Distressed Debt News Weekly Round-Up
Each week, I am going to attempt to provide readers with the most pertinent bits of information and happenings in the distressed debt world. My sources for distressed debt news range from trade publications to my Bloomberg. One of the keys to distressed debt investing is staying on top of what is going on in the courts and in high yield. In most situations, I will provide a link so readers can further explore the story on their own.
If you have any tips or news stories regarding distressed debt, email me at hunter [at] distressed-debt-investing [dot] com.
Distressed Debt News - Week Ended 4/19/2009
- GGP Files for Bankruptcy: As outlined in this post, GGP Bankruptcy, GGP filed for bankruptcy this week. First day motions were customary in nature, with the big news being Pershing Square's involvement in the DIP financing. In my opinion, Pershing Square's equity position was much more a negotiating chip versus an outright long position. The DIP terms are exceptional from Pershing Square's standpoint, especially the interest rate and the fact that they will receive 4.9% of the reorganized GGP (including, 4.9% of certain subsidiaries, which if I am not mistaken, believe to mean Rouse in the chance Rouse is re-organized into its own seperate company post plan confirmation - something I see as possible given the distinct debt structure and guarantees vis-a-vis Rouse and GGPLP LLC).
- AbitibiBowater Files for Bankruptcy: Newsprint and paper products producer AbitiBowater filed for bankruptcy this week. Filing in both Delaware and Canada under Chapter 11 and CCAA (Canadian Reorg Bankruptcy Law), AbitibiBowater concluded that no other alternatives presented themselves and determined bankruptcy was the best course of action. At some point in the near future, we will do a post about this company as its corporate structure is complicated and will provide a fantastic learning experience for our readers. Information on the U.S. docket can be found here: AbitibiBowater Bankruptcy Information
- MGM's Possible Restructuring: As reported throughout the week, MGM bondholders are licking their chops about a possible debt for equity exchange. Press reports indicate that Carl Icahm and Oaktree Capital Management (working independently from one another) are pressuring the company to file for bankruptcy. From a quick glance at some filings it looks like MGM's big issues are 1. Financing the remainder of CityCenter and 2. The credit agreement maturing in 2011. Admittedly, I have not followed this situation as close as I would like (someone else here covers it). If you are following this situation, and have thoughts or a valuation model, please contact me (email address above).
- Six Flags offers Debt Exchange on Certain Bonds: We first began following Six Flags in this post, Six Flags Distressed Debt Analysis. This week Six Flags, offered to exchanged $588.3M of its holdco notes, $280M of its converts as well as its preferred equity for common shares. If all goes according to plan, the straight bonds would own 58.3% of the company, the converts would own 26.7% of the company, and the preferred's would own 10% of the company, with existing holders getting 5% of the company. The company needs a 95% acceptance rate from the bond holders and convertible note holders, and if it does not get that, will look to other alternatives (read: Chapter 11). The offer expires June 25th. The bank debt looks to be trading at 74-77 post the news.
- Buffet Holdings Plan of Reorganization is Confirmed: For all you Old Country Buffet restaurant lovers, you will be happy to know that the company will be emerging from bankruptcy soon. The company announced receiving a total of $117.5M of new exit first lien financing which will enable the company to emerge successfully. Approximately $140M of prepetition debt will remain outstanding as second lien rollover financing. The plan or reorg estimates at 69 cent recovery for the pre-petition bank debt holders and a 4.5 cent recovery for the bond holders. I have no idea where either are really trading though. Here is the docket: Buffet's Bankruptcy Info
- BearingPoint seeks to sell assets to Deloitte and PWC: Bearing Point, a provider of computer services consulting, said it will sell most of its assets to Deloitte for $350M. While contended in court, the judge approved the sale. In addition, Bearing Point agreed to sell its Japanese subsidiary and commercial services business to PWC for $45M and $25M respectively.
- Other news that I haven't gotten time to go over: Spectrum Brands getting closer to emerging, the ongoing issues at GM and Chrysler, Station Casino's continuing talks with creditors, the Polaroid Liquidation, Charter, and a few others. I apologize. My one-man wrecking crew has its limits.
5 comments:
can you elaborate on why do you think Ackman position in GGP is bargaining chip?
I never though there is any value in the equity. In normal times sure they may survive but now with abysmal retail sales and distressed commercial real estate markets the value will disappear quickly.
Can you please discuss whether it is common for purchasers of distressed debt (or original bank lenders) to also buy cds (and have zero economic exposure or even negative net exposure) and then vote their interests in a manner which may not be in the company's best interests (e.g. the recent article in FT about Citibank and Abitibi). Do you see this a lot and do you think the law should be changed to require people to prove their economic exposure before voting in bankruptcy? Thanks
Sami:
I believe Hunter reviewed that in the GGP post, but Pershing got a $15mm incentive fee for the DIP piece. This financed the ~$15mm outlay for the equity position and helped expediate the reorg process. If another fund owned the equity piece, they would likely battle for better terms and extend the process. Yet in this case Pershing could argue that if GGP conceeded favorable DIP terms Ackman (as an equity holder) would support a filing and the subsequent wipeout of the equity holders.
JG
very interesting, would you like to do a analysis on Harrah's?
I am new to this site. I have just learned about this site. I am going to read on and it’s very interesting to know.
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