Monday, March 2, 2015

Walter Energy Distressed Exchange

Walter Energy:

We have agreed to issue an aggregate of 8,650,000 shares of our common stock, par value $0.01 per share, in exchange for $66,725,000 aggregate principal amount of our 8.5% Senior Notes due 2021 (the “Senior Notes”) held by a noteholder.

We will not receive any cash proceeds as a result of the exchange of our common stock for the Senior Notes, which notes will be retired and cancelled. We executed this transaction to reduce our debt and interest cost, increase our equity, and improve our balance sheet.
Nice dilution.

4 comments:

jHurt said...

What's the point of doing this as a noteholder? A) the announcement is going to cause the stock to drop and B) wouldn't you get more value selling out of the notes then exchanging into the stock (morningstar prices the 8.5% notes due 2021 at 14, versus this values them at basically 13 cents on dollar). Or do you do this because there's no takers for these bonds?

Anonymous said...

They exchanged $66 million in debt for 8.5 million shares that have a market value of less than a buck a share. Pretty good deal if you ask me.

CP said...

I'm guessing the holder was the mutual fund company that owned this exact face amount of notes on 12/31. They were the largest holder.

The problem is the 14 cent note trades that have been happening probably wouldn't happen if you were trying to move $67 million of the paper. Nobody wants to spend $9 million with a very high chance of losing it all.

With the exchange, they get much more liquid stock that they can essentially sell to morons.

jHurt said...

Got ya. I guess current value of common exceeds 2 more coupon payments. I'll try to find out tomorrow if the bonds are trading 'flat' (without accrued interest), I don't think so (then you'd definitely find no buyers) but worth the question.