Re: sge, points agreed, except i would have thought the junior debt holder
posted on
Mar 01, 2007 06:50AM
A lot of good points being raised this morning. I'd just like to add some more speculation. As stated yesterday the junior lender still has rights to the receivables and inventory transferred to SSDI. It's kind of been the assumption by everyone here that the value of these are negligible. I find that very hard to believe. Typically lenders will not lend more than 80% on receivables and 50% on inventory. That's not to say that things don't sometimes get away from them - I worked with a company that ended up in bankruptcy. The bank that was the secured lender ended up taking a hit of about $4 or $5 million because the value put on inventory when it was time to lend money was a bit overstated, not to mention some bad receivables being carried at face value. Point is, I think they took a hit of 4 or 5 million on a loan that was about $30 million. They got a good part of their loan back thru the receivables and other liquidation processes. That's probably the position this junior lender is in - they will recover a good part thru the receivables and inventory, and recover the rest, plus interest, thru the earnout. Corrections/comments welcome.