wobatus

Is There a REIT Reverse Inquiry Conspiracy?

DiP lenders will be (and are) secured.


On Apr 27 02:18 PM This Game is so Rigged wrote:

> @ wobatus
>
> I think we have a vocabulary misunderstanding.
>
> Secured, in this case, are mortgagors. They will foreclose and take/sell
> the specific underlying properties.
>
> DIP lenders will become the new senior unsecured debt holders.<br/>
>
> Unsecured, old-senior debt holders will get "bent over - crammed
> down - offered new bonds at less favorable rates - converted to common
> - whatever you want to call it" in favor of the common shareholders
> (current management).
>
> The common shareholders (who ought to be wiped out entirely), won't
> be (hence Ackman saying he expects the common of GGP to emerge intact).

Is There a REIT Reverse Inquiry Conspiracy?

Ackman is taking or has taken positions all along the capital structure in GGP. You are right that unsecureds may nt get the property, but I don't think the bankruptcy judge bends them over. Bankruptcy can tend to favor the unsecureds at the expense of secureds at times, if there is a viable business. In a succesful bankruptcy, the point is to cram down the secureds to collateral value and pay out over time to assure that unsecureds get at least something from the going concern value of the business over time. of course, this is real estate. The collateral is the business.

If you have cash flow, yiou have feasibility, you can cram down the secureds to current market value, pay them over time (if you can meet the "fair and equitable test") a stream with a present value of the collateral, and use the unsecureds as an accepting impaired class to trigger cramdown under 1129 of the Bankruptcy Code.



On Apr 27 12:01 PM This Game is so Rigged wrote:

> @ crazylegs:
>
> Your assumptions about taking the property unlevered are completely
> without merit. What will happen to the bond holders is the bankruptcy
> judge will "bend them over" and require new - non-senior debentures
> to be issued and exchanged for the bonds that you're holding (at
> a haircut). The new debentures will be adequately adjusted down in
> rate and up in term to be viable based on the new, lower cashflow
> and reduced values of the underlying assets. You're playing in the
> deep end of the pool.

Is There a REIT Reverse Inquiry Conspiracy?

This was another well-thought out piece by Zero Hedge, but also a very good reply here by Mr. Bernstein (which, if not as entertainingly certain and snarky, seems a bit more detached and "gets it"). Nice work folks and thanks.



On Apr 27 09:08 AM Jeffrey Bernstein wrote:

> You fail to discuss one topic. REIT valuations versus underlying
> commercial real estate prices. There is a significant discount embedded
> in REIT prices....partially to reflect maturity default risk. However,
> part of the discount is also a discounting of future weakness in
> CRE prices....which is being driven by to a great degree by over-leverage
> and both maturity default risk as well as cash flow risk, not significant
> over-building of CRE. So maturity default risk is being baked in
> twice. This is why some large investors like Equity One are now looking
> at buying REITs as a way to buy commercial real estate at or near
> bottom dollar valuations. Yes we all know Wall Street has an excess
> of back scratching and that it looks even more excessive now that
> there are only a couple of backs to scratch, but their is a fundamental
> story here based REIT's discounted valuations vs. underlying CRE.
> I'm not sure I'm a believer in it, but one must acknowledge it.

The Great REIT Unravelling Begins? Simon Property Group Defaults on Loan

Since the morning this article was published, SPG is up 56%. KIM, which i suggested (I said I wouldn't buy GGP, now bankrupt), is up 67%.

Of course, the story isn't over. More retail bankruptcies to come. But, KIM raised equity and was able to do some debt deals, the sky hasn't fallen in.

Indeed, GGP remains cash flow able to service. It just couldn't roll in this market. Ackman is providing DiP financing.

And KIM is down about 50% from the beginning of the year. I took some off the table in the early january bounce.

Long term, KIM will be in very good position, i'd say. The capital markets nearly collapsed. Some benefited greatly from that.

Later.

The Great REIT Unravelling Begins? Simon Property Group Defaults on Loan

i figured kim might be a decent bet. shorty was covering his bets, not reloading. maybe now they reload. peace out, all my negative recommenders. :)


On Mar 31 07:27 AM wobatus wrote:

> online.wsj.com/article...;amp;mod=yahoo_hs
>
>
> I'm a bankruptcy lawyer, btw. This article gives you the picture
> of what is happening. Not that I'd buy General Growth. KIM may
> be a good gamble.

The Great REIT Unravelling Begins? Simon Property Group Defaults on Loan

How's the great unraveling going? I warned ya. This was written for folks ready to get out of their shorts. Malach knows what's goin' on.


On Mar 31 07:22 AM wobatus wrote:

> good point malach. tyler is just shillin'.

The Great REIT Unravelling Begins? Simon Property Group Defaults on Loan

online.wsj.com/article...;mod=yahoo_hs

I'm a bankruptcy lawyer, btw. This article gives you the picture of what is happening. Not that I'd buy General Growth. KIM may be a good gamble.

The Great REIT Unravelling Begins? Simon Property Group Defaults on Loan

good point malach. tyler is just shillin'.