babcock shares as good as worthless, page-2

"But the probability of existing shareholders getting something out of it is close to zero. Part of the deal is a capital restructure, ‘which is expected to include a debt for equity swap, acceptable to the banking syndicate’. So the banks are going to convert some of their debt into ordinary shares. Fair enough.

The problem is that Babcock owes some $3bn, dwarfing its current $143m implied equity value by a factor of 20 to 1. So any swap of debt for equity is going to mean the debt holders end up with close to 100% of the equity and existing shareholders an extremely small percentage of a large number of shares. Put simply, the banks are going to take the equity and then manage it as they see fit."