I am curious to note where fairness comes into play when common share holders get 1.6 cents on the dollar while bond holders get 50 cents on the dollar by reducing their debt in half with this deal.
Keep in mind that this is CBCA and must be approved by each stakeholder class individually. If you look at the terms offered, pref gets 12.5x the common which is the same conversion ratio as the a series gets contractually. I can certainly see one pref series voting NO to the offer, like series c or d, to negotiate better terms. Easy to make such a case as being reasonable.
The banks could put the brakes on this in no time. I think they really get about 200 million (50 million in cash and 150 million in a secured note which is better for YLO than a LOC) and 4.4 million shares from 419 million. What would the commercial loan group of the major banks want with shares?
In the conference call, the treasurer said that the banks didn’t know the terms of the proposal in advance. If the banks dislike the deal and put up a common front, they and disgruntled convertible debenture holders might be able to block the deal, since some of the small holders of MTNs might not vote. On the other hand, if the MTN holders put up a common front they can get 2/3 debtholder approval even in the face of 100% rejection from the banks and convertible debenture holders.
Attention all equity holders!
If you are pissed at this deal, please go out and contact other Business Development Companies to urge them for emergency loans on behalf of yellow media. If the company won’t do it itself, we can go do it. This is some BS.
PSEC, SLRC, etc!
If you look at the recapitalization, for starters, as you’ve seen here, it isn’t necessary. the company can come out of this without defaulting and in fact it can take advantage of the situation by closing out on debt at a discount to issuance price.
So, the company has proactively decided to screw the shareholders. This is A BREACH OF FIDUCIARY OBLIGATION. What they are doing is immoral and unjust.
Look at how great this deal is below, the creditors are being given the company for no reason!!!
- “They gave up $700 million of debt to get 21.3 million new common shares.”
- For most of us our out of pocket was 50% on the debt. We are buying 82.5% of YLO for $350 million actual, which puts the assessed market cap at $411 million. Of that the present shareholders will own 10% or $41 million. Divide that by 520 million shares and you have an 8 cent per present common share value.
- Anything more the market wants to give is just gravy on our french fries. Our real take is having full face value secured against everything, with interest rates at 16-18-24% wrt our actual cost.
- Oh yes, if it is rejected then the poop in the pound is it goes from 82.5% of the company for 39% debt relief, to 100% of the company for 50% under CCAA this Fall. What ever way really does not matter. I think most now realize that when I said we had them by the bagpipes, I was serious.
Frankly, the creditor is wrong and fails to realize that the company can buy back debt at market! I want to see something of reasonable proportions.
39% of the company for 39% debt relief
they shouldn’t be getting 82.5%. That’s some bullshit. Cut that in half to 41.25% and you’re looking at something that is reasonable.
Either that or give them less of a haircut. But this is a crying shame.
That’s why we need to contact our mezzanine lending companies.