SGH might go private, page-38

no. I mean Anchorage take away $95K from every working lawyer at SGH through 95% D4E dilution (on their $100K equity stake).

And then Anchorage issue every working lawyer with $95K in post-dilution equity as an incentive to stick around. (obviously scale to match each individual's pre-dilution holding - and how much you want to retain them... JS might get back less than his current holding for example!)

SGH Lawyer (staff) effectively loses nothing - and if the go-forward plan presented by management is feasible (to them) and they see the potential, they are at least equally incentivised to remain as they currently are.

Anchorage gives up a very small percentage of their holdings in order to retain key staff. Even if this is as much of 20% - they are still WAY in front and still retain ownership and control of ~80% of the entity.

The key point is that existing non-staff shareholders are left with 5% of their current holdings post-dilution.

I am simply pointing out that whilst staff are also shareholders and would nominally suffer through any dilution - they can always be given fresh incentives after the dilution to salve their pain and keep them on the team.

Current non-staff shareholders are not in the same boat as staff - so you need to be careful in any assumption that for Anchorage to "protect staff interests" they will need to limit dilution - because it is simply not the case.

And let's face it - if they wanted to limit dilution to retain staff - they'd have to keep dilution to a very low number. I'd imagine staff would be almost as unhappy about 80% dilution as 95% dilution - and if Anchorage only diluted by say 10%, then it would have practically zero impact on the debt - and Anchorage are not in the business of debt "forgiveness".

So - if dilution happens (which imho seems likely) - it will unfortunately be brutal.