| | | The common shares seemed to like the proposed deal at they were +30% earlier in the AM. Common reacted to the restructuring that does not wipe common. Common is getting 4% of new equity plus warrants. Assuming Yahoo market cap is correct and the restructuring plan survives, common might be better than bonds... Common market cap now is 4.7M. If that's 4% of new unlevered entity, then the common is valuing the new unlevered entity at ~$100M. That seems very low, so common has a high chance to runup.
OTOH assuming all unsecured notes get 96% of new equity (which they don't, they are getting less), the new unlevered equity would have to be valued at >$1B to get the notes to par. Of course, since notes are also trading at less than 10% of par, they are also valuing the new entity at ~$100M. So I guess, notes and common are trading at very close valuations based on new entity. Since common is easier to buy and sell, plus it gets warrants, common might be better buy here than notes. Although if plan is modified, any modifications likely not gonna benefit common, so there's that.
I'll have to spend more time on this, but I doubt that the new entity will trade at more than $200M unless oil/gas prices recover a lot. That would give about $.20 recovery on notes - not much.
In any case, we are mostly stuck for now (unless you want to trade equity), since notes are not really trading. |
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