Replies to post #441 on Bankrupt and Distressed (BAD) Research and Due Dil

[pathan786]

Madclown,

Nice elaborate post on CORSQ.

First off, the things that are certain for now are:

Assets $314M, Liability $533M and future NOLs $648M

where Assets are comprised of mostly tax refunds of $258M out of which CORS has "pledged" $109M for FDIC; liability include $416M TOPrS debt and $109M pledged to FDIC.

1. The shareholder equity is -219M;
2. Add future tax refunds @40% of future $648 NOLs i.e. $259M

3. Shareholder equity is -219 + 259 = $40M.

So far we haven't talked about any debt to equity conversion yet.

Your calculations around realization of future NOLs being limited to $8.14M per annum is true ONLY if Corus is not able to use IRS Section 382(l)(5) exception. It appears that Corus is trying hard to maintain it's eligibility to use section 382(l)(5).

They also apparently have one or multiple POR sponsor(s) and a draft POR ready which is being negotiated between debtor, sponsor and Credit Committee. I think the POR would not be released till CORS cuts a deal with FDIC on tax refund distribution.

Now, the question is, given that section 382(l)(5) requires that the at least 50% of the re-organized company should be owned by old shareholders and creditors - then --

a. what is the incentive for the Plan sponsor to get into an uncertain mess if he'd only get 50% of the company at the most?
b. what is the incentive for hundreds of actual creditors (CDO owners) each holding just a couple million $$ debt, to not liquidate Corus, take 50-60c on the dollar; end of story.

This is where the suspense lies. The board believes that the Plan sponsor is also a majority share holder and thus the POR would keep commons alive.

Note: That it is confirmed that NOLs are at $648M before any "Cancellation of debt". How much debt is cancelled, how much converted to equity and how much paid back in Cash remains to be seen and may be one of the points under negotiation. A lot depends on the outcome of negotiations and litigation against FDIC.

The $100M number that the company has put for refunds from carryover NOLs in BK filing is vague, just doesn't add up; $100M is 40% of $250M. no where close to 40% of $648M. Of course the NOLs would be reduced by the amount equal to Cancellation of Debt, if there is any in POR. They might just have put an arbitrary number assuming all CDO debt is cancelled: $648M NOLs - $416M = $232M. and 40% of 232M ~ 100M