People, understand one thing ...The deal is already done. They would not be using the CBCA if it wasn’t. They already have the necessary votes. They secured them by agreement before the filing. That is how it is done.
The only question is at what valuation have they agreed to compensate the unsecured debt with equity. It has to be fair and reasonable. Keep in mind that the valuation is of the Company WITHOUT the $2B of unsecured debt, not with it, so it gets very interesting, especially because the $2B of unsecured debt will not be valued dollar-for-dollar. It will be valued just slightly above the common equity, because, like the common equity, it would be worth zero if the Company ultimately fell to the secured debt. The unsecured debt needs to co-operate to ensure that that does not happen in the long run.
By the way, companies with a current ratio of 2:1 do not go bankrupt, at least not in the short-term, and that’s what the Company’s was at the end of June. It is even better now. Book value of the Company after the deal is done will be about $600MM. Enterprise values will be a multiple of that. In theory, the share value should pop, so, even with substantial dilution, anyone who bought in at anything close to current lows, say, in the last few months, should win big.
This will be interesting...