How Much Will It Take For Shareholders To See Any Type Of Recovery?

I'm well aware that shareholders are generally wiped out when a company goes bankrupt (ie. Dendreon).

However, now that Valeant has increased their "stalking horse" bid to $400 million, I'm trying to get an estimate with regard to how much Dendreon's assets would need to bring in order for shareholders to see any sort of recovery.

Based on DNDN's financial statements, court filings, etc., it seems as if total liabilities (including debts) were around $650m in Nov., 2014. Current cash is most likely less than $90m. Since cash is not included in the sale, that leaves us with $560m (ie. $650m - $90m) plus accrued (unpaid) expenses since Nov., 2014. I read somewhere that accrued expenses were around $125m; however, I have not been able to confirm that figure - I have not read through all of the BK filings to date.

If the accrued expense figure is correct, that means a sale would need to bring at least $685m (ie. $560m + $125m) before shareholders would see a penny.

Do others agree with these estimates? If not, I'm interested in your calculations. Also, has anyone seen any figures for the accrued liabilities since the BK filing in November?

Thanks!

 

There are a few big unknowns lurking among the liabilities, and the court has just set the deadline for filing liability claims. The final number won't be known for a while, but we do know that the company has scheduled debts (i.e. admitted that they owe certain debts) and creditors have filed claims (i.e. asserted that the company owes them money not already scheduled) that total more than $726 million as of today. You can look at the claims detail on the PrimeClerk site:

https://cases.primeclerk.com/dendreon/Home-ClaimInfo

and cut and past them into Excel yourself. It is updated daily. Remember that these are the claims, the court may allow them all or disallow some of them in whole or in part.

Add to that the costs of the bankruptcy case itself (legal & banking fees) and costs that the company has not been paying (like interest on the bonds since the last coupon date) and the total it will come to something like $750 million (plus or minus $50). Cash as of the last status report was about $100. So $750 - 100 = $650 million, and that is pretty close to your estimate of $685 million.

Our figures differ by less than the estimated margin of error so your ballpark number is as good as mine.

 

Ask on the Yazoo message board. You will get a response in less than 5 minutes. They will also give you projected estimates in the billions for buyout and $35 a share. I go there once in a while to get a good laugh.

 

Thanks........I appreciate your thorough and detailed reply. What are your thoughts with regard to the asset sale fetching ~$650m+? I personally see that figure as a very long shot, but I'm interested in your opinion?

I did see that the bonds were trading up to around 79 cents on the dollar today (up from the mid 60's) after news of the increased minimum bid was announced. It is my understanding that the bonds are basically "unsecured" and hold the same priority claim as the unsecured creditors. Do you know if that is a fact? If so, and bond pricing turns out to be accurate, a 75%+ recovery for unsecured creditors would definitely be above-average for a Chap. 11 filing. Nevertheless, shareholders would still be wiped out unless all creditors recover 100%.

Again, I appreciate your expertise regarding this situation.

 

Yes they truly funny. I do however see value here along the .85-1.25 range. Great return from here.

 

Don't think the past holder from way back will see a return.
Those that are in these current levels should see 3-5X returns though. Added 120,000 today

 

To quote Bill Murray from Stripes "That's a fact, Jack!". When the bonds were sold originally the focus was on the convertibility to common stock. Back then Provenge was supposed to bring in $4 billion in revenue, so the thought of securing the bonds was never really on the table and the bond covenants granted no seniority upon liquidation.

Now things are different and the only liability classes with priorities are those explicitly defined by bankruptcy law (administrative claims, a small amount of unpaid wages & benefits, and certain obligations to government entities). Everything else is general unsecured debt and is junior to all claims except equity (which are dead last).

You can't really make a blanket statement about what a "normal" creditor recovery is because every case is different. Certainly in Chapter 7 liquidations the creditors do poorly, but in many Chapter 11 cases the creditors do OK. Here the board knew they were headed into BK court because attempts to sell they company failed, and did the right thing by pulling the trigger while they still had funds to operate. It is neither legal nor ethical to run the company into the ground before pulling the plug, and this was a textbook example of how a board should behave.

As for what the company will fetch, I have a hard time believing it will get to $650 million. Personally, I see no economic value in the technology so I would not have offered more than the salvage value of the hard assets and collectable accounts receivable. Others obviously have a different view and have already bid more than I would. That does not mean that Provenge does not help some of the patients, it undoubtedly does, but not every therapy that works clinically is economically viable.

 

Shareholders will not get return. V bid is valued at $436M with cash and assumed liabilities. This plus cash on hand will not cover debt.

 

^^^^Wayyyyyyy too much!

 

Yahoo is dead now. Investors Village is still going strong with insane pumpers though

 

Isn't the phrase "insane pumpers" redundant? Either term will suffice on its own.