GREY:LSTMF - Post by User
Post by
boarderex86on Jun 03, 2016 1:13am
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Post# 24930190
Recourse for JR debt
Recourse for JR debtAnyone contacted IR to see if they can share what recourse is available to the junior debt holders upon default? It dawned on me that the LOC cut could be part of a deal to exploit the jr debt.
This is very "conspiracy theory" for me but, hypothetically, if a banker knew that a deal would be reached to resolve the LOC issue (which is secured debt), they would probably be tempted to buy the junior debt while the market is in limbo. If a favorable renegotiation of the credit facility or asset sale were coming, the debt would be bound to recover quickly once news of new financing were released.
Perhaps the anticipated timeline of reaching agreement after the June 15th debt payment but before June 30th is not entirely related to timing of negotiations. Could it be timed to drive the debt price down before announcing a transaction? I would imagine certainty on a quick trade like this might influence the terms of a negotiation..
There was a comment made on three cc about the banks not wanting the company to use the LOc to pay the interest on the junior debt... Buying the debt would solve that issue too.
Of course none of this would make sense if a default on the junior debt will give debt holders some sort of recourse or ability to intervene in asset sales or new equity raises.