Quindell's buyers sue to reclaim every penny spent, page-122

It's hard to find a set of figures that deliver a reasonable chunk of debt reduction, based on attainable revenue and margin numbers with what I think hedge funds would see as "acceptable" risk/return weightings.

I'm not sitting in the negotiations - so take all of this with an extremely large grain of salt - just my opinion...

After running numerous scenarios I believe it is most likely that current s/holders will be offered a token amount (<$0.05) and will be left with about 5% of the company - the debt holders will take the rest.

That said - debt holders may be prepared to give away a little more to make it easier to get the recap deal across the line - though I don't think they are in any particular hurry or under any great pressure - so I'm not expecting extraordinary generosity.

To get a deal close to the current share price, you'd still have to assume reasonably optimistic revenue and margin figures (or at least a very quick turnaround from the last half's figures) - and a low risk-weighting on the D4E swap.
If you swap a little more debt on the figures I used above, you get a share price close to current:

Revenue: $700M
Margin: 10%
Risk-weighting: 4x
Swap $315M gets D4E @ $0.093 - which is pretty much spot-on VWAP - and 90% dilution

	Column 1	Column 2	Column 3	Column 4	Column 5
0				Calculation	Explanation
1	Revenue	A	700		projected future revenue
2	Margin (%)	B	10.0%		Expected margin
3	Profit	C	70	= A x B	= Revenue x Margin
4
5	Debt swapped 'M	D	315		How much debt will they swap
6	Interest rate on debt	E	5.0%		What is the interest rate on the debt
7	Interest foregone (M)	F	15.75	= D x E	= How much interest they forego
8
9	Risk weighting	G	4		What multiple should we use to reflect additional risk
10	Risk-weighted return (M)	H	63	= F x G	Therefore - what they need to make
11
12	%age equity required	I	90.00%		= Risk-weighted return divided by Profit
13	Remaining % current shareholders	J	10.00%	= 1 - I	100% less %equity required to deliver the risk-weighted return
14
15	Current shares on issue (M)	K	375
16	New shares on issue (M)	L	3375	=(K / J) - K	How many new shares they need to issue to hit their equity required
17
18	Issue price	M	$0.093	= D / L	= Debt swapped divided into New shares issued

I agree - hard to see D4E being done at a substantial (or indeed any!) premium to current SP - the prolonged range trading around 9.5c is certainly something the hedge funds can point to and say "The market values it at $35M - and we're offering you $250M or $350M (in debt) for 90% of it - effectively valuing it at 10x market value".

Whether this translates into an actual uplift in the SP post-D4E remains to be seen of course.