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In last week's post about the Evergreen Solar (ESLR) distressed debt exchange offer, I wrote:

It is very unlikely that there will be a substantial increase in the number of bondholders who tender. I assume that if they terminate the offers, they will go back to the drawing board completely, with an understanding that the bondholders have all the cards and need to be given a much more substantial inducement to reduce the company's debt burden.

The revised, extended exchange offer expired on Friday afternoon. It turns out that bondholders correctly sized up the insufficiency of the offer and their superior negotiating position.

Very few of the senior secured convertible 13% notes tendered, so the company is not accepting any of those notes for exchange.

A small number of the 4% notes did tender (approximately $45.4 million aggregate principal amount), and the company accepted these in exchange for new 4% notes with longer maturity and a 50% haircut to principal. I do not think it was rational for these people to have tendered - they made all the other bondholders and the stockholders better off at their own expense.

Management says that they are not going to go back to the drawing board right away with a new exchange offer. The press release says,

"When we assessed the option of enriching our offers even further in order to induce their further participation, our analysis concluded that to do so would not be in the best interests of our shareholders given that the earliest maturity for any of our notes is in mid-2013."

However, the market correctly recognizes the bearish implications of the rejection of the exchange offer by bondholders, and the stock has fallen 10% over the past two days.

By the way, one thing that amuses me is the inordinate number of page views and comments that the Netflix (NFLX) posts get relative to a great idea with high expected IRR like the ESLR capital structure arbitrage or the Conrad Industries (OTCPK:CNRD) value idea.

Source: Bearish Implications Over Bondholder Rejection of Evergreen Solar Exchange Offer