RE: RE: RE: RE: RE: Fairness Opinions and the Vote My point to you, however, is very basic. Given the uncertainty about YLO's future top-line, you ought to be more circumspect about declaring that senior creditors "took a big hit" when that outcome is far from clear. Most certainly it is a possible outcome, but there is also a significant possibility that an MTN holder who keeps the new dog-pile of securities for 5 or 6 years will find that he has recovered 120 cents or 130 cents on the dollar. Unfortunately the same cannot be said for junior creditors or preferred holders.
I have no problem acknowledging that if everything turns out well the MTN holders might end up with 120 cents on the dollar. But you need to value the deal today, not 5 years from now when we already know how well things will turn out.
Based on everything we know now:
- The new bonds might trade above or below par, but can't trade very far above par because of YLO's right to re-buy them at a small premium. They could easily trade at a discount to par.
- Assuming that the new bonds trade at par, the new shares must trade at $30 for the MTN holders to break even. For various reasons (stated in previous posts), I would be astonished if the new shares opened at anywhere near $30. I'm pretty sure you would be astonished too.
So, yes the MTN holders are taking a hit. The shares that they receive as part of the deal could increase or decrease in value, and might even increase to the point where the MTN holders are ahead of the game, but that doesn't change the fact they are today receiving less than par.