Bonkers thought: IF Corona is a short term problem (call it a year), is there any reason companies shouldn't declare BK if they run into grumpy creditors, to kick the can? If results/the market improve by the end of the process, interesting cases might be made about valuation?
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There’s a difference between solvency & liquidity Courts (Delaware or BK) put a lot of weight into DCF analysis Let’s say you’re a restaurant chain - you’re worth $1b, have $500m of debt run out of cash Bc of CV and lenders won’t provide liquidity, so you file to get a DIP
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3 months later doors are open, slinging burgers, and maybe your TEV is now $800m (higher DR given change of perceived risk) There’s material eq value The BK judge is PISSED. You’ve racked up tens of millions of advisory/lawyer fees, all because the lenders wouldn’t help
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Forcing companies that have been impacted by an exogenous event (CV shutdown) that are otherwise healthy businesses to file BK is going to be a rarity Exception will be companies that are irreversibly impacted post CV - a prof svc firm that loses key employees, for instance
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Would essentially pause things legally. I suspect there will be some of this going on throughout many industries without the legal apparatus but would be a good time buyer
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