Do you happen to know if the debt for equity swap that is talked about on the CORSQ board is voluntary or otherwise whose decision it is to convert? I haven't seen or read the TOPrS creation documents but I would just guess that if the conversion is/was at the discretion of the company that option would be removed in the event of default. If the choice to convert lies with the holder, I just don't see where it benefits them to go from being senior in the priority scheme and then convert themselves so that they are now Pari passu with a bunch of other stockholders who paid pennies for their shares.
The idea of stockholders getting $1 per share much less $10 per share seems a bit of a stretch when you think about how the TOPrS as primary creditors are taking a 40% haircut as a priority claimant but could somehow drop down in priority (while sharing their recovery with many others) and fall headlong into a windfall profit scenario.
Be careful on those NOL valuations because they are some of the most difficult assets to value due to the complexities of the tax code and the uncertainties of how the endgame will shake out. Just realize that no one is going to pay you dollar for dollar on them. Let’s say you have a $600 million NOL and a 34% tax rate. That gives you about $200 million of potential tax savings IF you have earnings to use it all. Then you have to multiply that number by the Federal LT Tax exempt rate which is currently 0.0399 to arrive at the annual usage cap which leaves an annual usage amount of about $8.14 million. Then you have to do a present value of cash flows on them over a 20 year period, which is the usage period, so each of the annual $8.14 million cash flows have to be discounted to present value. I would assume a discount rate of AT LEAST 15% to account for potential NOL expiration/impairment in the case where you don't have enough earnings to use the annual cap amount and you also have to assume some discount for time value otherwise you couldn’t entice a buyer. I show a present value of roughly $51 million in this scenario and that is overly aggressive because the NOLs are going to be reduced by any cancellation of debt income to include accrued and unpaid pre and post petition interest and the total NOL will be limited to the fair market value of the company at the time of emergence.
The company has put a value of $100 million on the NOLs but I suspect they are either using a much lower discount rate in the 5% to 6% range or they are projecting a value based on the assumption that an ownership change will not occur, that the surviving company will make full use of the NOLS before expiration and that they will not have to make any other reductions. I believe their assumption of value is questionable because it looks like the NOLs will be limited, at best, to a number much closer and probably less than the total asset number in the $300 million range (assuming the company keeps all of the tax refunds) even if someone comes riding in on a white horse with an equity injection. The IRS rules don’t typically allow new equity injections to count towards the new emergence value for the purposes of determining the amount of NOLs that survive.
CORSQ is an interesting case study, no doubt, I just have reservations about going up against the FDIC especially at a time when they are also insolvent. The FDIC had to go hat in hand to the taxpayers for additional borrowing lines 5x their normal levels because of how insolvent they are. They also revised the FDIC insurance premium calculations to generate more cash inflows from those insurance premiums and also required insured banks to prepay 3 years of assessments because of how insolvent the corporate FDIC fund is. Given their desperate need for cash I just see them continuing to play hardball with CORSQ in much the same way they have with WAMU because so many of their individual receivership pools have contributed heavily to the insolvency of the FDIC corporate structure.
News 
Market Data 
Discover 
