Distressed Securities Class Presentation

(1)

D

i

s

t

r

es

s

ed

S

ecur

i

t

i

es

Valuation

www.ibtraining.com

(2)

Distressed Securities

T

The

he ye

yea

ar

r o

of

f tt he

he vu

vult

lt ur

ure

e

““

ThThe e prprii vatvat e e eeququii tt y fy f ii rr mms s tt hhat at wiwi lll l tt hhrr ii ve ve ii n n tt hhe e yeyear ahar aheead ad ar

are e tt hhoosse e tt hhat at knknoow hw hoow tw t o o prpr ooff ii t t ff rr oom m oott hheerr ss' ' m

mii ssff orortt uunneess” ”



2007 w

2007 wa

as

s a

a tt a

alle of

e of tt wo ha

wo hallves

ves



 The first was ebullient: nine out of the ten biggest leveragedThe first was ebullient: nine out of the ten biggest leveraged

buyouts ever, and Blackstone becoming a publicly traded buyouts ever, and Blackstone becoming a publicly traded company

company



 The sThe second wecond waas s one ione in wn whihich LBch LBOOs s ffelell l ffrrom aom allmosmost t 40% 40% of of tt hehe

doll

dollaar r vavalue of lue of deadealls s tt hrhr ougough Julh July ty t o a o a ssiingnglle-dige-digiit t mamarrket ket sshaharr ee May 15, 2008 Fortune Magazine

(5)

W

ha

t

A

r

e D

i

s

t

r

es

s

ed S

ecur

i

t

i

es

?



 DDiisstt rresesssed sed secuecurriitt iies es aarre se secuecurriitt iies es of of cocompampaninies es tt hahat t aarre eie eitt herher already in default, under bankruptcy protection, or in distress and already in default, under bankruptcy protection, or in distress and hea

headiding ng tt owaowarrd sd such a uch a coconditndit iionon



 Distressed fixed income securities are rated below investment gradeDistressed fixed income securities are rated below investment grade



 The The mosmost t common tcommon types ypes of of didisstt rresesssed sed securecuriitt iies es are bonds are bonds and baand bank debtnk debt



 While there is no precise definition, fixed income instruments with a yieldWhile there is no precise definition, fixed income instruments with a yield

to maturity in excess of 1,000 basis points over the risk-free rate of return to maturity in excess of 1,000 basis points over the risk-free rate of return (e.g. Treasuries) are commonly thought of as being distressed

(e.g. Treasuries) are commonly thought of as being distressed



 While sound methodologically, the absolute 1,000 basis-pointWhile sound methodologically, the absolute 1,000 basis-point benchmark may not be appropriate in all market environments benchmark may not be appropriate in all market environments



 Average credit risk spreads can fluctuate widelyAverage credit risk spreads can fluctuate widely



 AA basis pointbasis point ((oofftt enen dedenonott ed ed aas s bpbp, , bpbpss) i) is s a a ununit it tt hahat t is is eqequaual l tt o 1o 1// 110000tt hh

of a percentage point of a percentage point



 As we will see later in the presentation, the market for distressedAs we will see later in the presentation, the market for distressed ssececuriuritt iies es iis s llesess s efefffiicient cient tt hahan otn otheher r mamarrketketss, , enenaablbliing ng sskilkil lleded iinvnvesestt ors ors tt o eo eaarrn sn supeuperriior ror riissk-adk-adjj usustt ed reted ret urnsurns

(6)

10 Largest Bankrupt cies in US 1980 - 2007

Company Dat e Asset s Worldcom 07/ 21/ 2002 $103,914 Enron Corp 12/ 21/ 2001 $63,392 Conseco, Inc. 12/ 18/ 2002 $61,392

Texaco, Inc. 4/ 12/ 1987 $35,892

Financial Corp of America 9/ 9/ 1988 $33,864 Refco Inc. 10/ 27/ 2005 $33,333 Global Crossing Lt d. 1/ 28/ 2002 $30,185 Pacific Gas and Electric

Company

4/ 6/ 2001 $29,770

UAL Corp 12/ 9/ 2002 $25,197 Delt a Air Lines, Inc. 9/ 14/ 2005 $21,801

(7)

What is Dist ressed Debt ?

