Comments on Distressed Debt Investing: Distressed Debt News: GGP Files for Bankruptcy

A question from Finland, Europe: I am not famili...

2009-04-23T16:27:00.000-04:00

A question from Finland, Europe:

I am not familiar with the US banktruptcy law, but one writer asked a question of what the residual value of equity (common stock) might be after the reorganization. This puzzles me, because if the recovery rate for bond debt is 50 per cent of face value, how could equity have ANY value? At least here in Finland the pecking order is very clear: each level in the capital structure must be compensated IN FULL before the next level can get anything. So, if GGP was a European company, bond-holders would need to get 100% of bond's face value + accrued interest before there would be any survival for equity. My question may sound stupid to you - but as I said I am not really that familiar with US banktruptcy code. Can someone please explain?

To me it does not make any sense that equity would have value if bond-holders do not get 100% back. I do own some American bonds, so this worries me a bit. It sounds like American bonds are not really pure debt-instruments at all. In Europe, we would call them hybrid-bonds or debenture loans, but senior bonds in Europe are true debt - and the pecking order is very clear.

Thanks in advance if you care to answer!

Lawrence, where did you read that Ackman got a $15...

2009-04-21T14:13:00.000-04:00

Lawrence, where did you read that Ackman got a $15M commitment fee for the DIP? Thanks.

Great work on profiling this situation.

2009-04-20T16:48:00.000-04:00

Great work on profiling this situation.

I just noticed that Ackman received a $15 million ...

2009-04-18T01:14:00.000-04:00

I just noticed that Ackman received a $15 million commitment fee for the DIP, so the cost of his equity position has effectively been returned.

Even better blended return!

According to the 13-Ds filed by Ackman, the total ...

2009-04-18T01:07:00.000-04:00

According to the 13-Ds filed by Ackman, the total cost of his equity position is $14,803,824 (he doesn't disclose the cost of his swap positions).

If that gave him the ability to make 15% (minimum, assuming repayment of the DIP) on $375 million, I would say his blended return looks pretty good.

I guess that's a decent return for Ackman on the D...

2009-04-17T09:58:00.000-04:00

I guess that's a decent return for Ackman on the DIP, but on a blended basis, his equity and debt returns aren't looking so hot.

How do you come up with a "50-60 cent recovery for...

2009-04-17T09:34:00.000-04:00

How do you come up with a "50-60 cent recovery for the Rouse bonds?" I fail any argument that backs that statement up.

good stuff thanks for taking the time to comb thro...

2009-04-16T13:52:00.000-04:00

good stuff thanks for taking the time to comb through everything. look forward to reading your insight!

Jay
marketfolly.com

Fascinating and highly useful post. Just linked he...

2009-04-16T13:09:00.000-04:00

Fascinating and highly useful post. Just linked here from our Investing Insights blog.http://www.businessweek.com/investing/insights/blog/archives/2009/04/general_growth.html

What do you think of the equity? Zero?

2009-04-16T12:57:00.000-04:00

What do you think of the equity? Zero?

Im in GGP as an equity holder but maybe I should l...

2009-04-16T12:31:00.000-04:00

Im in GGP as an equity holder but maybe I should look into the debt as well?

Great info: putting up on my twitter.

i just posted a comment on 1 of your previous post...

2009-04-16T11:32:00.000-04:00

i just posted a comment on 1 of your previous posts and you already came up with snapshot on GGP debt opportunity. keep up the good work! as DIP market is still pretty much very tight, most willing lenders are getting compensated quite well (like Per Square).