I have this case study - I'm not asking for the answer to this by any means, but I would really, really appreciate it if you guys can give me some feedback on this.
The company I'm analyzing was highly over-levered; analysts even believed they would burn through all their cash by 2008 (as of 3Q06). So, this company underwent a debt-to-equity exchange to significantly reduce its debt and interest payments. In addition, bondholders who held 91% of the senior subordinated notes agreed to exchange their notes for 87% of the company's common stock.
My questions to are: 1. In theory I understand that improving the debt situation would improve the high leverage situation, but how does restructuring bonds into common stock improve the company's equity situation?
- This is almost completely irrelevant to the above, but what would be the best way to find comparable companies? This company is in the telecommunications/wireless technology industry, so 1) where would I go to find the industry EV/EBITDA multiple and 2) is it common practice to compare different company's assets to see which ones are comparable?
Thanks guys...
1) As equity holder, if the firm is going to be bankrupt in a year with certainty, then your ownership stake is essentially worthless. 13% of the value as a going concern is much higher than 0% of liquidation value.
2) 1. Everywhere - yahoo, google, bloomberg 2. Compare assets how?
2) 1. Depends on what you are looking for. For simple method, you can find competitors in the same industry - just go to the section for that industry, and you can pull up their ratios. Alternatively for more detail, you can search for companies that do similar things or have similar Xs depending on what you're comparing and spread them individually/all for comparison. 2. Of course assets from the bs. What exactly are you comparing? Balance sheet ratios? Whether they both have a pool in their backyard? In any case, comparing straight assets without regard to any other factors is retarded. By coincidence you can have two completely unrelated companies that exhibit completely different characteristics that may have similar balance sheets.
2.1) What "section for that industry" are you referring to? Sorry I'm really new to this 2.2) Well I meant total assets, but yeah that's pretty retarded, nevermind that.
Thanks for your help btw
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