S&P Moody’ s AAA AAA AA Aa A A BBB Baa Investment Grade BB Ba B B CCC Caa CC Ca C C D Speculative Grade

 Most t radit ional way of

categorizing debt is with reference to the ratings systems of the most prominent debt ratings agencies: Moody’ s Invest ors Service (Moody’ s) and St andard & Poor’ s (S&P)

 Whil e t hese firms use slightly

different ratings notation, they have a functionally similar 10-grade scheme ranging from AAA t o D

 A prominent dividing li ne is between BBB and BB. BBB and above is classified as invest ment grade, while BB and below is

characterized as speculative grade and was, during the 1980s, labeled “ j unk”

(8)

Descript ion of Bond Ratings (S&P)



AAA – highest rat ing assigned t o a debt inst rument , indicat ing

an extremely strong capacity to pay principal and interest.

Bonds in t his cat egory are oft en referred to as gilt edge

securities



AA –high quality bonds by all standards with strong capacity to

pay principal and interest. These bonds are rated lower

primarily because t he margin of protect ion are less st rong t han

t hose for AAA bonds



A –these bonds possess many favorable investment attributes,

but element s may suggest a suscept ibilit y t o impairment given

adverse economic changes



Bonds are regarded as having adequat e capacit y t o pay

principal and interest, but certain protective elements may be

lacking in t he event of adverse economic condit ions t hat could

lead to a weakened capacity for payment

(9)

Descript ion of Bond Ratings (S&P)



BB –Bonds regarded as having only moderate protection of

principal and interest payments during both good times and

bad times



B – Bonds t hat generally lack charact erist ics of other desirable

investments. Assurance of interest and principal over any long

period of time may be small



CCC –Poor quality issues that may be in default or in danger of

default



CC –Highly speculative issues that are often in default or

possess ot her marked short comings



C – lowest class of bonds. These issues can be regarded as

extremely poor in investment quality



D –Issues in default with principal or interest payments in

arrears. Such bonds are extremely speculative and should be

valued only on the basis of their value in liquidation or

(10)

Bond Ratings of Companies

 As of the spring of 2008, there were only six companies left with "AAA" ratings from bot h S&P and Moody's. They are Aut omat ic Data Processing (ADP), Berkshire Hat haway (BRK), GE (GE), Johnson &

Johnson (JNJ), Exxon (XOM), and Toyota (TM) –April 2008. In the late seventies this number was 58 and in the nineties it was 22

 Compet it ion and willingness t o t ake on more debt possible reasons

 Rating agencies conduct a very thorough review of the companies t hat t hey rate. There are numerous considerations t hat are weighed, t he most import ant of which is a company’ s cash flow

 Basicall y, if a company is a cash cow, it is very li kely t o have a high credit rat ing.

Rating companies look closely at t he source of a company’ s cash flow as well as it s variety, availability, and source

 Companies with high credit ratings have quick-turning, high quality accounts

receivable, meaning that they are getting paid on time and getting all that they are due. Rating agencies also consider it import ant t hat a company have t he abilit y t o sust ain t heir profit abilit y

 Aside from cash flows, rating agencies scrut inize a company’ s management for t heir

compet ence, st ruct ure, st rat egic planning, and composit ion. Ot her considerat ions include scrut iny of a company’ s appetit e for risk and competit ion

 Rating agencies must always consider ext ernal factors such as t he economic cycle

but t he fundamentals of t he companies t hat t hey rat e always get first considerat ion and have a far greater bearing on a company’ s overall rating

– Nevertheless, rating agencies have increased their responsiveness to and consideration of the economic cycle in recent years given the large impact that the economic cycle has on many companies

(11)

Investing in Distressed Debt?

 Dist ressed debt is not a part icularly suit able or pract ical invest ment for individual investors:

 Significant risk of loss

– Annual t otal market ret urns could vary dramati call y

 Professional participants in the market could have significant

informat ion advantages

 Distressed securities market is often fairly illiquid, which means

there can be very high transaction costs for individuals investing on a “ modest ” scale

– Transaction costs increase the relative risks and make it very difficult to earn appropriate risk adj ust ed returns

 Size of the average trading unit or block is so large that, except

for t he most wealt hy, it is difficult t o have an adequat ely diversified portfolio

– Risk of t his asset class is such that invest ing should generally be done on a diversified basis – Bank debt and corporate bonds generally trade in blocks of $5mm and $1mm respectively.

