JO does it again... (and Mesa recall rumor)
01-08-2009 | 05:52 PM
#31
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From: Engines Turn or People Swim
For the bond holders to see that money they still have to dump those shares. One way or another they'll have to hit the street to be worth anything. Even if they are issued to the holders at an average of .28 they still will dilute the amount now available for trading meaning anyone holding onto their shares will see them drop since their market share is also diluted with it. If the stock was issued and the price didn't change accordingly it'd be no different than them printing their own money. One way or another, regardless of who gets the shares or how they get them, once those shares leave the companies hands the price/value of the ones currently out there will plummet.
Let me spell it out like this.
Bond Holders:"Hey guys we sure appreciate the money for the bonds that are coming due".
JO:"OH... yea... errr........... lets see I need to find a way to NOT pay you that money because... well... we don't have any. I know how about I avoid declaring BK right now by simply giving you a big bag of air and calling it stock repayment since it was agreed on in the past. That way my debts to you legally taken care of yet by the time you get to cash those shares out, if ever, they'll be worth nothing anyway! YAY I've avoided less people in line at the BK courts and can keep flying current contracts right now because if I had declared BK papa DAL would cut me off at the knees. Just a little more time to get golden parachute all lined up and papers burned so I don't go to prison!!" "Hey you there's porn on all the computers upstairs go start erasing everything!".
Let me spell it out like this.
Bond Holders:"Hey guys we sure appreciate the money for the bonds that are coming due".
JO:"OH... yea... errr........... lets see I need to find a way to NOT pay you that money because... well... we don't have any. I know how about I avoid declaring BK right now by simply giving you a big bag of air and calling it stock repayment since it was agreed on in the past. That way my debts to you legally taken care of yet by the time you get to cash those shares out, if ever, they'll be worth nothing anyway! YAY I've avoided less people in line at the BK courts and can keep flying current contracts right now because if I had declared BK papa DAL would cut me off at the knees. Just a little more time to get golden parachute all lined up and papers burned so I don't go to prison!!" "Hey you there's porn on all the computers upstairs go start erasing everything!".
01-08-2009 | 05:54 PM
#32
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From: Engines Turn or People Swim
01-08-2009 | 06:13 PM
#34
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I think the chances that the Note Holders demand cash is a lot higher at Mesa than it was at ExpressJet.
Plus, I think the Note Holders would get good amount of their money in the end if Mesa had to liquidate.
01-08-2009 | 08:01 PM
#35
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From: blueJet
That's why JO has to offer them something tangible, like a BigWheel!
01-08-2009 | 08:03 PM
#36
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From: CRJ FO
Originally Posted by DENpilot
I'm not sure everyone fully understands...
IF the bondholders elect to exercise their repurchase rights, Mesa has the right to repay in stock. The amount of stock is calculated by using some 5 day average stock price. There is no choice for the bondholders as this was the terms of the early repurchase and since this move was approved by the shareholders, it is all kosher.
So, assuming all bondholders exercise their repuchase rights, at an average price of .28, it would take a little over 300 million shares to repay it.
IF the bondholders elect to exercise their repurchase rights, Mesa has the right to repay in stock. The amount of stock is calculated by using some 5 day average stock price. There is no choice for the bondholders as this was the terms of the early repurchase and since this move was approved by the shareholders, it is all kosher.
So, assuming all bondholders exercise their repuchase rights, at an average price of .28, it would take a little over 300 million shares to repay it.
For those that aren't quite getting it CLICK HERE and read the actual filing. Page 10 includes the table with a variable stock price (for those that keep talking about it becoming diluted). The $.28 is just what is being used now. Like DENpilot said the actual value will be based on a 5 day average. Again read the filing.
The bondholders have three options:
1.) Take the shares in lieu of cash (MESA has the right to do that, refer to the bottom of page 10 in the SEC filing).
2.) Not exercise their rights. Just because the bonds are due doesn't mean they have to collect on them, they can defer to a later time.
3.) Refuse the shares, demand cash, put the company in BK and hope to collect anything after all assets are sold. Like MESA really has that much to sell.
Of all the options, #1 is looking pretty good. At least you get something (well 900M tons of printed paper). Sell it for what you can get because it's really that or nothing at all.
OO.
01-08-2009 | 08:24 PM
#37
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From: blueJet
^^^This is as simple as it gets.^^^
For those that aren't quite getting it CLICK HERE and read the actual filing. Page 10 includes the table with a variable stock price (for those that keep talking about it becoming diluted). The $.28 is just what is being used now. Like DENpilot said the actual value will be based on a 5 day average. Again read the filing.
The bondholders have three options:
1.) Take the shares in lieu of cash (MESA has the right to do that, refer to the bottom of page 10 in the SEC filing).
2.) Not exercise their rights. Just because the bonds are due doesn't mean they have to collect on them, they can defer to a later time.
