A little more commentary on the SPF deal
From the legal filing today(commentary in italics)........
"On May 26, 2008, Standard Pacific Corp. (the “Company”) entered into an investment agreement (the “Investment Agreement”) with MP CA Homes LLC (“MatlinPatterson”), an affiliate of MatlinPatterson Global Advisers LLC, pursuant to which MatlinPatterson has committed to: (i) purchase, for approximately $381.3 million in cash, 381,250 shares of senior convertible preferred stock of the Company (“Senior Preferred Stock”), which are equivalent to 125 million shares of the Company’s common stock (the “Common Stock”), on an as-converted basis and will be automatically converted into junior convertible preferred stock of the Company (“Junior Preferred Stock”) subject to receipt of approval of the Company’s stockholders, (ii) exchange, for approximately $128 million principal amount of the Company’s outstanding notes currently owned by MatlinPatterson, a warrant to purchase 272,670 shares of Senior Preferred Stock, or, if stockholder approval is received, shares of Junior Preferred Stock (“Warrant”), which are equivalent to 89.4 million shares of Common Stock on an as-converted basis and (iii) in connection with a rights offering of 50 million shares of Common Stock to be made to the Company’s existing public stockholders (the “Rights Offering”), commit to purchase, in exchange for 6,100 shares of Senior Preferred Stock (“Commitment Fee Shares”), which are equivalent to 2 million shares of Common Stock on an as-converted basis, any unsold shares offered to the Company’s public stockholders in the Rights Offering (collectively, the “Transaction”). The closing of the sale of the Senior Preferred Stock, Warrant and Commitment Fee Shares is subject to the satisfaction or waiver of certain conditions (“First Closing”)."
First, SPF must convert $128 mllion face value of its debt, into preferreds convertible into about 90 million shares of SPF(it is very likely the fund purchased that debt for much less than face value and based on the recent trading price the fund is likley paying less than $1.00 per share. Then only if shareholder's agree to selling over half the company for such a cheap price...the fund agrees to guarantee the purchase of another 50 million shares at $3.05 per share if existing shareholders don't participate in the second closing.
Can you believe how happy they will be to dump that subordinated debt?????Poor existing shareholders have to pay $3.05 per share if they want to participate.....boy is SPF's management being nice to existing shareholders....allowing a fund to pick up 90 million shares at probably an effective cost less than a buck and existing shareholders have to pay $3.05....not that is exercising your fidcuiary duty to shareholders if I have ever seen it.
Under the terms of the Investment Agreement, the Company has agreed to call a special meeting of stockholders for the purpose of approving: (i) the issuance of the Junior Preferred Stock in connection with the conversion of the Senior Preferred Stock, which would also permit the issuance of the Common Stock in connection with the conversion of the Junior Preferred Stock, and (ii) certain amendments to the Company’s certificate of incorporation, including amendments to remove certain anti-takeover provisions contained in the certificate and to increase the number of authorized shares (the “Proposals”). If the Transaction is approved by the Company’s stockholders, the Senior Preferred Stock held by MatlinPatterson would automatically convert into Junior Preferred Stock, and the Warrant would be exercisable for Junior Preferred Stock.
Following the First Closing, the Company will commence the Rights Offering pursuant to which each holder of the Common Stock will be offered the right to purchase up to such holder’s pro rata share of approximately 50 million shares of the Common Stock at a per share price of $3.05 (the equivalent price per share being paid by MatlinPatterson for the Senior Preferred Stock). The purchase by MatlinPatterson of the shares not purchased by the Company’s stockholders in the Rights Offering will be consummated in a separate closing following the Rights Offering (“Second Closing”).
If SPF's shareholders don't accept the 90 million shares for the debt exchange at the very discounted price, then no buying the 50 million shares at $3.05. This could be a big sticking point to the transaction and read below.
Now the doozie:
The Senior Preferred Stock will be the highest ranking equity security of the Company and will have a liquidation preference over the Common Stock and other junior stock equal to the greater of: (i) the purchase price per share plus any accrued dividends, or (ii) participating with Common Stock on an as-converted basis. The Senior Preferred Stock will vote on an as-converted basis with the Common Stock, subject to a cap on voting power equal to 19.9% of the outstanding Common Stock on the First Closing Date, and will have customary protective provisions. If stockholder approval of the Proposals is not obtained on or prior to September 15, 2008, then dividends on the Senior Preferred Stock will equal 17% of the liquidation preference (accreting to the liquidation preference) for the first six months and increase by .5% every six months until the Proposals are approved by the Company’s stockholders, with such annualized accretion to be capped at 20%.
My friends, somethings better left to stand on their own.