We have been following closely this Chapter 11 case and it does have many points of interest. See if you agree with us.
1. Southern District of Texas – Case 11-35926, 11-35927 and 11-35938.
2. Financials are stale; the last earnings release goes back to Q2-10 according to which tangible book value at the time was $168 mm. Equity market value currently is ~$4 mm.
3. Total pre-petition debt is $285 mm. Total shares outstanding (per a 13G filed by AQR on 2/11/11) are $16 mm. Assuming this data is still current, total EV is $289 mm.
4. Historical EBITDA data points are as follows:
2006:$17.7 mm; 2007:$50.4 mm; 2008: $57.1 mm; 2009: $39.1 mm; 1H10: $14.4 mm; Q210: $6.1 mm
5. Per a Form filed with the SEC on 6/30/11, here is some color on 2010 results:
“Due to the negative trend in general market conditions and in the tanker charter market during the year ended December 31, 2010, the registrant anticipates that there will be a decline in its results of operations for the year ended December 31, 2010, as compared to the same period ended December 31, 2009. The registrant’s revenue is expected to decline by approximately $0.6 million, or 0.8%, from $64.5 million for the 12 months ended December 31, 2009, to $63.9 million for the same period ended December 31, 2010, while voyage expenses increased to $13.0 million in the year ended December 31, 2010 from $1.5 million in the year ended December 31, 2009. These changes related to certain vessels’ above market time charters expiring and those vessels trading in the somewhat depressed spot market during 2010. The registrant’s net income/loss is expected to decline by approximately $9.4 million, or 165%, from income of $5.7 million for the 12 months ended December 31, 2009, to a loss of $3.7 million for the same period ended December 31, 2010.”
6. There is significant insider ownership of stock – the CEO owns 21%; MHR Capital owns 8.5% and has been in the stock going back mnay years; AQR Capital owns 5.7% – we have seen both of these funds involved in bankruptcies in the past – with participation on various committees.
7. MHR Capital is being represented by Akin Gump in the case - there is no shareholders committee yet.
8. We have not been able to ascertain yet where the bank debt is trading or its ownership. This article attempts to shed some light on it: http://www.tradewinds.no/tankers/585374/omega-in-chapter-11.
9. The Debtor contends that Lenders have adequate protection because book value of assets exceeds debt by more than $100 mm.
10. This is a contentious bankruptcy so we guess that it will drag on – and equity is at $4 mm so we see option value here. ONAVQ is as speculative as speculative gets but it has several aspects which can make a case for residual value for equity... and residual value worth fighting for.....