Why they entered Ch 11
They entered CH 11 because of a large looming principal payment on the senior notes, but more importantly, the converts were maturing in September as well ($60mm payment). Unfortunately, they had a bad March quarter with lead spiking and then the Vernon issue hit, so their ability to refinance debt was basically non-existent. Thus, they didn't have the liquidity to meet their near-term debt obligations. This was a liquidity issue, in my opinion, much like General Growth and Pilgrim's Pride had back in 2008/2009. Bankruptcies occur for both solvency and liquidity reasons. The former is usually much more problematic to deal with than the latter, particularly in a benign interest rate environment like we currently have.
The frustrating part here is that the company did have availability under its prior revolver to make the necessary payments (at least as of their February earnings call), but the poor March quarter restricted that availability and making the payments would have left them with very little cash (and the Vernon issue to deal with).
Bankruptcy basically allowed them to conserve cash and hopefully to fix the operational problems that were plaguing the company.
As far as timing, I think it's possible that they come out in Q2 2014, but more likely later in 2014. The POR has to be presented to the presiding judge and I'm sure there'll be some negotiating using that as a starting point. As common holders, we need them to boost EBITDA the next two quarters so that LTM EBITDA is something close to $150-$200mm in my opinion.
