Someone explain upcoming debt for equity swap please?, page-10

First 10 Last

Share
Profile

Follow
rosencrantz

2,808 Posts.

592

21/03/17

12:43

Post #: 23509278
Share

Originally posted by sohei ↑

To answer your question about the debt write off findingnemo - yes the banks took a loss of approx 75% and on sold their debt to funds who specialise in investing in distressed debt (also known as vulture funds).

The thing is that the debt bought by the vulture funds is 100% and not 25% - 25% is simply what the vulture funds paid for the debt. Their opening gambit in negotiating with SGH will be to want 100% of the debt or as close to it as they can. Obviously that is not possible given the parlous state of SGH's finance, but they are legally entitled to it so the company will have to counter with an offer to appease the vulture funds to take a lesser debt position. In this case SGH are suggesting Debt for Equity as the best option to reduce debt and remain operational. If the Debt for Equity goes through then it will only be possible if there is massive dilution of existing share holdings, so it won't only be the banks taking a hit, everyone will take a hit.

To look for a silver lining in all of this the vulture funds will know that there is no way they can extract 100% of the debt out of SGH but they will want as much as they can. And while they are in charge now there doesn't seem to be much to gain for them if they wipe SGH out all together to sell off what assets there are. So a D4E seems to be their best bet and they will probably accept it you'd figure and reduce the level of debt accordingly - they won't be charitable though - just realistic.

Expand

"And while they are in charge now"
Who says the vulture funds are in charge now?
I thought Andrew Grech was in charge.
bought more SGH at 12.5 today

SGH Price at posting: 12.0¢ Sentiment: Buy Disclosure: Held
6 Upvote

0 Great analysis

Reply

Top Stories

ASM

ASM to push Dubbo REE play towards economical production with A$5M Federal govt grant

BM8

Battery Age Minerals gets set to capitalise on critical mineral demand

MKT

The ASX can overlook its Telecomm small-caps. Here’s one diversified brand with an international footprint

A1G

African Gold finds significant 5.5g/t intercept over 65m in Cote d’Ivoire

Wealth Within: the latest stock tips from Dale Gillham