SCAC - Saban Capital Acquisition Corp

[gfp]

Hey all,

 

Anyone feel like taking a look at this potential short to get a second opinion?  Basically the situation is this:  Blank check company put out there by the power rangers / univision guy, needed to consummate a deal by last year, finally came up with Panavision + SIM Group, got an extension to do so, panicked when the stock market went down in December and their regulatory sign-offs were slightly delayed by the partial government shutdown and today decided to call off the deal and send back the money.

 

So by 10 days after 3/31, they will send the class A shareholders their one and only distribution, which I am sure will be less than today's 10.24 / share - but I am not sure by how much.

 

I think the true class A share count is 21.157776 million shares, but sometimes they make it seem like class A shares 'eligible for redemption' is 19.511708 million.  I think this is not relevant to this liquidation, as it was only there to make a distinction between shareholders equity categories where they couldn't classify most of their SE as permanent capital so they carved out $5m tangible assets worth initially and classified that as permanent.  But it ain't permanent after 3/31.

 

So my other questions are around the accrued expenses.  I know the $8.75m liability goes away.  But there was already $6.76 million of accrued expenses at 9/30 and I'm wondering if all or some of these can somehow not be paid since they cancelled the deal.  IB fees, etc...

 

Anyway - Its only interesting as a short term Short, not a long.  If anyone feels like kicking the tires and answering any of my uncertainties I would love to read it.  Thanks

 

[allnatural]

I am hearing the trust value is around $10.25-$10.30 today which is what holders should expect to receive in distribution... Hence the share price today.

[gfp]

Thanks for your reply.  Who are you hearing this from?  That would imply all accrued expenses from the last 10Q disappeared and there were no further expenses in Q4 while working to close the deal.  Interest on the trust account is only one million or so a quarter (money market fund).

 

Also - it was 10.19 per share for the early redeemers.  Hard to believe it is going up.

[5xEBITDA]

Class A shareholders will receive $10.31 per share (net of liquidating expenses) following the 3/31/19 expiration. At today's share price of $10.25, that is a 7.56% IRR for 30 day paper. Why not buy now, redeem, and then short later on?

[gfp]

Class A shareholders will receive $10.31 per share (net of liquidating expenses) following the 3/31/19 expiration. At today's share price of $10.25, that is a 7.56% IRR for 30 day paper. Why not buy now, redeem, and then short later on?

 

 

Thanks - what is the source of the 10.31 number? 

 

I'm looking at a last reported balance of $215.37 million in the trust account and 21.1578 million class A shares outstanding. But there were expenses incurred since that report and accrued expenses at the time of that report.

[5xEBITDA]

Class A shareholders will receive $10.31 per share (net of liquidating expenses) following the 3/31/19 expiration. At today's share price of $10.25, that is a 7.56% IRR for 30 day paper. Why not buy now, redeem, and then short later on?

 

 

Thanks - what is the source of the 10.31 number? 

 

I'm looking at a last reported balance of $215.37 million in the trust account and 21.1578 million class A shares outstanding. But there were expenses incurred since that report and accrued expenses at the time of that report.

 

On 9/30/18 there was approximately $215.4mn in the trust account for $10.19 per share. SPAC trusts are invested in 3-6 month U.S. treasury paper, the blended rate of which is approximately 2.42%, or 0.20% per month. So by the 3/31/19 expiration date interest accrual will have grown the trust balance to ~$218.0mn, or $10.31 per share. SCAC is incorporated in the Cayman Islands so they do not pay taxes on interest accrual to the trust account, and liquidation expenses are capped at ~$100k, which nets you to $217.9mn, still $10.31 per share.

 

They do not provide this number, you have to calculate it yourself. Sometimes they will provide an approximate number in the proxy but it is frequently incorrect for various reasons.

[gfp]

Thanks - so you don’t believe they will have any expenses from 9/30 to 3/31?  The accrued expenses in the last 10Q go to zero and the 5 additional months of trying to complete the deal and get regulatory approval is also a zero?

[5xEBITDA]

Thanks - so you don’t believe they will have any expenses from 9/30 to 3/31?  The accrued expenses in the last 10Q go to zero and the 5 additional months of trying to complete the deal and get regulatory approval is also a zero?

 

They can only carve-out $85k from the trust account to pay working capital expenses, if they choose to dip into the account at all for it.

[gfp]

Well that explains it - thanks for the clarification.

[5xEBITDA]

Well that explains it - thanks for the clarification.

 

No problem. SPAC mechanics can be tricky, its better to read the issuing prospectus than the 10k in most instances.