RE:Re the awardActually, from conversations I assumed they held bonds. I thought it was a good idea. Was thinking of buying myself. In fact, we all should be thinking about it to reduce our risk, except that the new financing reduced the security of those bonds significantly. Don't you agree that but for the new financing, holding the bonds is a smart way to protect your equity investment? Makes great sense to me when the bonds are trading at half price. Buy $10 million in bonds for $5 million, buy $5 million in equity. Total investment = $10 million. If the company sinks, you collect on the bonds in all likelihood, lose your equity, and your even on your original $10 million. You've just traded with the house's money. On the other hand, If the company performs, you double your money on the bonds, and probably have a 5 or 10 bagger on your equity. For the life of me I don't see the problem with that.
And keep in mind that it appears RR bought the bonds PRIOR to the new financing. They would have had no idea that management was going to sign on to a super-security financing deal that would trump the bondholder's claims. So your theory is that their plan was to buy the bonds, hope and pray that the company borrowed $70 million with a greater priority than their bonds so they could liquidate assets to pay toward the $70 million so that their position on the original bonds would be improved? Please tell me that you agree that such a plan is ridiculous.
So in your opinion, Copper, what is the problem with holding the bonds?
The company's theory is that they plan on sinking the company to make $4 or $5 million. Is that your theory as well? If not, could you show us the math where RR takes over the company or makes more money on the bonds?
I'd love for someone to show me a realistic theory where RR "steals" our company. So far you guys have said that they will sell the assets to their family and friends. Do you have a new theory? I'm not too proud to learn something new, and will gladly concede a good point that teaches me something.
And I mean all of this sincerely. I can't find a way that RR hurts shareholder value without hurting themselves more, other than the "sink the company to make $5 million on the bonds" theory, which I find silly.
Here's a conspiracy theory for you that would make sense mathematically. RR buys $50 million in bonds (25% of the bond debt). They buy 5% equity and stack the board with people who will sabotage the company just to the point of having to file bankrputcy -- assuming the stacking will work when in all likelihood it won't. Then they file bankruptcy and wipe out all of the equity so now the bondholders take over the company, and RR would then own 25% rather than 5%. But for the Red Kite loan, that would be a cunning plan. But can we agree that such a plan would have to be executed to perfection for it to work, and that as a practical matter, it wouldn't work?
But regardless, here RR has about 8% of the bond debt, so do they really want to put in the time and effort to pull off a grand conspiracy theory with 5 or 6 evil-doers acting together to pick up 3% by putting the company in bankruptcy? I find that to be an ulikely scenario.