Monday, March 21, 2011

Grubb & Ellis (GBE) Extends Expiration Date for Consent Solicitation, Decides Not to Declare Dividend on Its Preferred Stock, Announces That it is Exploring Strategic Alternatives

As I expected, Grubb & Ellis (GBE) just made an announcement (8-K filing after hours):

In light of current market opportunities and unsolicited inquiries that the Company has received, Grubb & Ellis Company (the "Company") has engaged JMP Securities LLC to explore strategic alternatives on behalf of the Company, including the potential sale or merger of the Company.

In addition, the Board of Directors of the Company has determined, as permitted, not to declare a dividend on the Company's 12% cumulative participating perpetual convertible preferred stock, par value $0.01 per share, for the quarter ending March 31, 2011.

The Company has also extended the expiration date for its consent solicitation with respect to its 7.95% Senior Convertible Notes Due 2015 from 5:00 p.m. New York City time, on March 21, 2011 to 5:00 p.m., New York City time, on March 25, 2011, unless further extended by the Company in accordance with the terms of the consent solicitation.
I view this as a triple whammy: very bearish.

If the company is extending the expiration date for the consent solicitation, it is probably because the noteholders have sized up their negotiation position and are realizing that they can demand a higher consent fee, and haven't consented to the company's opening offer.

The company had negative EBITDA in 2009 and 2010, so it is no wonder that they are deciding not to declare a dividend on the preferred stock.

What is bizarre is that the company put out a very happy-sounding press release about these developments, and the headline is about "strategic alternatives" and not the consent solicitation or the preferred stock dividend. For people who trade based on headlines alone, "strategic alternatives" is bullish sounding, and the stock is getting bid up after hours! Great selling opportunity!


eahilf said...

This is kind of morbid in the same way the Franco death watch was. What can really be done to profit from this? The stock is already trading at less than a buck.

CP said...

Maybe this answers your question?