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Strategies & Market Trends : LastShadow's Position Trading -- Ignore unavailable to you. Want to Upgrade?

To: computer_doc who wrote (26884)	12/11/1999 10:49:00 PM
From: eik	Respond to of 43080

>>Your way behind the times...<< News was out yesterday. Check out also CNBC video clip: CNBC's David Faber reports on Decision One, a bankrupt company whose stock soared today because of a press release on VA Linux's Web site. msnbc.com I haven't done any DD on DOCI at all (just not interested in OTC BB stocks) but... let's check out the Monday's closing price to see how the market reacts to this "old news".

To: computer_doc who wrote (26884)	12/12/1999 12:13:00 AM
From: Arcane Lore	Respond to of 43080

The referenced DOCI 10-K filed on Dec. 7, 1999 contains the following summary of the debt restructuring: On August 2, 1999, the Company announced an agreement in principle with the bank lending group and the holders of the 14% Notes on the restructuring of its indebtedness (the "Indebtedness Restructuring"). Under the terms of the final agreement, the bank lending group would exchange approximately $523 million in existing indebtedness for approximately 94.6 percent of the reorganized Company's equity and $250 million in new senior secured bank debt (the "New Credit Agreement"). The agreement further provides that the holders of the 14% Notes would exchange their notes for (a) warrants equal to approximately 4.2 percent of the reorganized Company's fully diluted equity, at an exercise price based on an enterprise value of $350 million and (b) warrants equal to approximately 2.0 percent of the reorganized Company's equity, at an exercise price based on an equity valuation of $280 million. The holders of the 9 3/4% Notes would exchange their notes for (a) approximately 5.0 percent of the reorganized Company's equity; (b) warrants equal to approximately 2.8 percent of the reorganized Company's fully diluted equity, at an exercise price based on an enterprise value of $350 million; (c) warrants equal to approximately 5.0 percent of the reorganized Company's equity, at an exercise price based on an equity valuation of $200 million; and (d) warrants equal to approximately 3.0 percent of the reorganized Company's equity, at an exercise price based on an equity valuation of $280 million. In addition, the holders of the 11 1/2% Notes and the holders of unsecured claims of Holdings would receive a total of approximately 0.4 percent of the reorganized Company's equity. The proposed Indebtedness Restructuring will be implemented pursuant to a prepackaged bankruptcy subject to the approval of a United States Bankruptcy Court (the "Bankruptcy Court") pursuant to Chapter 11 of Title 11 of the United States Code, as amended (the "Bankruptcy Code") and the approval of the bank lending group and the holders of the 14% Notes. Management does not anticipate any adverse impact on customers, vendors or employees as a result of the Indebtedness Restructuring, since the Indebtedness Restructuring will address only the de-leveraging of the Company's balance sheet through the reduction of its indebtedness. However, there can be no assurance that the Indebtedness Restructuring will be approved by the Bankruptcy Court, nor that any adverse impact to the Company, its customers, creditors or employees will be avoided. See Note 2 to the Company's Consolidated Financial Statements as of and for the fiscal year ended June 30, 1999 for additional information. freeedgar.com Leaving aside warrants for the reorganized company, the following table summarizes the approximate percentage of direct equity in the reorganized company received by the various claimants: Approximate Percent of Claimant Reorganized Company Bank Lending Group 94.6% 9 3/4% Noteholders 5.0% 11 1/2% Noteholders/Holders of Unsecured Claims of Holdings 0.4% 14% Noteholders 0.0% ============================================================================= Total (Approximate?) 100.0% Note that even one class of debt claimants (the 14% noteholders) receives no direct equity in the reorganized company (though they do receive warrants). I see no specific mention of current equity holders receiving warrants in the new company, let alone direct equity. One caveat - I believe the phrase "holders of unsecured claims of holdings" refers to unsecured debt holders outside of the other debt classes. It is, however, conceivable that it includes current equity holders. In this case current shareholders would receive a portion of 0.4% of the reorganized company. However, since one class of debt holders (the 14% noteholders) are receiving no direct equity and debt is always senior to equity I think it unlikely that the equity holders are in this class of unsecured claimants.