Though dist ressed securit ies may trade at signif icant di scounts, t his st ill i mplies t hat t o own a diversified portfolio of approximately 15 companies could require a significant amount of capital

(12)

How to look for Distressed Companies

 Public St ock

 Trading at 52-week/ all-t ime low st ock price

 Bonds

 Rat ing downgrade(s)  Sell -off in bonds

 Distressed bond investors start accumulating bonds

 Bank Debt

 Liquidit y crunch and concerns or abil it y to make coupon/ amort izat ion

payments

 Reduced borrowing base and availability  Waivers or amendments

 Internal Signals

 Declining operating performance  Management turnover

 Ext ensive and recurring rest ructuring charges/ asset writ e downs

 External Signals

 Weak economy

(13)

Revolver, Term Loans and Bonds

Revolver Term loans Bonds

Claim on Asset s

Senior Senior Subordinat ed

Collat eral Secured Secured Most ly

Unsecured Rat e Float ing Fixed Fixed

Principal Repayment s

Amort izing Amort izing On Mat urit y

Covenant Package

(15)

High Yield Debt



High-yield bonds are issued by organizations that do not qualify

for “ invest ment -grade” ratings by one of t he leading credit

rating agencies - Moody’ s Invest ors Service, St andard & Poor’ s

Ratings Services and Fit ch Ratings

 High yield bond/ non-invest ment grade bond/ speculat ive grade

bond or j unk bonds have a higher risk of default or ot her adverse credit events, but typically pay higher yields than better quality bonds in order to compensate for their added risk and make them attractive to investors



Credit rating agencies evaluate issuers and assign ratings based

on t heir opinions of t he issuer’ s abil it y t o pay interest and

principal as scheduled. Those issuers with a greater risk of

default —not paying interest or principal in a t imely manner—

are rated below investment grade

 These issuers must pay a higher interest rate to attract investors

t o buy t heir bonds and to compensat e t hem for t he risks

(16)

High Yield Debt Levels and Default Rates



Moody’ s said in a December 2007 report t hat Default s by

speculative-grade companies will quadruple next year as the

era of ‘ easy credit ’ comes t o an end and economic growt h

slows

 The global default rate will rise to 4.2 percent by November from

1 percent now, the lowest since 1981

 Forecast is based on an assumption that the U.S. economy slows

wit hout falling into recession. In a recession, default s may approach 10 per cent



More t han one in 10 of t he borrowers t o which Moody's assigns

rat ings are t reat ed as ‘ dist ressed’ by bond t raders, t he highest

proportion since global defaults reached 10.5 percent in 2002

 At that time, bondholders charged as much as 11.4 percentage

point s of extra yield t o buy high-risk, high- yield debt rather t han government bonds, double the current spread of 5.73 percentage points, according to Merrill Lynch & Co. indexes

(17)

Credit Det eriorat ion - Phase 1 and Phase 2

 Phase 1: New High Yield Debt Issued

 $150 million of XYZ Corp 13%Senior Not es due 1/ 15/ 2017  Purchased by traditional new issue buyers

 St andard credit prof ile and ratios – Debt/ EBITDA of 3.5x-4.0x,

EBITDA/ Int erest 1.8x-2.2x, bond price $100

 Initially highly liquid and price driven by market fluctuations and demand

for offering

 Liquidit y deteriorat es wit hin 6 months because outperf ormance of

Company financials result s in f ew sellers and underperf ormance result s in few buyers

 Phase 2: Company files 10-K or 10-Q

 Hosts management conference call and discloses a deterioration in

operating perf ormance and short t erm out look not promising

 Immediate dislocation in market with bond price range typically from

75-90 and issue supported by anchor buyers who put in lot of work in understanding the Company

 Pri ce and credit det erioration trigger credit focus screens among

distressed investors which may lead to short positions being established and further price pressure towards lower end of range

(18)

