Wednesday, April 16, 2014

Update on Genco Warrant Package For Existing Shareholders

From an 8-K filing today.

The Debtors’ financial advisor, Blackstone Advisory Partners LP (“Blackstone”), has estimated the post-confirmation enterprise value of the reorganized Debtors to be approximately $1.48 billion.  In developing this estimate, Blackstone considered, among other things, vessel appraisals and other valuation methodologies as well as the reorganized Debtors’ equity interests in Baltic Trading Limited and Jinhui Shipping & Transportation Limited and the $100 million of cash invested through the Rights Offering.  Given the approximately $250 million of debt projected to be on the balance sheet of the reorganized Debtors, the implied equity value of the Reorganized Debtors is approximately $1.23 billion.  The Reorganized Debtors will issue approximately 61.7 million primary shares of the common stock of reorganized Genco valued at $20.00 per share (prior to dilution) in order to satisfy claims pursuant to the Plan.

Under the Plan, holders of equity interests in Genco are entitled to receive warrants to purchase 6% of common stock of reorganized Genco (subject to dilution).  Such warrants, which are effective for a period of 7 years from the effective date of the Plan, are exercisable at a cash-less strike price of a total equity value of $1,295 million.  This strike prices equates to approximately $20.99 per share of reorganized Genco common stock.  The estimated value of such warrants is approximately $30 million to $36 million based on the Black-Scholes pricing model.  After accounting for such warrants, the implied share price of reorganized Genco common stock would range from approximately $19.42 to $19.52 before accounting for any subsequent dilution from the Management Incentive Program contemplated under the Plan.

The foregoing estimates of the post-confirmation equity value of the reorganized Debtors and the share price of reorganized Genco common stock are based on a number of assumptions, including no material adverse changes in the spot rate market, no further ship arrests, the continuing employment of the Debtors’ vessels, the continuing service revenue from Baltic Trading Limited and Maritime Equity Partners LLC, the completion of the Rights Offering, and the Plan becoming effective in accordance with the estimates, and other assumptions.
Their liquidation analysis says that, in a liquidation, the unsecured recovery would be very small.


Anonymous said...

Can't believe this thing is still trading ~$1.73. Are people just misinformed or am I missing something?

Anonymous said...

Suntech was trading at $1.30-$1.50 for months for no reason. However in this case it will be over in June.

Anonymous said...

40% of GNK shares are being held short, so people are buying in now
to reduce maintenance fees as well due to the risk of being wiped out.

It's actually a great opportunity to buy puts if GNK hovers above $2 again.

The company disclosed in the last filing that the value of the warrants is, at most, $0.80 cents (or $36M / outstanding GNK shares).

Suntech still trades with a $50M market cap as a result of the shorts buying in and puts being exercised.

The good thing about GSKFQ is that the shares will indeed be canceled.

Moreover, there is very little value to OTM warrants issued by companies which are not publicly traded.

Anonymous said...

It can go up on no reason and then go back down on no reason because of:

1. Traders who don't care at all about fundamentals but make money from the price action.

2. "Investors" who are totally clueless about the fundamentals and believe it can go to $3, $4, $5 etc.

Excel maritime tripled in 3 days from below $0.10 to over $0.30 although it was just weeks away from getting cancelled.

Anonymous said...

OZ showing up with counsel is just one of the things to get this party going. Anything goes in the world of distressed..

Anonymous said...

The chance of the RSA getting terminated is a little higher now that Aurelius is here. At the very least it will entertaining whatever the outcome may be.