MAY
31
2006

Owens Corning – Update on Bankruptcy Case


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Owens Corning has finally gotten a definite figure on its asbestos liability claims, and also offers an olive branch to existing shareholders… But is it worth investing in yet?


Owens Corning (OTC:OWENQ) finally made progress in their bankruptcy plan, and also got a definitive figure on their asbetos liabilities. And, as a final shocker, they also offered a small lifeline to existing shareholders of OWENQ. Firstly, they will be required to pay $5.1 billion to clear themselves of all their asbestos woes. Post bankruptcy, the agreement sets Owens Corning’s total enterprise value at emergence at $5.858 billion, including $3.942 billion of new equity, $1.8 billion of new debt financing, $55 million from existing debt at non-debtor Owens Corning entities, and $61 million in new tax notes.

The agreement assumes a total recovery value of $8.576 billion, consisting of the total enterprise value of $5.858 billion, assumed excess cash of $1.250 billion, and Fibreboard trust and asbestos trust assets of $1.622 billion, less existing debt of $55 million and $99 million in assumed value of new shares reserved for employee incentive programs. 131.4 million shares of new stock will be issued with an aggregate planned value of $3.942 billion. Based on the expected enterprise value of $5.858 billion, we can expected a share price of approximately $44.58/share.

The agreement also has ammended the company’s position on current shareholders, saying that existing shareholders will receive 7 year warrants to purchase 5% of the fully diluted shares of the reoganized company at $45.25/share. What exactly does this mean for investors? For every 1,000 shares of OWENQ that you own, you are entitled to 130 shares of the new stock at $45.25/share for up to 7 years. So, OWENQ has now effectively become a long-term LEAP option on Owens Cornings long-term prospects. Since the new shares are being priced at $30/share (the price that bondholders will receive), $45.25 may not seem like such a great deal, even though warrant-holders do have 7 years for the investment to work out. In the end, it may still be better to sit back and wait for the final dust to settle then reevaluate once the new issue comes to market. Now, if you can get the stock at $30/share you know that’s probably a great deal because DE Shaw & Co. and other big investors have agreed to backstop Owens Corning’s new equity at that price if there is any left over.

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 by on May 31, 2006, 12:00am
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2 Comments »

  • D.Dreggs:

    i take it back…. just change your position relative to the lights… i watched it a second time and noticed more the lighting than your eye position… sorry for any rudeness you may have misinterpreted (i cant spell)

    D.Dreggs

  • seems to me that your looking at the script more than the camera… your eyes met the lens once everything was said and done… rather than while you were trying to give information. Not saying you know nothing in your field, but to better establish yourself to your audience, familiarize yourself with the info you are going to relay, then look directly into the camera while you are giving it. the eyes are the window to the soul and you looking up rather than into the camera makes you look fake and sound scripted, and makes the general masses not want to listen to you…… my 2 cents.

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