equity raise. Again, the most interesting part of the motion is that any money coming from interested party Johnson Controls would only be compensated at 1.25% - that's ridiculously low - and would indicate that the IBs wouldn't be the primary driver bringing them to the table. The motion goes on to note that if the debtor structures a sale of the entire company while the IBs are in the process of trying to raise equity financing, both KPMG and Roth get a flat 500k.
You gotta overlay this change with what was originally supposed to happen here and what happened in the A123 case. Last September or so, Valence was saying they intended to exit by the end of '12, and they hadn't hired any IBs to search for money - which made it pretty clear that Berg would fund it. Berg has recently closed Mission West for 1.3 billion, so he isn't short for cash to do this himself. But this is where I find it most interesting - Valance didn't propose any plan in October to emerge by end of December - in fact nothing much at all happened in the case. But what was happening with A123? JCI was stalking horse for the automotive business of A123 and the SH bid was 120 million. It went to auction and JCI took their bid all the way up to 245 million- they more than doubled it, but Wanxiang took it for 250 million. In December, the A123 UCC motioned the court to put JCI's deposit that was required to bid in escrow pending forfeiture because on information and belief, JCI had sent lobbyists all over DC to try and get the auction blocked after the fact. Never seen that happen - JCI really didn't want the IP going to the Chinese. The auction results remained pending while the FCIUS debated allowing the IP to go to a Chinese bidder, and on 1/29/13 they rendered a decision allowing the sale to close. All the while, the Valence case just sits in a holding pattern. But in less than two weeks after the FCIUS decision, we see this motion that is a major turn in the case, and we know that Johnson Controls was all in a huff about it, and LiOn sector analysts have been saying for some time that JCI is incredibly weak in this space and would probably eventually have to buy out Valence or A123. All speculation on my part, but it seems to me that perhaps Berg was approached by JCI, who expressed dire interest in the event they couldn't overturn the A123 auction. It would make sense given Valence's NOLs for JCI to take a run, if that is their intent, while it is in BK as IRS code section 382 makes NOLs much easier to preserve under a sale while in Chapter 11. Those NOLs would be very valuable to a company that actually makes money. Berg's a smart man - you hire KPMG and Roth to apply a little extra pressure - esp. given that JCI more than doubled their bid last time pressure was applied. And just this week it came out that the Chinese are gunning for Fisker too - the space isn't dead. Hopefully the docket will provide us with further clues in the coming weeks, but I do think VLNCQ shareholders have a second chance here - still a long shot, but compared to what I thought the chances were a month ago, they are greatly improved.
