@Braintot - unfortunately, the "but this time it's different" (aka "special case") fallacy is a dangerous mindset to take when investing - as invariably an investor discovers that no, this time is NOT different.
What you are suggesting here - that hedge funds will offer a 3x or 4x premium to the current share price - and it seems mainly on the basis that it would help "employees who hold a lot of shares" - is problematic on two counts:
1) It has never happened before for a company with such a huge amount of debt relative to their market cap - i.e. history suggests it's unlikely to happen here, and,
2) If hedge funds were so keen to look after employees by making their shares more valuable - WHY did they specifically BUY BACK employee shares back in March (http://www.asx.com.au/asxpdf/20170331/pdf/43h5ysyqgylcvs.pdf)
There are plenty of ways to incentivise employees (ranging from profit share schemes, shares in a new entity, more training or advancement opportunities - to the very basic "you get to keep your job" scheme, that seems to work pretty well a fair amount of the time).
I would strongly recommend trying to take the emotion out of it - as well as forgetting any hopes and dreams about Watchstone delivering a billion dollar rescue package (hint: they don't have the money, it's simply not going to happen!).
Research other debt-for-equity deals that have been executed by hedge funds involving other companies. See if you can find an example where a hedge fund has done a debt-for-equity deal at a significant premium to the 30-day VWAP of a share. Try to draw parallels between SGH's situation and other businesses that have been involved in recapitalisation deals - debt level vs market cap etc. - as truly, this is your best guide as to the likely outcome here.
Good luck!
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