I agree. Cyrus has consistently shuffled things around to keep their unrealized losses off their books. (If my memory is right, this is how Bernie Madoff initially got off on the wrong track). It's only reasonable to presume that they will continue with this predisposition, and try to trade their debt for equity. That they and their affiliate bank allowed Colbeck to tag on the "fee" is an indication that they likely won't assert their rights to their junior debt (not to mention that they would most likely lose every last penny immediately, and not be able to hide that).
I think any Cyrus debt/equity trade will be short lived, though. Someone needs to fund the burn or the sheriff will padlock the doors. EK should rightfully struggle (and fail) to raise financing or bring investors on board, given how he burned through the VMF family trust funding, and another couple of big chunks of VMF's other cash. Even if VMF still believes in him, the books and due diligence should make anyone (else) shy away.
As I said before, I'd need $30-50M to bring Overland/Tandberg back to profitability, and that's after the debt is retired. Layoffs, closures, contractual defaults, payables and buyouts aren't cheap, and there is a significant lag between bringing the products up to date and making them competitive and when the net turns positive. The best-case scenario with EK's current fantasy would only be a delay of the inevitable.
My rule of thumb us that a company is worth somewhere around a year's revenue, or 10x net, whichever is greater, minus the debt, but you have to consider some abstract liabilities when assessing the debt. Overland/Tandberg could be worth $50-80M, but only if it were fully turned around. EK's got the train going the wrong direction (and he always has), and it's going way too fast. The debt is too big to overcome.
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