3.) Refuse the shares, demand cash, put the company in BK and hope to collect anything after all assets are sold. Like MESA really has that much to sell.
Of all the options, #1 is looking pretty good. At least you get something (well 900M tons of printed paper). Sell it for what you can get because it's really that or nothing at all.
OO.
For those that aren't quite getting it CLICK HERE and read the actual filing. Page 10 includes the table with a variable stock price (for those that keep talking about it becoming diluted). The $.28 is just what is being used now. Like DENpilot said the actual value will be based on a 5 day average. Again read the filing.
The bondholders have three options:
1.) Take the shares in lieu of cash (MESA has the right to do that, refer to the bottom of page 10 in the SEC filing).
2.) Not exercise their rights. Just because the bonds are due doesn't mean they have to collect on them, they can defer to a later time.
3.) Refuse the shares, demand cash, put the company in BK and hope to collect anything after all assets are sold. Like MESA really has that much to sell.
Of all the options, #1 is looking pretty good. At least you get something (well 900M tons of printed paper). Sell it for what you can get because it's really that or nothing at all.
OO.
You're saying Mesa can create 900 million shares of stock out of thin air, it will not go down in value because Mesa says so, and then they are allowed to use it as money to pay off debt?
If it was that easy, why would any company in the history of Earth ever need to file bankruptcy?
While he's at it, why doesn't JO just issue 57 billion shares of Mesa stock and use it to buy Delta?
01-08-2009 | 09:06 PM
#38
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From: doggy style
I'm no accountant, so let me see if I got this straight...
You're saying Mesa can create 900 million shares of stock out of thin air, it will not go down in value because Mesa says so, and then they are allowed to use it as money to pay off debt?
If it was that easy, why would any company in the history of Earth ever need to file bankruptcy?
While he's at it, why doesn't JO just issue 57 billion shares of Mesa stock and use it to buy Delta?
You're saying Mesa can create 900 million shares of stock out of thin air, it will not go down in value because Mesa says so, and then they are allowed to use it as money to pay off debt?
If it was that easy, why would any company in the history of Earth ever need to file bankruptcy?
While he's at it, why doesn't JO just issue 57 billion shares of Mesa stock and use it to buy Delta?
But you really cannot blame JO, these were the terms of the bonds when they were issued. The investors knew full well that it could come to this. Personally if it was my choice, I would ride it out a few more years.
01-08-2009 | 09:22 PM
#39
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From: RJ FO
This is not just me hating Mesa but if I were an investor I might want to take road three. Force Mesa to liquidate and get what I can now, with a bad economy and a company that is not looking so hot those shares might just end up being worthless anyway. But that is just my uneducated opinion.
01-08-2009 | 09:31 PM
#40
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From: CRJ FO
I'm no accountant, so let me see if I got this straight...
You're saying Mesa can create 900 million shares of stock out of thin air, it will not go down in value because Mesa says so, and then they are allowed to use it as money to pay off debt?
If it was that easy, why would any company in the history of Earth ever need to file bankruptcy?
While he's at it, why doesn't JO just issue 57 billion shares of Mesa stock and use it to buy Delta?
You're saying Mesa can create 900 million shares of stock out of thin air, it will not go down in value because Mesa says so, and then they are allowed to use it as money to pay off debt?
If it was that easy, why would any company in the history of Earth ever need to file bankruptcy?
While he's at it, why doesn't JO just issue 57 billion shares of Mesa stock and use it to buy Delta?
Where did I or anyone say it wouldn't go down? What are you reading? Short end of it, NO, you didn't get this straight. THE VALUE OF THE STOCK WILL BE DETERMINED BY A 5 DAY AVERAGE. Read the filing for yourself. It could go up, down or remain the same.
Here you go:
Originally Posted by "SEC filing, page 10
The “market price” of Common Stock means the average of the closing sale price of the Company’s Common Stock for the five trading day period ending on the third business day (if the third business day prior to January 31, 2009 and February 10, 2009, respectively, is a trading day or, if not, then on the last trading day) prior to January 31, 2009 with respect to the 2023 Notes, or February 10, 2009 with respect to the 2024 Notes, appropriately adjusted to take into account the occurrence, during the five trading day period, of certain events (i.e. stock splits, rights issuances and other distributions).
edit: MESA has been authorized (by the shareholders) to issue up to 900M shares. They don't have to issue all 900M. Depending on the stock price it can vary from between 350M up to 900M. The table on page 10 (SEC filing) shows a stock price down to $.10/share. If it were to go to $.05/share MESA would be unable to pay the debt. However, there are still other things JOe can do, like a reverse stock split e.g. ExpressJet. XJT did a 10:1 split. For every 10 stocks you held you now get one. That took the price from $.19/share to $1.90/share. But for now JOe has bought himself some time.
OO.
Last edited by OscarOscar; 01-08-2009 at 10:04 PM.
