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Nothing in particular, I just like to talking to people to learn more. Any idea why they withdrew the filing they made earlier today?

Anyone in touch with Laifer? Tried emailing him, no response.

I've thought about the same concern (.7 cent option vs 12.8 cent option), and it's hard to say. If there was no activist, it's a clear arbitrage play.

I think the less risky route is to see how the case goes on Friday and make a decision following that. I should have my analysis of the case posted soon – I think the valuation is strongly in Resilient's favor, the question is whether that is enough to sway the court.

Jae,

I think he really means do you see the downside as limited to $0.128 or zero for equity holders. The right way to think of it is multiple scenarios, probability-weighted, but it's hard to venture a guess on that front with authority. I am no bankruptcy lawyer (any in the house ?:) ) but I would think the threat to remove the "gift" is likely a bluff.

John

Correct me if I'm wrong..I initially thought this special situation was a simple arbitrage that subsequently turned into a cheap option. Admittedly after reading through the filings and talking to people, I purchased some shares for 13.5 cents. However after reading the case study, I am pretty sure I miscalculated that this was a 0.7 cent option but rather a 13.5 cent option. If an equity committee is established, the "gift" is in jeopardy and it is a full fledged bet that Resilient can squeeze more value from the other parties. Did you guys think of this situation as a 10-14 cent option or a -2 to +2 cent option?

Very solid documentation of this can be found here: http://www.scribd.com/doc/2935…..se-Summary

Reminder: Case is scheduled for the 9th!

Post edited 4:36 pm – April 2, 2010 by ankitgu

john_allen said:Jae- Thanks to you and all the others for your work on this interesting situation. Now perhaps the source isn't all that reliable, but the rbr.com article was bearish on the prospects for equity holders, as far as I could tell. At least nominally the company has more debts than assets – so is there much of a case that the equity holders will get more? On the other hand the fact they are getting something may indicate there actually should be a lot more. Have you been able to tell if the judge is likely to appoint an equity committee? Would it really have any influence?

I'll answer even though you put Jae's name simply because I think this is an interesting situation.

Look at page 488 till the end in this document: http://www.kccllc.net/document…..000018.pdf

The company does have more debts than assets, however the argument here is that there is more value than just the balance sheet alone. Using Oppenheimer's own valuation methodology, Resilient is saying that the equity is worth more than what they are reporting.

In terms of the likeliness of getting an equity committee, you should read Resilient's filing: http://www.kccllc.net/document…..000003.pdf

I've read their filing and have gotten copies of all the previous cases that Resilient cited. The quality/relevance of those will impact the judge's decision. Once I read through these, I'll post back with my analysis.

In addition, the same judge denied the motion of an equity committee for TLCV(Q.PK). I think the issue there was that the equity holders didn't file it in a timely manner.

I agree with Resilient that equity holders should get more, management is clearly being incentivized to make this happen and clearly loot from current shareholders. Depending on what happens in the next few business days, I plan on writing a few articles regarding the entire situation.

There was a filing yesterday regarding the equity committee, or the lack of one, and it simply re-emphasized from the trustee that they're waiting on it: http://www.kccllc.net/document…..000002.pdf

I'm not a lawyer, but I'm willing to say that having a trustee come out and say that their process was incorrect is a helpful fact.

While I say all of this, remember that if you buy at a decent price, your downside is limited. At 13.5 cents, and 12.8 cents on the table, you're essentially taking a 5.2% downside risk and a very large upside, with the upside being "Lance Laifer & Team" currency. He's obviously involved here because he feels something is wrong and that he can right this wrong. I'll try to cover Lance a little bit, but from what I've read about him, he seems to be a man that understands the difference between success and significance, and it seems he aims towards the latter. When you think about success and significance, one of them is immortal, and I think he's someone who understands that based on his fights toward Malaria.

Jae- Thanks to you and all the others for your work on this interesting situation. Now perhaps the source isn't all that reliable, but the rbr.com article was bearish on the prospects for equity holders, as far as I could tell. At least nominally the company has more debts than assets – so is there much of a case that the equity holders will get more? On the other hand the fact they are getting something may indicate there actually should be a lot more. Have you been able to tell if the judge is likely to appoint an equity committee? Would it really have any influence?

DrSues02 said:

Jae,

Any ideas for screening for these bankruptcy plays and other special events?  Or any recommending reading?  I've done a bit with de-listings, going private transactions, and merger arbitrage but haven't gotten into bankruptcy ideas. RGCIQ looks like a great play.

Here's a reading list: http://www.distressed-debt-inv…..-list.html

I haven't dug around for sources of bankruptcies, but here are a few:

1. http://www.kccllc.net/ (sort by date, view all, you will probably have to manually check which are publicly held and which are not)

2. http://www.netdocketsblog.com/ – They seem to cover large bankruptcies, none of the stories on the front page relate to publicly held companies though

3. SEC filings/Google News – This is where you'll probably find the good stuff

RGCIQ's announcement happened on March 1st. If you saw it then, you could have picked up a decent bit of shares at 10 cents knowing each was worth 12.8 cents. That's a 28% return, for holding for a very short time (2-3 months?). You could even set an auto-sell at 12.8 and to buy at 10 cents, knowing that they will be cashed out shortly.

Given enough of these in a year, you could have a nice little way of making some cash. The big money might be in catching something like this going from 10 cents all the way to 50-60 cents, or something like Visteon where it went down to a 1 cent and later went past $1.

I still have a ton to learn, but I'm starting to get familiar with Lexis to look up everything. Resilient's filings cite a lot of previous cases (4-5 citations) and so I went and got each of those today so that I can analyze it and try to understand what the judge's thought process might be.

As with any investment, proceed with caution, conviction, and your own analysis. There's always someone betting against you and someone betting with you so don't go into something just because someone else is doing it, that only leads to a herd mentality.