Wednesday, July 1, 2015
In the WSJ:
"Creditors expect restructuring talks to heat up ahead of the Aug. 1 repayment deadline for some of Alpha’s convertible bonds, according to people familiar with the investors’ thinking. The company has been buying back the notes, but $109 million worth remained outstanding as of March 31, according to a regulatory filing."Those bonds due Aug 1 were trading at 35 today! The market is saying that it's very likely the company defaults on August 1.
Posted by CP at 2:48 PM
Tuesday, June 30, 2015
Monday, June 29, 2015
"The extent of the value destruction is pretty breathtaking. They have consumed over $3.8B of capital between the paid in capital and debt outstanding. The 1L bonds are at 25, so that's about $160MM, Oaktree has about $250MM in so we have $400MM in round numbers of market EV (let's assume the equity is a goose egg), just a hair under 90% wealth destruction. That takes some doing - this will rival things like GSAT and IRDM in their first iteration...similar science project type of deals funded heavily with debt while in project development phase. Amazing bond holders sign up for this kind of nonsense."
Posted by CP at 3:45 PM
Sunday, June 28, 2015
"What I think is more likely to happen (given how strong the support for the Euro is internally) is they are running the presses legitimately to cover the sharp increase in cash circulation due to the deposit run. The one thing they cannot afford now IMO is banking system collapse.
Stepping into the phantasmagorical now>
Next step would be, since the machines are running, they print (covertly this time, with western codes/serial numbers) a bunch of EUR 500 notes on behalf of the government (or government entities) which deposits them in the banks. Deposits appear and the banks are safe.
They like what they see, so they decide to cover more expenses with euro cash. Two venues that I see are retirees and military. Once or twice per year, there is actual cash disbursed without accounting recognition so the budget looks better or within the agreed upon "cuts". There are 2.1 mm ppl over 65, at avg pension 1000 euros, that's 4.2 mm EUR500 notes, or at 100x per stack, that's 42,000 stacks. That's a ~35x35x35 stack "cube", not difficult to produce or manage. Greece is also very concentrated: half the ppl live around Athens and Thessaloniki.
Then there are 108k military personnel. Easy to disburse cash too at say 2000/mo avg once or twice a year.
Also, guessing, there might be a few of the large oligarch suppliers (ie gasoline for all state/military vehicles) that will take cash in full or in part. Or do a three-way deal with a Bulgarian oligarch or two who will take euro cash. The Greek banks have extensive operations in Bulgaria so the money can get deposited there.
So Greece can print legit currency and make its budget look better and better.
The EU has a problem then: is that legit currency or not legit? It will be hard for them to declare vast parts of the currency in circulation (printed in Greece) to be not legit so the only thing they can do is ban printing and take over the machines (could happen). While this is happening, the Greeks start spending fast; typical pre-inflationary crack-up boom, because they don't know what will happen and chances are, most hold Greece-printed currency (no neighboring countries use the euro so guessing low intermix of cash)."
Posted by CP at 4:02 PM
"Much of the investment world seems to view present conditions as a 'Goldilocks market' where economic growth is positive enough to avoid recession, but not fast enough to provoke the Federal Reserve to hike interest rates. Even if these views on economic growth and Federal Reserve policy are correct, it hardly follows that stock prices will advance. S&P 500 returns are only weakly correlated with year-over-year GDP growth and have near-zero correlation with year-over-year changes in earnings. Likewise, the stance of the Federal Reserve has much less power to distinguish investment outcomes than investors seem to believe, which they might realize even by remembering that the Fed was easing aggressively and persistently throughout the 2000-2002 and 2007-2009 market collapses."
Posted by CP at 3:14 PM
Hardly anyone even remembers or thinks about Indiana State Police Pension Trust v. Chrysler LLC.
During a May 29, 2009 interview with Human Events, Mourdock said, "This is the first time in the history of American bankruptcy law when secured creditors received less than unsecured creditors." Mourdock also stated, "The Chrysler deal is a clear violation of the Fifth Amendment to the Constitution and more than 150 years of bankruptcy law." Mourdock also stated that under the Fifth Amendment, private property cannot "be taken without due process of law. That clearly has not happened in this case. There has been no process of law consistent with long-standing precedent whatsoever."The ultimate outcome
On May 26, 2009, while speaking in front of U.S. District Judge Thomas Griesa, Mourdock stated, "As fiduciaries, we can't allow our retired police officers and teachers to be ripped off by the federal government. The Indiana state funds suffered losses when the Obama administration overturned more than 100 years of established law by redefining 'secured creditors' to mean something less... The court filing is aimed not only at recouping those losses but also reasserting the rule of law..."
During a May 21, 2009, interview with Reuters, Mourdock stated, "They bought according to the rules, and then the rules got changed," and, "Our portfolios are no longer going to buy the secured debt of American corporations that are accepting bailout moneys. It is an unacceptable risk for us to purchase that debt."
On December 14, 2009, the Supreme Court granted the cert petition in Indiana State Police Pension Trust v. Chrysler LLC and vacated the underlying Second Circuit opinion, but remanded the case with instructions to dismiss the appeal as moot. While the Court had declined to hear the case on June 9 which allowed the Obama administration's wealth redistribution BK plan to proceed without ruling on its merits, its Dec 14 action effectively de-legitimized the BK plan, yet the Court did not issue a ruling to explain its actions. This was far from the ideal outcome for the Indiana pensioners who sought equitable relief from the high court, but the vacatur of a flawed lower court decision is nevertheless an important development that will maintain the integrity of bankruptcy law going forward.Does the absolute priority rule apply with respect to secured claims at union labor companies when a Democrat president is in office? Who knows.
Posted by CP at 2:39 PM