Wednesday, June 23, 2010

ACAS: Exchange A Done Deal

ACAS announced this morning that its creditors' votes now exceed the threshold for adopting the out-of-court exchange contemplated by the amended exchange offer.

The bankruptcy-related panic is all over but the shooting: some closing conditions are to be satisfied during a new deadline extension, and the deal deadline has been extended to 5PM on June 25 for that purpose.

The upside and downside? ACAS surely spent a fortune preparing for a bankruptcy that has become unnecessary. Had ACAS not prepared for the bankruptcy, however, it would not have had the hammer with which to compel creditors' participation in the out-of-court exchange. Still, this will weigh on ACAS as an expense over the quarter. The upside is that when ACAS reports its results for the quarter, the NAV it reports will be taken more seriously by people who previously feared bankruptcy would somehow cause that equity to go up in smoke. The result: going forward, the panic over ACAS' performance will be replaced with a more sober consideration of its actual investment performance. With the elimination of default-rate debt interest, ACAS' spread (and thus NOI) should enjoy immediate improvement going forward. This won't be immediately apparent in the results of this quarter – which was consumed under the old debt agreements – but will show up in the second quarter ACAS reports following the close of the exchange deal.

Now for more interesting questions: what will ACAS do with all that cash? (which exceeds its repayment requirements, particularly after some creditors have the right to exchange debt without early repayment) I'm hoping that the crazy economy provides some excellent investment entry opportunities to provide rocking returns for the next decade.


feralcomprehension said...

Thanks for the continued and well considered commentary. Several times in the last 18 months I read your column and thought, "Aha, that makes *perfect* sense."

Keep it up!

Anonymous said...

Hi there, please keep the analysis of ACAS going. You always seemed to be able to analyse the business of ACAS and explain them in a clear and easy to understand way.

Vested. :o)