Thursday, February 20, 2014

USEC Inc ($USU) Restructuring Plan

From the 8-K describing the restructuring plan, filed in December:
 As described in the Term Sheet, the material terms of Plan include, among other things, that, upon the effective date of the Plan (the “Effective Time”):

  • The holders of the Convertible Notes will receive, on a pro rata basis, in exchange for claims on account of their $530 million in outstanding principal amount of Convertible Notes:
    • 79.04% of the common stock of reorganized USEC (“New Common Stock”), subject to dilution on account of a new management incentive plan; and
    • $200 million in principal amount of new notes issued by reorganized USEC on terms described in the Term Sheet (the “New Notes”), with the New Notes being guaranteed and secured on a subordinated and limited basis by Enrichment.
  • Subject to further agreement, as described below, Babcock & Wilcox Investment Company (“B&W”) and Toshiba America Nuclear Energy Company (“Toshiba,” and together with B&W, the “Preferred Investors”) will each receive in exchange and on account of their shares of the Company’s Series B-1 12.75% convertible preferred stock (the “Preferred Stock”) (as of October 1, 2013 there were 85,903 shares of Preferred Stock outstanding having an aggregate liquidation preference of $110.4 million) and warrants dated September 2, 2010 to purchase up to 250,000 shares of the Company’s common stock (the “Warrants”):
    • 7.98% of the New Common Stock (15.96% in the aggregate), subject to dilution on account of a new management incentive plan; and$20.19 million in principal amount of New Notes ($40.38 million in the aggregate).
  • The Preferred Investors would enter into an agreement to each invest $20.19 million (for an aggregate investment of $40.38 million) of equity in the American Centrifuge project in the future, upon mutually agreed upon terms and conditions, but in any event contingent upon the funding for the American Centrifuge Plant of not less than $1.5 billion of debt supported by the U.S. Department of Energy (“DOE”) loan guarantee program or other government support or funding in such amount (the “ACP Funding Condition”).
  • The holders of the Company’s common stock will receive, on a pro rata basis, 5% of the New Common Stock, subject to dilution on account of a new management incentive plan.
  • All secured claims will be reinstated and otherwise not impaired and all liens shall be continued until the claims are paid in full.
  • All general unsecured claims of the Company will be unimpaired and will be either reinstated or paid in full in the ordinary course of business upon the later of the Effective Time or when such obligation becomes due according to its terms.
The market cap is currently $25.6 million, which is valuing the new equity at $512 million.

The notes last traded at 37, for a total market value of $196 million. If you assume that the $200 million in new notes are worthless, you are valuing the new equity at $196mm/0.7904 = $248 million. If you assume the $200 million in new 8% notes would trade at par then the noteholders are getting paid to take 79% of the company. 

Clearly, the stock is way overpriced relative to the notes.


Stock Exchange said...

Investment managers attributed this to India's better grip over some of its critical macro-economic parameters such as its twin deficits current account and fiscal

Anonymous said...

Hope this works out for you, CP. The fees are too big for me as a small fish. But there are many more opportunities out there like this to be found.