Say the asset sales are voted down. As at Dec 31 2011, FIU had negative working capital of $52.3mm. The company is obviously having liquidity issues so it had to take a $10mm bridge loan from GDO. This will be payable on demand after the deal is terminated. FIU will also be responsible for the $2.5mm break fee. So FIU will have to pony up $12.5mm to GDO. Last quarter, FIU burned through $5mm in cash, so we can assume that whole $10mm from the loan has been spent.
So if the deal is terminated, FIU has $64.8mm in near term payments due (negative working capital as Dec 31 + bridge loan + break fee), with $12.5mm due immediately. This is in addition to the $315mm in debt due within the next 12 months. Yes the debentures can be flipped into shares, which will take-over the equity, but the notes are secured by MWS, and FIU does not have an option to pay in shares.
Does anyone have a credible plan to deal with this? Are any shareholders willing to step up for a $200mm rights offering to recapitalize the company?
Why do you think that FIU wouldn't accept the best deal possible? Isn't it clear that this was the best they could come up with after trying to sell the company / assets over the past 7 months? Also, FIU has a "fiduciary out", which enables them to accept any superior proposals. Have any come along yet? Have you ever considered that these assets aren't very good? Clearly with the shares going from $13.00 to
0.13, the market has figured this out.
I am looking at this from a prospective FIU equity purchaser. Recovery on the shares could be up to
0.26. Shares are at 0.14. Obviously the market disagrees that this can be sold for more, but its almost a 100% return if this deal closes as expected.
If this doesn't close and a very large equity financing does not happen, then what? How would the company meet its short terms liquidity needs, which are substantial? Why wouldn't FIU immediately file for creditor protection under CCAA? Have you thought about the shares value under a bankruptcy filing scenario? I haven't heard of one credible plan to deal with these pressing financial issues, besides the current asset sale.