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ATPG a Heist in Progress?

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June 09, 2013 – Comments (9) | RELATED TICKERS: HE , I , ST

This stock has had more ups and downs than any I have followed since the crash.  At one time I and others advised people to buy the stock.  Then the BP oil spill happened and all bets were off.  Then things seemed to improve (tho in hindsight it was more delusional emotion).  I made the mistake to get back "on board" to my loss.  Ah well I learned a few lessons.  I've learned the value of free cash flow when concerning debt heavy companies.  I've also learned not to trust ATP management. 

My concern is not so much with me (I've written my losses off and moved on).  What I am concerned is what is happening to all the many innocent shareholders and bondholders.  Right before their eyes ATP management and Credit Suisse are taking away all the viable assets.  And they are doing it in a clever way.

Had ATPG filed for liquidation all assets would have been sold and whatever monies received would have gone to mostly the bondholders, possibly a few pennies to equity.  That would have wiped out ATP management.  ATP management found themselves a partner, Credit Suisse, formed a DIP and went to Reorganize first.  By doing so the DIP moved ahead of everyone. Poof to the bondholders.  Instead of trying to operate the company, they then proceeded to sell all the viable assets with Credit Suisse being the only realistic buyer. 

I have read elsewhere that these assets will go to a holding company with ATP management getting a 10% slice. Now if that is true then a clear conflict of interest exists. ATP management has zero incentive to actually try to succeed with any reorganization.  They win on a liquidation since they wind up with a 10% interest in a basically debt free company.

As a kicker they apparently also keep the "claim" against BP.  I had argued before that a claim should be put in.  Management refuses and waits until Bankruptcy to do so.

The sale has not been approved yet and I think it should not and an investigation should take place.  I also submit that the Trustee replace current management as soon as practical.  

9 Comments – Post Your Own

#1) On June 09, 2013 at 4:27 PM, HarryCaraysGhost (99.64) wrote:

How is this even possible? my understanding of bankruptcy is liquidation,  bond holders first in line.

I suppose that fruity little club will let that happen, whilst any punishments would amount to a mere slap on the wrist. So why should anyone behave ethically?

Sad.

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#2) On June 09, 2013 at 4:50 PM, awallejr (77.23) wrote:

The DIP (debtor in possession) loan allows it to.  Had they gone liquidation you would be right.  But by going reorganization they can circumvent that.  Credit Suisse loaned about 700 million and bought the viable assets by basically forgiving much of the debt, hence no meaningful cash to the rest.

If this was contrived in the first place, and if it is true that management will get 10% of the new holding company I would suspect it was, then the Attorney General needs to get involved.

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#3) On June 09, 2013 at 4:55 PM, Mega (99.97) wrote:

http://en.wikipedia.org/wiki/Chapter_11_bankruptcy
http://en.wikipedia.org/wiki/Debtor-in-possession_financing
http://en.wikipedia.org/wiki/Seniority_(financial)

DIP financing having first priority is standard practice. 

If bondholders don't like the deal, they are free to argue against it in court and vote against it. 

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#4) On June 09, 2013 at 5:29 PM, awallejr (77.23) wrote:

Well kind of makes sense since who would lend to anyone heading into bankruptcy.  But if this really was nothing more than a contrived plan to get the viable assets out of a debt laden company and into a debt free one by management and Credit Suisse, then I think the Bankruptcy Court Judge needs to do some digging as well as the Trustee.

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#5) On June 09, 2013 at 5:33 PM, somrh (75.00) wrote:

I'm curious about this because I don't know much about the legal pecking order here.

1. Why would this ever be in the interest of bond holders?

2. If in a particular situation it is not in the interest of bond holders, can the bond holders actually nix it? Or does the DIP have priority?

3. Who made the decision to allow this financing? Can this be done without bondholder approval? 

It seems to me that reorganization might not be a bad thing. IIRC, the company had OK cash flows from what I recall; they just had too much debt so their cash flows couldn't meet interest payments.

Apart from liquidation, why not reorganize the company wiping out equity holders (or diluting them for the same effect) and swap current bonds for a viable debt/equity restructuring? Is that something bondholders have a choice on or can management/Credit Suisse simply go through with it without their say?

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#6) On June 09, 2013 at 5:54 PM, awallejr (77.23) wrote:

It depends if it was a sincere attempt to reorganize or not.  Bondholders and equity holders would want to keep the company operating, unless of course a liquidation would make them whole.

Now if it is true that ATP management  will be getting a slice of the new holding company then they never had any real incentive to succeed at reorganizing.

What is happening now doesn't help any bondholder or shareholder except Credit Suisse.  They basically bought what was once claimed to be worth 6 Billion dollars for 700 million.  Even assuming that to be a fair price, had they liquidated much of that $700 million would have gone to the secured creditors and bondholders at least. In addition if it is true they also keep the BP claim, well that actually could be worth billions if successful.

Sounds like people got sand bagged.  Reading this link at the time of filing and what is going to take place smacks of sand bagging to me (and as an aside can someone explain to me as if I were a 4 year old how to shorten these links please):

http://us.rd.yahoo.com/finance/external/bloomberg/SIG=1389fk3jl/*http://www.bloomberg.com/news/2012-08-22/atp-wins-approval-for-credit-suisse-bankruptcy-financing.html?cmpid=yhoo

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#7) On June 09, 2013 at 6:14 PM, Mega (99.97) wrote:

1. Why would this ever be in the interest of bond holders?

They get cash on the barrelhead, which they might prefer to equity.

2. If in a particular situation it is not in the interest of bond holders, can the bond holders actually nix it? Or does the DIP have priority?"

Different groups can submit bankruptcy plans, and the judge decides which ones are eligible to be voted on.

Generally, creditors who will have full recovery and those who have no recovery don't get to vote on the bankruptcy plan. Only the ones who have partial recovery get to vote. 

3. Who made the decision to allow this financing? Can this be done without bondholder approval? 

Bankruptcy judge. Depends.

4. Apart from liquidation, why not reorganize the company wiping out equity holders (or diluting them for the same effect) and swap current bonds for a viable debt/equity restructuring? Is that something bondholders have a choice on or can management/Credit Suisse simply go through with it without their say?

Yes, bondholders could propose a different type of plan. Auctioning off the assets isn't necessarily any better or worse for bondholders than reorganization of the company.

http://www.bizjournals.com/houston/morning_call/2013/05/bankrupt-atp-oil-gas-to-sell-assets.html 

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#8) On June 09, 2013 at 6:27 PM, scruffy4life (83.33) wrote:

Scruffys wonderin what happens to his 40.000 shares of

ATPAQ ?

Hmmnn Hrmmnn!

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#9) On June 13, 2013 at 11:29 AM, L0RDZ (78.84) wrote:

http://www.youtube.com/watch?v=Jomr9SAjcyw

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