RE:RE:RE:RE:Chapter 11 vs. 7
Wonderfully well put, RonJadler. You've seized upon some key points: Chapter 11 rather than 7, which means the lenders see an upside to cleaning TID's operational and financing house. The statement regarding strategic partnering or sale: Combined with the decision to go Chapter 11 rather than 7, it's pretty clear that the lenders intend to polish up TID before the sale, rather than settling for fire sale prices. Considering TID's woes are liquidity, not profitability based (at current rig useage levels) the lenders' actions make sense. A running car always sells for far more than a car sold for parts. Since the lenders hold significant shares, maximizing sales price beyond the outstanding debt is of interest to them.
And then there's the stock from the Africa sale. Good and bad news. Good news is that if the company sells for well above the outstanding debt level, this stock becomes a valuable asset. It's essentially treasury stock, which is now aka lender-owned stock. It's the single largest reason current stock wouldn't be cancelled and reissued. Hooray! It also represents a significant dilution to the rest of us, which the lenders have no reason to give up. Boo! So I see it ensuring that we get some money, but also ensuring that we get not as much money. Management alluded to that in their PR announcing the creation of this block of stock. They titled that PR 'Early Warning.' How cheeky was that?
Pennywyse2 raises some astute, if unpleasant, points. I agree there is a significant chance this is a liquidation, not a workout. But Chapter 7 is so much more efficient for liquidation, and the lenders had it well within their power to go that road. They didn't. A slow-motion liquidation through Chapter 11 is a small detail which makes a world of difference to us shareholders. And yes, those who got in around a dollar may never be made whole. Those who got in around a quarter may not make money. Those who got in at a nickel may fall upstairs. But most outcomes on the table at this point beat two cents per share. So again, this puppy goes on the shelf and I'll focus elsewhere. New pipeline online this month! New crude oil refinery in Ohio! New work to do! Best to all of you as we play the waiting game.