Simply making an attempt to make sense of all of it, with out providing any particular recommendation, as a result of I have not seemed into the corporate in particulars:
The corporate will not be doing properly, and its credit standing was downgraded for quite a few causes.
They’ve renegotiated the phrases of their financial institution debt with financial institution lenders, more than likely to keep away from a covenant breach and default, and to get extra time to show the enterprise round. Banks in all probability accepted this restructuring to keep away from a liquidation, however could not be capable to enhance their publicity (i.e. lend more money).
The corporate is subsequently unsure they will be capable to repay or refinance the Notes due 2024 (which you are holding), and took the initiative to barter with the most important institutional noteholders for an alternate (on considerably the identical phrases they’re providing to you now) in 2022. Over 80% of the noteholders (massive establishments) have accepted these phrases (in all probability as a result of the choice was insolvency and a loss).
PIK signifies that your curiosity/coupon on the brand new notes is not going to be paid in money (as a result of they’re form of strapped for money proper now). As a substitute, they intend to pay you the compounded curiosity in money solely at maturity in 2026. Nevertheless, PIK Toggle means they might attempt to pay money curiosity/coupon if they’ll, however more than likely at their discretion.
You have additionally missed the March fifth early hen deadline for the early participation premium of $50 (that means you may solely get $950 per $1,000 of notes).
We won’t advise you on one of the best plan of action now. What is obvious, nevertheless, is that for those who do not settle for the alternate, you may be one of many stragglers (a part of a subset of the remaining 20% of noteholders that also do not settle for the alternate). And it is unclear whether or not the corporate will probably be able to repay you at par subsequent yr. You will have to take a loss in your principal.
Then once more, you obtain these bonds at $74 cents. The corporate might repay wherever between $0 and $100. On that time, I am sorry I haven’t got a view.
Are you okay to take that danger, or would you relatively take the prospect (just like the 80% noteholders and the banks) that the corporate can turnaround? During which case you would be rewarded with an 8.5-12.5% compounded return (on $95 cents). Or would you relatively take your probabilities that they are in a position to repay $74-100 subsequent yr?
