tag:blogger.com,1999:blog-6321089372587128676.post2046996749163062820..comments2023-10-17T10:01:00.917-04:00Comments on Distressed Debt Investing: Distressed Debt: What I Will Remember About 2012 and a look to 2013Unknownnoreply@blogger.comBlogger4125tag:blogger.com,1999:blog-6321089372587128676.post-34172620913844228562013-01-15T21:13:05.230-05:002013-01-15T21:13:05.230-05:00I was thinking about this too and here's what ...I was thinking about this too and here's what I teased out from my own reading:<br /><br />CASHFLOW NEGATIVE BUSINESS<br /><br />- 95% of pre-file equity recoveries occur in scenarios where one or more assets were sold to strategic parties. This makes intuitive sense because it is difficult to see a full par recovery for the liabilities without some kind of synergies that turn a negative operating environment around.<br /><br />- Re-orgs without asset sales usually result in such massive dilution that it may as well be a zero<br /><br />- Obviously exceptions abound, but this seems to be a good rule-of-thumb<br /><br />CASHFLOW POSITIVE BUSINESS<br /><br />- Refinancing need during broader credit crunch forces bankruptcy for orderly sale/refi process (GGP)<br /><br />- Lawsuit / fraud / other sudden event (non-core business related) creates sudden liquidity crunch. Orderly sale/refi process needed (classic Texaco / Pennzoil case)<br /><br />IN ALMOST ALL CASES<br /><br />- A major non-management shareholder who has a lot to lose from being zero'd out and will fight for value in front of a judge<br /><br />- <10% management shareholders have perverse incentives vis a vis pre-file equityholders in selling assets or otherwise maximizing value. They are likely to buddy up with creditors and argue for low valuations in order to secure post re-org positions and 5-10% equity stakes.<br /><br />Anything to add?<br /><br />Hunter, I think this would make for an interesting postTboneSamhttps://www.blogger.com/profile/07365046731660230233noreply@blogger.comtag:blogger.com,1999:blog-6321089372587128676.post-84614882026052404132013-01-14T16:56:27.465-05:002013-01-14T16:56:27.465-05:00"the one thing I'll remember about 2012: ..."the one thing I'll remember about 2012: equity recoveries in bankruptcy."<br />W/o having historical experience to fall back on (currently finishing the DDI course 201 recommended reading), any comments on if there was a general trend driving the equity recoveries? <br />Were there less complex investors on the funding side, a result from issuance during the crisis, thus increasing the equity recoveries? Liquidity driven BKs, maybe from tighter credit to SME's, instead of insolvency?<br />All were just case-by-case and nothing consistent overall?<br /><br />ThanksAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-6321089372587128676.post-49174120735934361912013-01-08T17:07:41.031-05:002013-01-08T17:07:41.031-05:00What are your thoughts on CAGAQ and it's liqui...What are your thoughts on CAGAQ and it's liquidation value? Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-6321089372587128676.post-16703963218316558182013-01-03T22:55:24.147-05:002013-01-03T22:55:24.147-05:00"can't buy the stock for 3 months" b..."can't buy the stock for 3 months" bc of liquidity/float, etc or bc it is on you firm's restricted list?Anonymousnoreply@blogger.com