Monday, March 4, 2013

GMX Resources Misses Interest Payment ($GMXR)

Well, after last week's bizarre rally (and selling opportunity) in GMXR, this morning they announce

On March 4, 2013, GMX Resources Inc. failed to pay an interest payment due on its Senior Secured Second-Priority Notes due 2018 (the "2018 Notes"). The 2018 Notes are governed by an Indenture dated as of September 19, 2012, among the Company and U.S. Bank National Association, as trustee and collateral agent.[...]

As previously disclosed by us, we have engaged Jefferies & Company, Inc. as financial advisor to assist the Board and senior management in its ongoing exploration of financing alternatives, including a potential restructuring of the Company's balance sheet in light of its current liquidity and cash needs. If we are not able to successfully implement a consensual alternative for restructuring our balance sheet, or in order for us to implement a financial alternative, we may voluntarily seek protection under the U.S. Bankruptcy Code.
I wonder whether they will be able to avoid liquidating this time?


Allan Folz said...

Shouldn't the common be a 0 now?

CP said...

Of course.

This wouldn't be the first time an equity price was slow to react.

The pref is now at 19 cents.

May $1 put (actually $13) is $0.85 (actually $11.05). So you can short at $1.95 synthetically basically.

Anyway, $1 payoff for about $0.88 including commissions, assuming you hold the short to zero, is a 13.6% return. 8% if you cover at a nickel.

blogger said...

"The pref is now at 19 cents.
May $1 put (actually $13) is $0.85 (actually $11.05). So you can short at $1.95 synthetically basically."

I'd be interested in more explanation about this trade, if you have time to detail a bit and do some "hand-holding". Why is it actually $13?

Also how do you evaluate the probability that the stock will go to 0 before expiry in May? Is there statistics about how long a stock takes to go to 0 after filing Chapter 11?

blogger said...

How do you evaluate the probability that the stock goes to zero before option expiration?
Do you have data on how long stocks take to go to 0 after filing chapter 11?