Tuesday, February 15, 2011

Bondholders Didn't Go For Evergreen Solar (ESLR) Exchange Offer

In last week's post about the Evergreen Solar (ESLR) distressed debt exchange offer, I wrote:

It is very unlikely that there will be a substantial increase in the number of bondholders who tender. I assume that if they terminate the offers, they will go back to the drawing board completely, with an understanding that the bondholders have all the cards and need to be given a much more substantial inducement to reduce the company's debt burden.
The revised, extended exchange offer expired on Friday afternoon. It turns out that bondholders correctly sized up the insufficiency of the offer and their superior negotiating position.

Very few of the senior secured convertible 13% notes tendered, so the company is not accepting any of those notes for exchange.

A small number of the 4% notes did tender (approximately $45.4 million aggregate principal amount), and the company accepted these in exchange for new 4% notes with longer maturity and a 50% haircut to principal. I do not think it was rational for these people to have tendered - they made all the other bondholders and the stockholders better off at their own expense.

Management says that they are not going to go back to the drawing board right away with a new exchange offer. The press release says,
"When we assessed the option of enriching our offers even further in order to induce their further participation, our analysis concluded that to do so would not be in the best interests of our shareholders given that the earliest maturity for any of our notes is in mid-2013."
However, the market correctly recognizes the bearish implications of the rejection of the exchange offer by bondholders, and the stock has fallen 10% over the past two days.

By the way, one thing that amuses me is the inordinate number of page views and comments that the Netflix (NFLX) posts get relative to a great idea with high expected IRR like the ESLR capital structure arbitrage or the Conrad Industries value idea.

6 comments:

Taylor Conant said...

Psssh, value is boooo-ring! I want to see an idea where something is going up, fast.

CP said...

Plus, why would I be interested in Conrad if I don't personally own barges?

Duh, you have to "invest in what you know" like Peter Lynch says.

"This simple principle resonates well with average non-professional investors who don't have time to learn complicated quantitative stock measures or read lengthy financial reports."
http://en.wikipedia.org/wiki/Peter_Lynch

Why would I need a lengthy financial report on NFLX. At Thanksgiving this year EVERYONE at the table was a customer. We all love to rent movies like "Crash". So "obv" you should be buying NFLX.

Taylor Conant said...

Yeah I finished "One Up On Wall Street" and I decided it wasn't worth reviewing. I think my reviews are going to suffer from "selection bias" in general because I probably won't write many 1 and 2-star reviews unless the book is an especially bad/egregious 1 or 2-star example.

I really didn't learn much of anything from the book that I hadn't learned already, better, from someone like Graham or Fisher. And as far as providing a portal into how the great mind of Peter Lynch picks(ed) stocks... it was essentially worthless. Especially when he revealed that he now has 4,000 stocks in his fund (book published in 1988/9, I believe). Can you even be considered to be "picking" stocks, at that point? More like dispicking the few you don't own.

Look, Peter Lynch has made way more than I have or I may ever make, but his book sure didn't give you an idea of how he did it. Instead, it just made me suspicious that the rising tide of monetary inflation lifted his boat quite a bit.

CP said...

"Dispicking" lol.

NO ONE at my Thanksgiving owned a Conrad barge, or any barge. Therefore, why buy Conrad?

Eric said...

By the way, one thing that amuses me is the inordinate number of page views and comments that the Netflix (NFLX) posts get relative to a great idea with high expected IRR...

Maybe more of the latter and less of the former?

And if the 'latters' were just as spectacularly right as the 'formers' have been spectacularly wrong -- OK, perhaps only NFLX qualifies as spectacular here (as far as I can remember) -- then the 'latters' would get more attention.

But maybe since the 'latters' are typically 'value' plays, spectacular is asking too much. But you get the idea.

LangoneRedStudyGroup said...

> By the way, one thing that amuses me is the inordinate number of page views and comments that the Netflix (NFLX) posts get relative to a great idea with high expected IRR like the ESLR capital structure arbitrage or the Conrad Industries value idea. <

Why does this amuse you? Conrad is an illiquid, pink sheet microcap. I just don't invest in stocks like that, many others won't either. Regarding capital arb, I have zero competitive advantage investing in a situation like that, so I don't.