Tuscany International Drilling Inc T.TID

Chapter 11 vs. 7

[justsomeguytrading]

I apologize if this has been posted already. Source: Investopedia.

Please see the last line.

Chapter 7 bankruptcy is sometimes also called liquidation bankruptcy. Firms experiencing this form of bankruptcy are past the stage of reorganization and must sell off any un-exempt assets to pay creditors. In chapter 7, the creditors collect their debts according to how they loaned out the money to the firm (also referred to as the "absolute priority"). A trustee is appointed, who ensures that any assets that are secured are sold and that the proceeds are paid to the specific creditors.

For example, secured debt would be loans issued by banks or institutions based upon the value of a specific asset. Whatever assets and residual cash remain after all secured creditors are paid are pooled together to be paid to any outstanding creditors with unsecured loans: e.g. bondholders and preferred shareholders.

Chapter 11 bankruptcy can also be called rehabilitation bankruptcy. It's much more involved than chapter 7 as it allows the firm the opportunity to reorganize its debt and to try to re-emerge as a healthy organization. What this means is that the firm will contact its creditors in an attempt to change the terms on loans such as the interest rate and dollar value of payments. Like its cousin, chapter 11 requires that a trustee be appointed; however, rather than selling off all assets to pay back creditors, the trustee supervises the assets of the debtor and allows business to continue. It's important to note that debt is not absolved in chapter 11: the restructuring only changes the terms of the debt, and the firm must continue to pay it back through future earnings.

If a company is successful in chapter 11, it will typically be expected to continue operating in an efficient manner with its newly structured debt. If it is not successful, then it will file for chapter 7 and liquidate. In both instances, common shareholders will most likely see little (if any) return on their investments.

[justsomeguytrading]

A bit of additional information. Source: Wikipedia I posted these as much for myself as anyone else. IMHO the avenue that TID is currently on is one that is working in the best interests of CREDITORS. We as common share holders are not creditors. It's a sad day to see this fail and all of our equity (potentially) destroyedStock[edit]If the company's stock is publicly traded, a

[jakethesnake2]

justsomeguytrading, As much as it pains me to say, I concur that our shares will most probably be worthless. Good thing that for once my loss will not be as painful as the last one I had (Poseiden Concepts). I took a beating and a half  on that one Cheers Jack

[Fullblast]

People, I can't imagine Walter giving up so easily on 10 miilions of his stocks...

[jakethesnake2]

You would think that he would not give up so easily as you say but I don't see any other way out. I hope there's a solution out there  where the shareholders would come out hole but I can't see it right now. Hope you're right Fullblast Regards Jack

[Fullblast]

Jack, chapter 11 is complicated and every situation is different. That's why it goes before a judge where creditors and management state their case. Right now, they all seem to be in agreement about the fact that this is a valid company in need of oxygen. Chapter 11 and DIP give TID months of oxygen to continue operating under improving market conditions, rightsizing the operations etc. I

[justsomeguytrading]

Oh Jack, kills me to remember my 25K loss on PSN... didn't learn cause this was worse :)

[RonJadler]

Thats because there was fraud at Poseiden.. approximately $95 million to $106 million (subject to detailed quantification by the Company) of the Company's $148.1 million in revenue for the 9 months ended September 30, 2012 should not have been recorded as revenue in the Company's financial statements Also, Poseiden didnt have the asset base of TID. If they sell all the gear then there

[dogtoobad]

Not sure it can be done. CS is not an operating company and has no insurance for the purposes of "renting". Bank looks after the recovery of the lending not shareholder interest. In situation like this, bank would lend additional money to the company, not because they can see the company making profits but to make sure the current assets values would not deteriorate further. Management

[jakethesnake2]

In no way that I meant that there's fraud in TID, just that the result may be the same as far as shareholders are concerned. I hope that you are right and we will end up OK with this one. Jack

[onthecase]

Wonderfully well put, RonJadler. You've seized upon some key points: Chapter 11 rather than 7, which means the lenders see an upside to cleaning TID's operational and financing house. The statement regarding strategic partnering or sale: Combined with the decision to go Chapter 11 rather than 7, it's pretty clear that the lenders intend to polish up TID before the sale, rather than

[justsomeguytrading]

Well said onthecase.  GLTA.

[jakethesnake2]

onthe case,             Good job with your take on things