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Gold/Mining/Energy : Royal Oak-RYO
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To: Michael Bidder who wrote (1659)3/29/1999 9:36:00 PM
From: Daniel Chisholm  Read Replies (3) of 1706
 
Isn't Trilon going to receive 100 cents on the dollar?

I expect so - at least, if anyone receives 100 cents, they will - they're first in line!

I wrote:

Trilon's CCAA (court supervised superpriority) financing (call it $10M US) comes first, then Trilon's $120M (US) senior. $175M (US) at 25 cents on the dollar is $43.75M (US).

Allow me to explain my explanation ;-). Assume the first two items (both due Trilon) get 100 cents on the dollar. Next in line is the 12.785% $175M subordinated debt that I mentioned being indicated at 18 bid 25 offer.

Let's say that there's only enough left over to pay the subordinated ($175M) holders 25 cents on the dollar (i.e., exactly what the bond market is offering me the bonds for). That would mean that the subordinated note holders, in aggregate, would receive $43.75M.

(Perhaps the confusion is due to $10 + $120 + (0.25*$175=$43.75) = $173.75, which is coincidentally awfully similar to $175?)

Adding these figures up gives about $174M -- so my statement/question was that this is the market's estimation of how much the company is worth. Actually it is an "offer" in the sense that the bond market is offering this debt to you and me today at this price. If we were to estimate that the company was worth substantially more than $174M we should perhaps consider buying the bonds. And if we were to estimate that the company was worth substantially less that the similar figure one would arrive at using 18 cents on the dollar, then it might be worthwhile considering shorting the bonds at 18.

Clear as mud? ;-)

- Daniel
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