Yesterday, Citi kicked off its 2011 North America Credit Conference. As usual, Citi provided a strong offering of management presentations across the credit spectrum as well as many fascinating panel discussions (just to name a few: Global CDS Central Clearing Update, 2012 Implications of Dodd-Frank and Changes to the Banking Regulatory Scheme, a high yield panel, etc). Most relevant to us, Citi's distressed desk analysts presented a variety of actionable ideas to a large audience of distressed debt investors.
- Creditor Committee counsel, Martin Bienenstock (Dewey & LeBoeuf), said in court: "We think there is potentially quite an estate to be amassed here for the benefit of creditors."
- Rumors that Appaloosa had been buying bonds in the mid 30s according to unnamed sources
- Rina Joshi, Citi's distressed desk analyst covering MF, laying out a case that the bonds could be worth between 50 cents to par at Citi's credit conference yesterday.
Rina demonstrated this with a variety of assumptions of the level of haircuts which restulted in a par recovery for a small levels of haircuts and lower recoveries for larger haircuts for a range of 50-100 cents on the dollar. These levels have to then be discounted depending on your hurdle rate and how long until you expect to receive distributions. Ultimately, and I think this was my biggest takeaway, she noted that the trading level of the bonds imply $2.6B of equity was lost at the organization which she seemed to be aggressive. She did note that if the $500M+ of missing funds were not recovered, this would ultimately affect recoveries on the order of 20-30 cents, but she believes that money is somewhere in the system.