RE:RE:RE:Keep Focused on the Improved Oil PriceScottie99 wrote: Good analysis Petro and all your suggestions is achievable though with various degree of success.
Suggestion 1 is the most probable and I think this is the one the Receiver and Lender would likely stick with, if no serious bid was made based on the value the Receiver thinks the company is worth from current base production and his assessment of the forecasted production coupled with the current and future oil prices. All that the Receiver would do is to request for an extension and the court would gladly approve it!
Suggestion 2 is the next probable but it would be based on the Adhoc Committee making a credit bid along with a restructing proposal. If the Receiver does not accept the bid along with other, then it is not going to work. Remember the Adhoc Committee wanted to make a pre-emptive bid but it was turned down by the Receiver. Because of the confrontation in court, there might be bad blood between the Receiver and the Adhoc Committee for this suggestion to be considered and it is why it might not be achievable. If the company wasn't under Receivership, then there is a good chance but because it is now a private company under a Receiver, the deb holder don't have much say for this suggestion to be considered.
Suggestion 3 is the least probable and don't see it being considered both from the view of the Receiver as stated in suggestion 2 above and the fact that a preferred share issue is not possible with TBE in Receivership. Moreover, I doubt if the Receiver would want to go through the hassles involved and most retail investors being the ignorant group that don't know their rights won't buy into it. These are the factors that won't let this suggestion work, it has too many working parts and the chances of success is very remote!
The fact that the company is still operating and generating higher cashflow with the increasing oil prices without any news on the SISP till now, makes the situation lean towards suggestion 1.
Here's my thoughts on your commentary of the possible outcomes, Scottie:
1. Definitely the company can keep paying the debt down, however the banks are trying to grab repayment all at once, which is the problem. But receivership is supposed to get as much value as possible. If the current price forecast is higher than previous forecasts, then there ismore value in the assets. Thus they could command some better offers, but people may still try to lowball the offers. No different than if you were trying to purchase a foreclosed house: put in a stink bid. Receiver can realize, there is more value in keeping the company going, especially in a rising oil price environment.
2. The debentures are in technical default, although I am not sure if there has been an official default notice, served. But the bank debt is the main issue, that forced the company into receivership. If the bank debt can be dealt with, to the satisfaction of the banks, then the debenture holders must also be dealt with, in some way. But I think the debenture holders are more open to negotiation. (At least I am, as a debenture holder that also owns shares, and wants to see more value out of both.)
So the receiver is looking out for the bank's interests, but also has to look out for all stakeholders. That is why the preemptive bid was correctly turned down, by the receiver: they needed time to review the full state of the company, rather than immediately give it away. The Ad Hoc group could tell there was value, and wanted to do the credit bid at that time, which to them, would make alot more sense than taking 14 cents on the dollar cash, from Reignwood.
A credit bid is still possible, but if there is more value in the company, then shareholders should be entitled to it. Thus either the debenture holders get all their money back now, or if the company wants to keep going to try and salvage future value for shareholders, they need to placate the debenture holders somehow, and ensure their investments are safe. So they need to somehow be compensated for the year of missing interest payments.
3. A preferred share issue could only be sponsored by someone who wants the chance to recover more value from the common shares, by not diluting them. They are just another form of debt, but they aren't bank debt. This could also be the form of a bond deal. We'll see if any groups want to pursue this path, and it could be feasible, in a rising oil price environment.
We shall see where things go, but hopefully the process can drag on, and the banks can feel comfortable that they will continue to get their money back, and aren't so keen to get it all back at once, which is hard to do.