I'm trying to better understand dynamics/structures in this restructuring deal I'm analyzing.
To over-simplify info:
- $550 mm debt being asked to be paid by lenders
- resolution has been determined with the following components:
- $150 mm canceled/extinguished
- $75 mm portion of total debt ($550 mm) converted into sr. term loan at a higher interest rate
- $125 mm portion converted into sub debt at a higher interest rate with PIK feature
- $75 mm preferred stock issued with liquidation preference
Obviously, if you do the math, both sides don't add up / off by $125 mm.
How could this $125 mm hole be explained? The only explanation i can think of is that lenders took a haircut in an amount equivalent to $125 mm.
Other thoughts/insights I may have missed?
Would appreciate some help from any restructuring experts in the field.
Thanks in advance!
So you are saying that old debt is $550mm? You already mention the "haircut," so it is likely something additional.
My guess is that, in addition to to the list above, there was additional debt put on the company to allow for operations.
are we talking a pre-petition level of $550 million, or was it $425 million with the additional $125 million coming from a DIP?
if not, could we just be looking at the other $125 in straight reorg equity?
To Golfer 23,
$550 mm (sitting on the company owed at the time a suit was filed against the company) was the pre-petition level (no DIP involved).
My questions is that if $125 mm could be looked at in straight reorg equity, wouldn't it also be shown in the settlement document as part of the list? FYI. The list of settlements I laid out in the original thread was the only info in the settlement document. That's why I'm a bit stuck, trying to tie out numbers.....
I'm not a restructuring expert so thought I'd be able to get help here.
Any further thoughts?
Maybe pre-petition senior/secured lenders were paid out 100%, thus not listed as part of the resolution. Or some senior/secured was reaffirmed? I am not sure if that would be listed on the resolution statement or not.
Yeah i hate to just piggy-back on heebbanker's answer again, but without knowing more details my gut would say there is either a 100% recovery involved or an equity payout. Hope that helps
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