wojownik
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- May 15, 2009
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It would appear that the present company, fronted by Sciens Capital Management, plan to file bankruptcy, and then buy back whatever they want, and thereafter continue on without the present debt load. Those that held unsecured bonds are likely going to lose their entire investment, but they may not go quietly and force matters beyond 60 to 90 days. Also Sciens Capital Management's, apple cart might be upset if someone else outbids them.
So the soap opera continues...
There are going to be several potential twists and turns to this bankruptcy. Colt's bankruptcy plan is a fast rebalancing act that is really going to squeeze the bondholders. Colt wants to have the company auctioned off by August 3rd, with existing owner Sciens placing the stalking horse bid**. Colt says it will continue operations uninterrupted. I think that August target is unreasonably optimistic.
Sciens is not looking to let go of the reigns - it want to be the stalking-horse bidder for all assets and liabilities, and the two secured lenders agreed to provide a $20 million debtor-in-possession credit facility. So the equity holders and secured creditors have coordinated, but all this is subject to court approval.
The court will be most likely be made well aware of the rather tough positions Colt has taken vs. the bondholders, and the steadfast rejection of those revised terms by the bondholders. Because of the rather tense relationship between management and bondhodlers, the court may propose its own debtor-in-possession terms and auction milestones.
If that happens, the bankruptcy court could open the door for other financing proposals, and either avert - or more likely cause - another series of fights between Colt’s lenders and unsecured bondholders.
Sciens has already noted that if the bondholders push this into protracted litigation, then the company would simply liquidate. Then, the bondholders would see a total loss in that case. The bankruptcy court may weigh in, with that in mind - it will be interesting to watch what the court does.
** For those really into the trivia, when Sciens' says it wants to be the "stalking-horse bidder," that means it want to be the one that makes an initial bid on Colt's assets. Usually, from a pool of bidders, the bankrupt company chooses the stalking horse to make the first bid. In this case, Colt proposes to choose its existing equity owner to make the first bid.
Why? This would allow Colt avoid low bids on its assets. Once Sciens has made its bid, it has set the bar so that other bidders can't low-ball the purchase price. If another bidder comes in higher, then Sciens is presumably out. But its pretty clear that the secured creditors are making accommodations for Sciens that they might not extend to an outside bidder. And presumably, bidders are aware of that. This might be a poison pill from someone like Beretta coming in at this stage.
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