MBAC2014 wrote: A recent study by two finance professors from London Business School.
"We study 21,849 completed US acquisitions announced over the period 1982-2012 for
which the transaction value is at least 1% of the size of the acquirer. Four hundred and twenty
eight of these transactions involve a distressed target....Firms that buy distressed and bankrupt companies or some of these companies’ assets earn excess returns."
In other words, big players in the industry do have incentives to acquire firms like MBAC.
Furthermore, valuation methods for financially distressed firms are extensively discussed and tested; the book value of equity is NOT a significant factor at all.
The MBAC case provides an example to illustrate why accounting numbers are less relevant. The financial expenses would have been recorded as assets if the firm had not announced the maintenance mode.
"Prior to January 7, 2015, the Company capitalized interest expense and amortization of deferred transaction costs relating to the Itafós Arraias SSP Operations as
property, plant and equipment, ...... Effective January 7, 2015, the Itafós Arraias SSP Operations has been placed under care and maintenance ......accordingly (such expenses) are recorded as “finance expense” in the consolidated statement of operations."
The loss number of Q1 is horrible, but it is mainly an accounting choice.
The USD / BRL exceeded 3.30 in March, which resulted in significant unrealized foreign exchange loss. But on the other hand, it is REALLY good news for producing fertilizer in Brazil.