PART II
messages.yahoo.com
Letter to Mr. Fitzgerald, part 2
by: dykstra99 2936 of 2959 I understand that the unsecured bonds were underwritten or have been sold with the help of Wall Street financial advisors Donaldson, Lufkin and Jenrette (DLJ).
Question 6: Is DLJ advising you to pay unsecured bondholders more than they are due and are they telling you to reduce common shareholder's stake to almost nothing ?
I am sure your firm may feel some allegiance to DLJ, but I would not worry too much about them. As soon as there are fat fees to be made, they'll be back in a flash; backslapping and all.
According to the latest Lazard Freres list of High Yield (junk) Shipping Bonds, the 8.375% 2008 Hvide bonds sell currently at $ 40 for every $ 100 face value.
Question 7: If these unsecured bonds are only worth $ 120 mil. in total, why would you want to pay them $ 377.2 ?
I think you should offer the junk bond holders no more than $ 120 mil plus perhaps stock options for new shares. It is my understanding that this is the way other shipping junk bond holders are treated. Under your Reorganization Plan anybody who is bought these bonds recently will get back more than $ 120 for every $ 40 invested. Absurd isn't it ?
Question 8: Are any of the so-called "insiders" (see below) holders of these bonds ?
As far as the junk bond holders are concerned, they win some, they loose some, just like venture capitalists. On average they do ok. Don't feel you have to keep them from the poor house. Hvide's first allegiance is to its employees and retirees who have suffered catastrophic stock losses due to management's ill informed decisions. You also owe allegiance to current and future share holders. Above two groups of people will be crucial for the survival of the company; not fast talking Wall Street types and not "vulture" capitalists. Remember: "Figures lie, liars figure". If you shaft current shareholders, I predict Hvide etc. will fold within a year and we would all be much better off if the company was liquidated right now. Even if liquidated though, you will still be battling shareholder's lawsuit for years to come. Moreover, if there is suspicion of witholding information, or squireling away company assets, officers and directors may personally have to answer to these suits.
As a side note, judging by the Lazard Freres List of Junk Bonds for Shipping, most shipping companies have not done well and quite a few have defaulted on their bonds. Easy financing is kind of like giving a drink to an alcoholic.
Various reports state that "insiders" (supposedly original founders + family + friends + perhaps management) own 6.95 mil shares out of a total 13 mil (non-voting) A shares plus about 2.5 mil. (voting) B shares for a total of 15.5 mil shares. This means "insiders" own 45% of SE.
Question 9: Why would "insiders" agree to take only 1.25% instead of 45% ?
I smell a rat here.
I am afraid that the way you plan to treat stockholders Hvide will wind up in the Guinness Book of Records under the category: Largest Shareholders rip-off. |
