Lightstream was a Complete Disaster A real shame for the shareholders and the unsecured debt holders. I'll have to sort through some of the court documents, to understand the downfall, but this looks to me like a staged takeover, by the secured debt holders. A real bankruptcy protection, would have tried to draw this out for a longer period, at which time oil prices would have risen higher.
This was basically a short bankruptcy time period, commodity prices didn't support higher valuations, so there were no adequate offers made for the company, that could pay all of the debt. The secured debt holders, owned too much debt for anyone else to make a serious offer, without a higher oil price forecast. Don't forget that LTS was also a major natural gas producer, that was even worse off than oil, thus there was little value in the company.
There needs to be proper regulation in the markets, including bankruptcy markets during times of a prolonged price collapse. However, the courts, lawyers, bankers, and oil company executives, really don't care one bit about the small investors. The government is unable to grasp the transfers of wealth that are occuring from poor to rich, in this prolonged price collapse, that allows certain groups to engineer the demise of certain companies.
I get a kick out of the statements on the Lightstream website:
"Our assets support our long-term, sustainanble business model of long-term growth. We create value for our shareholders by entering into oil rich resource plays and applying our technical expertise to maximize returns. The repeatability of this model enables us to grow organically and generate long-term results."
There was only shareholder wealth destruction, created at Lightstream! It was borrow more and more money, to overpay for mediocre assets, and give the illusion that there was some value in the company. Even the unsecured debt-holders got sucked into the lending frenzy, and when they wanted to get more secured debt, were denied the opportunity.
Keep a close eye on this new Ridgeback company, and what happens when they go public. This theft of shareholders value, to enable a few people to get rich, at the expense of others, needs to be controlled by the government, as the courts sure aren't doing their jobs, by quickly caving in and letting things go private, just before the oil prices start to rise.
The lesson will be for people to not invest in any company that has some debt. Of course it is impossible to grow production without debt, so it will be interesting to watch the oil prices rise, to support the capital required to counteract the declining production. Unfortunately, all the benefits for Lightstream's production, will go to the new private owners.