Wall Street Layman

 Sable Permian Resources is a small player in the Permian shale oil patch. They have the oil rights for 127,600 acres and produced an average 51,500 BOE/day (barrels of oil equivalent per day) in the past quarter. Current book value of these assets is $990 million. Sable underwent a major restructuring in 2017 and then again in 2019. On June 25th they file for Chapter 11 bankruptcy protection. This time the assets are being sold off. The auction is set for October 2nd - this coming Friday. Sable is not a public company. The overview of the company and situation provided for the bankruptcy proceedings is the best place to start. The company has $10.5 million in cash and $1.3 billion in debt in three tranches: $574.9 - Revolving Credit Facility $707.7 - 12% Senior Secured First Lien Notes due 2024 (ask price: 10; no bids) $36.1 - Senior Notes (price: 0) Despite their name, the First Lien Notes are subordinate to the Revolving Credit Facility. All the assets are in the subsidiary na...

Neiman Marcus Group is planning to emerge from bankruptcy September 30th. Their restructuring plan was confirmed by Judge David R. Jones on September 4th. Neiman Marcus has been owned by Ares Management and the Canada Pension Plan Investment Board but they will be losing their ownership in the restructuring. The creditors will become the equity holders. The plan is pretty complicated. There are 14 different classes of claims and the equity is being split among five of them. There is only one bond issue trading in the public market: 7.125% Senior Debentures due 6/1/28 Price: 2.00 Outstanding: $125 million Treatment:1.7% of equity (2.8% diluted down to about 1.7%) + 2.8% participation rights in the Exit Loan Facility The official Disclosure Statement of the plan  (Exhibit D: Valuation Analysis) puts the total equity in the reorganized Neiman Marcus at $1.015 billion. A naive valuation of the bonds using the 1.7% equity would give a fair price of 13.80. But will it reach tha...

Overview Siemens AG, the giant conglomerate with headquarters in Germany, is spinning off 55% of their energy business later this month. Each Siemens shareholder will receive one share of Siemens Energy for each two shares they own on September 25th. The company intends to sell most of the remaining 45% in the open market 12-18 months from now. Spin-offs sometimes provide great investment opportunities. Many shareholders, when faced with two stocks after purchasing just one, decide they want one and dump the other. If many decide to dump the same stock the sudden selling can drive the price down to unreasonably low prices. Other times a lackluster parent company is able to shed an unprofitable business unit and start producing financial reports that allow the market to realize their full value. The Siemens Energy spin-off appears to have both of these dynamics at play. I recommend purchasing the Siemens stock now, before the spin-off, or wait for Siemens Energy to sell at a great price...

 FTS International is a fracking company. The shale oil companies hire them to frack their new wells. Shale oil wells produce very little oil without fracking and then in a predictable diminishing pattern. This requires that shale oil companies must be ever drilling new wells and those wells must be fracked. The sudden impact of oil prices falling has shocked the shale oil companies and they virtually stopped drilling and fracking. Thus FTS' business fell off a cliff - for now. FTS is about to file for bankruptcy protection. On August 24th they announced they had signed a Restructuring Support Agreement (RSA) with a majority of their debt holders. The RSA binds the signers to work together to achieve the following milestones: Bankruptcy filing: Sep 15 Judge confirms plan: Nov 14 Plan becomes effective: Nov 29 So the bankruptcy should be over by the end of November. Things can go wrong but it is in everyone's interest to minimize how long it takes as protracted restructurings ju...

Pacific Drilling (PACD) owns seven drillships which it rents to large oil companies to drill deep ocean wells. The ships are typically rented for 6-18+ months for rates in the hundreds of thousands of dollars per day. These are large, complex, and expensive ships. Renting a ship includes a crew to operate it and its drilling equipment. There are nine companies in the world that own and offer drillships for rent. Pacific Drilling is the smallest. Three of the nine companies are currently in bankruptcy (Valaris plc, Noble Drilling, and Diamond Offshore). Two are openly preparing for bankruptcy (Seadrill, Shelf Drilling). And one, Borr Drilling, just worked out a deal with its creditors to avert bankruptcy. During the years when oil was over $100, the offshore drilling companies expanded too much. The COVID-19 pandemic has resulted in a dramatic drop in global oil demand and even more dramatic drop in demand for new offshore drilling. Excess supply of offshore drillships coupled with a dr...

AMC Entertainment Holdings is the largest owner of movie theaters in the world with over 900 theaters and 10,000 screens. It is a high-margin business that doesn't require lots of capital. However, the company is highly levered with over $5.1 billion in debt against $2.5 billion tangible assets. AMC has $4.6 billion in building leases. A building lease is an asset when it is in a great location and a good rate for a very profitable business. It is a liability any other time. Especially if a pandemic forces all locations to close simultaneously. AMC has been able to negotiate forbearance on most of its leases and is now reopening theaters. With almost $500 million cash on hand and no debt coming due until 2022, AMC doesn't have a near-term liquidity problem. For investors, AMC is one of those rare situations where a senior security is troubled while a junior security is rising - its bonds are troubled while its stock is rising. For example, AMC's 6.125% Senior Subordinated N...

Whiting Petroleum Corp (WLL) About the Company  Whiting Petroleum Corp (WLL) is emerging from bankruptcy today. Whiting is an oil and gas company that does lots of shale production. Shale oil wells are more costly to drill and develop because they require fracking. The rate a well produces oil diminishes over time and shale wells diminish faster than others. Oil companies must be drilling and exploring or their production will diminish over time - especially shale oil companies like Whiting. Debt and Leverage Metrics of Whiting Petroleum at 9/1/20 Face Amt Price Mkt Value Restruct Value TTM Period End 6/30/20 Cash 492 Credit Agreement 912 100 912 912 1.25% Convertible Senior Notes 2020 187 25 47 187 Peak EBITDAX 2486 5.75% Senior Notes 2021 774 24 186 774 TTM EBITDAX 108 6.25% Senior Notes 2023 408 25 102 408 6.625% Senior Notes 2026 1000 25 250 1000 Total 3281 1497 3281 Equity -178 0.79 72 73 Leverage At Face Net at Market EBITDAX = 108 Thru Notes 30.4 13.9 EBITDAX = 800 Thru Note...