Replies to post #9017 on Trenwick Group, Ltd.(fka TWKGQ)

[Dondoodit]

And your conclusion from this?

What do you suppose is the "fair market value" of the merged entity? The "merged entity" of course is TGL.

I would suggest that the number is zero, or close to zero, judging by the fact that no buyers have emerged.

But let's do an exercise.

How much are th NOLs? Some $343 million, right.

According to the language you site, if you are bought out by a new entity (that is, the pre-transaction shareholders -- you -- of the loss corporation -- TGL -- own less than 50% of the surviving entity) then the NOL available to the buyer equates to fair market value of the merged entity -- TGL -- multiplied by the highest long term tax-exempt bond rate over the previous three months.

An index of the Federal Reserve shows that state & municipal debt had a peak rate of 6% in the past three months

http://www.federalreserve.gov/releases/h15/data.htm

http://www.federalreserve.gov/releases/h15/data/Weekly_Thursday_/H15_SL_Y20.txt

Let's assume just for fun that Fair Market Value is $343 million (the amount of NOLs available). Multiply by 0.06 (6%) and you get $21 million. Seems to me you owe the Series B shareholders another $45 million before you will see anything.

And this is assuming Fair Market Value for TGL = NOL

[Dondoodit]

Read the article in Saturday's Wall Street Journal on Liberty Media's investment in Sirius and its attempt to capture the NOLs. The article lays out some of the limitations on utilization.

I made an error (imagine that! And imagine that I or anyone else on this board would admit to it!) in my earlier post on this subject, in hypothesizing a fair market value for the target. In truth, the fair market value is the market cap of the company. At the moment, 36 million shares at $0.009 would equate to $324,000. Now, using the Fed's data for tax-exempt yields over the last three months, the NOLs that would be available to a buyer would be 6% of this, or $19,440.

It gets worse. The NOL utilization is stretched out, possibly 15 years or more. So the value of the NOLs is something like the present value of $19,440 earned over 15+ years, discounted at a rate equivalent to the firm's cost of capital. In other words, "Peanuts."