Southwest Airlines (LUV)) Message Board

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Non-Tech : Southwest Airlines (LUV))

LUV 30.30

+0.7%

Oct 31 9:30 AM EDT

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To: Toby Zidle who wrote (285)	8/12/2002 10:08:18 AM
From: SLSUSMA	Read Replies (1) of 299

New US Air Valuation. Saw on Yahoo! About the only smart thing I have seen on Yahoo! messages.yahoo.com The terms of the bankruptcy were as follows. $500 M kicked in by new investors. $200 M by Texas Pacific. Texas Pacific will own 38% when they emerge from bankruptcy. So the $500 M stake gives the new investors 95% of the company, right? 500 / 200 = X / 38% X = 2.5*38% = 95% for new investors This means current equity holders own only 5%. 95% = $500 M means 100% = $526.3 M Current shareholders own $26.3 M in terms of valuation. Divide this by the 68.1 M shares outstanding and you get 39 cents. Or, alternatively, you can say current market cap is $166.845 M (based on 68.1 M shares and $2.45 friday closing price) So equity holders are getting $26.3/166.845 on the dollar, or 15.77%. Time closing price Friday is $2.45. If they are only getting 15.77% on the dollar, then current shares are worth 38.6 cents. Will open at 38.6 cents? Probably not. Investors may decide that equity holders (current) can come out good like Continental, so they will get a premium over the floor of 39 cents. Unless you believe that the new money (Texas Pacific) are idiots (putting in too much money for too small a stake), then you should see the 39 cents as a floor If they open at significantly lower, then a good buy.

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