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Published byGeraldine Berry Modified over 8 years ago
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© 2003 Dechert LLP Rights Offerings: Pay To Play? Is the Right to Participate in the Acquisition Of Your Obligor a Recovery on Your Claim? Seventh Annual East Distressed Debt Investing Forum June 29, 2004, 9:45 - 10:30 a.m. Roosevelt Hotel 45 East 45th Street New York, NY 10017
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 2 Panelists Panelists: n William Q. Derrough Jefferies & Company, Inc. New York, NY n James K. Schaeffer PPM America Inc. Chicago, IL n Glenn E. Siegel Dechert LLP New York, NY
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 3 Getting Out of Bankruptcy o Management Doesn’t Want to Sell to Strategic Buyers o Private Equity is Competing With Existing Investors o Large Potential Upside
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 4 Existing Investors to the Rescue o Allow Other Creditors to Participate in a Rights Offering on the Same Basis o Go Private o Preserve Long Term Upside of Business o Contribute Cash and Claims to Acquire Debtor
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 5 Is This A Good Deal? n Chance to Preserve Your Upside n Chance to Make A Good Investment in a Company You Know n Don’t Need to Write Off Your Investment
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 6 What If You Can’t Invest? n No Available Funds n Existing Fund Can’t Take Equity n Existing Fund Can’t Buy Into a Private Company n Can You Put It in Through Another Fund?
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 7 Is This Even A Recovery? n You Have to Pay Something to Get Anything n You Don’t Get Any Credit for Your Existing Investment n You Can’t Transfer the Right to Participate n You Don’t Like the New Investment Anyway
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 8 Can You Find Another Bidder? n Sell Your Position to Someone Who Can Participate n Find an Equity Sponsor With a Better Deal n Find a Strategic Buyer
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 9 Confirmation Fight
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 10 Vote Against the Plan n They Can’t Vote, They’re an Interested Party n You Vote No Since You Have to Pay to Play n Force Valuation and Cramdown
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 11 Valuation o We’re in the Money o The Bidding Was Rigged o This Is Undervalued o You Can’t Buy This for Less Than What It’s Worth, Even If No One Else Wants It
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 12 Unfair Discrimination o They Are Using Their Blocking Position As Debtholders to Buy the Company o The Deal Actually Gives Them Credit for Their Claims o They Get Something for Their Claims and We Don’t
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 13 Absolute Priority o The Secured Creditors Have Received More Than They Are Owed o Management Can’t Get Anything If We Don’t o Trade Can’t Get Anything If We Don’t
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 14 Best Interests o We Might As Well Liquidate o The Company Is Worth More in Pieces Than As a Going Concern o If You Liquidated, We Would Get More
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 15 Can You Win? n The Right to Participate is of limited duration and non-transferable o Force Valuation of the right to buy in and create a cash alternative o Get Equity For Your Existing Investment
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© 2003 Dechert LLP Pay to Play: Are Rights Offerings A Recovery on Your Claim? 16 Can You Avoid the Problem? n Is It the Only Way to Do a Deal? n If You Can’t Pay, Maybe You Shouldn’t Get Anything n Maybe Your Investment Isn’t Worth Anything Anymore
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