RELY - Real Industry

[Guest roark33]

Bankruptcy filing on friday.

[Green King]

This is a very odd situation. I got in the day of the super drop on Friday & sold on Monday with a 30% gain. As far as I can tell the sub is going to bankruptcy and the parent holds the tax loss. The sub is a call option on the price of the commodity that is improving unlike $zinc there is no major operations problem. But it looks like management is trying to loot shareholders.

 

This could move like Peabody bankruptcy due to price vol of the commodity. The bankruptcy looks to be mostly weather affected you know they got hit by a hurricane. I thought the lenders were willing to adjust the convents.

 

Also, do the high volume of trading create a change of control trigger? I don't know tax assets.

 

Theoretically, they can have the sub go to zero and keep the tax assets on the parents and play this game again.

 

But structurally no one can jump in without change of control.

 

I might be wrong with this correct me if i am wrong.

[bskptkl]

Docket is here https://cases.primeclerk.com/realindustry/Home-DocketInfo

 

Docket entry #3 says parent (RELYQ) has $2 mm unrestricted cash and $900+ mm NOLs

They paid $525 mm for sub in 2015 (6.25x LTM EBITDA which was $84 mm in 2014) which now has $401 mm debt and $25 mm preferred stock liquidation preference. Sub had best month in 2 years. Will try to monetize by sale.

 

Docket #85 filed 11/28 outlines bid procedures for sale of substantially all REALQ's assets. Key date is Jan 18, final stalking horse proposal deadline. Bearish note: they have been running a sales process since earlier in the year however and no stalking horse bid is ready now.

 

9/30 balance sheet lists $620 mm total liabilities. Last 9 months EBITDA = $43 mm as compared to 2016 = $56 mm

 

Last trade in bonds on 11/30 was 60, down from 92 pre-filing

http://finra-markets.morningstar.com/BondCenter/BondTradeActivitySearchResult.jsp?ticker=FRELY4440919&startdata-ipsquote-timestamp=12%2F01%2F2016&enddata-ipsquote-timestamp=12%2F01%2F2017

[bskptkl]

Also, do the high volume of trading create a change of control trigger? I don't know tax assets.

 

Theoretically, they can have the sub go to zero and keep the tax assets on the parents and play this game again.

 

But structurally no one can jump in without change of control.

 

I might be wrong with this correct me if i am wrong.

 

They filed Docket #12 - a motion to establish trading procedures for those substantial shareholders that own more than 4.5% or 1.34 mm shares. I think if new buyers stay below that number, no change of control will occur. If you go over the limit, you have to file with the bk court.

[Sunrider]

How would this be affected by the GS funding commitment which, if executed would see them take up to 49% of the company? I suspect the NOL’s stay intact (why would GS do it otherwise)? But thought I’d see what people here think.

Thanks!