Good Day,
Thought the plan you guys came up with was interesting. My interpretation is that it is so bad for most of the stakeholders involved that the intent was not necessarily for it to go through. I, for one, am voting against it. I’m not sure why anyone except the MTN’s would ever support such an agreement that transfers extreme wealth at market crisis prices to those who aren’t entitled to it.
I certainly hope that the intent in writing it was to incentivize the banks to stop this in its tracks, along with the rest of the stakeholders to stop it. What this does as I see it is puts the banks in a position where they can make a better deal… but kind of “forces their hand to go along with this” if the MTN’s all vote yes and the bank doesn’t extend their credit facility.
My hope is that the bank is somewhat intelligent, but not too intelligent. If they are really smart, they’ll support this agreement and make out really well in a few years. If they are somewhat intelligent they will oppose it, stop it, and force you to meet their obligations at par, now or in a few months after you convert the A’s to common. The best case is that the simply extend their credit facility a few years and allow you to pay down $25M per quarter and basically buy back MTN’s at market for a while. The second best case is they stop you and force you to pay them first and you buy back MTN’s at market on your own and continue to meet your obligations for the next few years. The third best case is that the banks simply change the terms of this agreement so they get back 100% at par value and take that value from someone else. The fourth best case is that this thing goes through.
So, I wanted to reach out and pat you on the back. I think the creativity in making this recapitalization plan is incredibly high. It qualifies as both the stupidest thing that I’ve ever heard of in my life and the most intelligent strategic initiative I have ever seen in my life. I liked the fact that you borrowed credibility from BMO Capital Markets and Canaccord Genuity on this one and find that my thesis of trying to get the banks to make you a deal is supported by the FACT that you didn’t even approach them about this and just caught them with their pants down. So now, the ball is in their court as well as the court of the stakeholders, who I believe will vote this down.
One thing that this does do for all share classes is put in a floor. Things cannot get any worse than this recapitalization plan, because it is certifiably the dumbest thing that I have ever read in my entire life and I was absolutely shocked and floored when I first read through the immense stupidity of the terms that were laid out for all stakeholders except the MTN’s who effectively walk away with the entire company and make a few hundred percent return.
Best of luck, I hope that this thing goes as planned and gets shut down.