Hi Roger,
SWAG is Silly Wild Assed Guess, Scientific Wild Assed Guess, etc.
With respect to "credibility"/"marketability of new equity", I honestly don't know. Several years ago I would have thought that it was a simple "live by the sword / die by the sword / no-hard-feelings" sort of thing, but I am no longer so sure.
As a bond holder (who bought it as a distressed security, at a price of 50), I would be happy with my debt being converted 100% into new equity, or with it being partially redeemed in cash, partially in new debt and partially in new equity. I think the company does indeed have value, just that the value is probably a bit south of 100 cents on the dollar for the bondholders.
As far as having marketable securities (equity, I assume you mean), I would suppose that that would happen more or less automatically -- there wouldn't be an IPO or any sort of beauty contest like that, just a listing of a new class of shares that are already publicly held (as a result of the Chapter 11 reorganization). I'm not a pro at this however, so I'm really just guessing here.
If you'll note my parenthetical comment at the top of my message (the one you responded to), you'll see that I ran my SWAG as I was typing my reply. I was actually a bit surprised to see the common worth so much (i.e., in the ballpark of the current market price), given my assumptions (cash flow and multiples) and yours (5%-10% new equity). At this point I've begun to reconsider my plan to re-short the common with vigour should it pop to $C3.00 (oftentimes dying stocks have remarkably strong spikes on the road to zero).
Oh well, we shall see. At this time there is a 31 Dec 00 deadline for Loewen to present a reorganization plan to the court (after which time creditors may present a plan of their own). These things (transition into bankruptcy, bankruptcy re-org, emergence frmo bankruptcy) sure don't work on Internet Time, eh?
- Daniel |
