Calculations for new common
Assuming the number of shares stay the same as afterwards, call it 154 million shares in Newco (reformed company after chapter 11).
A share right now is $7.50. After Chap 11, that share is only going to be about 35% in Newco equity and maybe less, so the price of existing common shares to new shares would be $7.50/35% or $21.40 per share in NewCo.
document 817 lists possible company values of $5.5 billion, $6 billion and $6.25 billion; so assume NewCo has 154 million shares with a value of $5.5 billion. That would make each Newco share worth $8.67.
Buying the existing common shares at $7.50, that get exchanged into Newco shares at 35% cost $21.40, so the stock at $7.50 is way too high.
The current stock price needs the shares to drop to at around $3 ( $3.00/35% is equal to the expected Newco share value of $8.67 ) in order for the exchange to be equal value, and lower to have a margin of safety.
Louis J. Desy Jr.
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