Credit Det eriorat ion - Phase 3



Phase 3: Company f iles subsequent 10-Q

 Disclosure of furt her credit det eriorat ion which may include

– Violat ion of senior secured credit facilit y – Total Debt / EBITDA increases above 8x – EBITDA/ Interest falls below 1x

 Furt her decline in bond price wit h st op at around 50 (est imat ed)

-dependent on size and condition of the shorts

 Bond price settles between 25-40 as mutual funds continue to exit

credit and dist ressed buyers evaluat e t he opport unit y

 Distressed buyers that started work on the credit early in the

process dominate volume and may accumulate a control position OR

 The Company may report an improvement in operations and

securities trend towards 75-90 –takes 2 quarters of continued st eady / improvement in operat ions

(19)

Credit Det eriorat ion - Phase 4



Phase 4: Further material adverse credit event

 Event of default under indenture but no Chapter 11 filing

– Bonds prices t rend f lat and trend t owards approximat ely 20, mat erial downward asset re-valuation which may result in almost zero value for unsecured creditors

 Voluntary Chapter 11 filing which could be a prepackaged or a

prearranged deal

– Reorganizat ion Plan and disclosure st atement make recovery analysis clearer

– Prices dependent on asset valuation, capital structure and timing of emergence

 Free fall Chapter 11 will lead to chaos and lack of disclosure

(20)

Recovery and Rest ruct uring – Phases 5, 6, 7



Phase 5: Emergence



Court approval of plan, NewCompany capital structure

becomes effective



Pricing of old debt securities contingent on equity and or

debt prices of NewCo securities



Phase 6: Post restructuring



First 4 quarters of stronger operating statistics therefore

credit profile improves and equity value increases



Phase 7: Post restructuring



NewCompany experiences 6-8 quarters of steady operating

performance

– Process of refinancing restructured debt securities begins – Newco seeks access t o new issuance market

(21)

Current Sit uat ion



Companies are coming under increasing pressure f rom lenders

at an earlier stage than before



Banks have a large number of distressed credits in their loan

portfolio



The leveraged loan market has experienced a sharp

contraction



Banks no longer have patience with troubled companies

 Less willing to extend waivers indefinitely  Demanding more in fees and amendments



Banks are forcing more companies to go to auction or sell

asset s quickly

 Relationship lending is not as prevalent

(23)

How t o Get Cont rol of Dist ressed Asset



Out of Court

 Purchase bonds and exchange for equity in a privately negotiated

transaction

 Exchange offer to completely recapitalize the Company 

In Court

 Formal process of a Chapter 11 reorganization  Chapter 7 liquidation

(24)

Advant ages and Disadvant ages of In Court and Out -of

Court for Distressed Investor

 In Court Advantages

 Can acquire assets free and clear of liabilities and encumbrances

 In Court Disadvantages

 Transaction costs associated with bankruptcy proceeding

 Potential for competing bidders and plans as part of the bankruptcy

process

 Higher and Better offers

 Out of Court Advantages

 Can avoid competing bidders in open auction process  Avoid bankruptcy cost s

 Can privately negotiate a debt for equity swap that creates the right

capit al st ruct ure

 Out of Court Disadvantages

 Possibility of acquiring hidden liabilities

(25)

Debt for Equity Swaps

 Buying bonds at a discount and swapping into equity through a privat ely negot iat ed transaction wit h t he company

 Can approach the original equit y sponsor before buying t he bonds t o ensure a friendly transaction and potentially access detailed due diligence information

 Acquire enough of the bonds so that a swap will engineer the best capit al st ruct ure for t he company

 Exchange the bonds for most of the equity

 Leave original sponsor wit h a st ub equit y port ion (5%-15%), warrant s or

other consideration

– More favorable than a long drawn out restructuring – Ot her bondholders remain in place

– Now have par paper

– Senior l enders should be more comfort able and willing t o st ay commit t ed to the credit

 Must get in earl y and exploit t he sit uat ion before t he credit is t oo dist ressed

(26)

Exchange Offers



A more comprehensive approach could involve the combinat ion

of an exchange offer and new money investment



Combines t he rest ruct uring of t he old debt wit h a change of

control



Can often prove the most efficient method to gain control in

the public forum

 Accomplished relatively quickly

 Low t ransact ion cost s compared t o bankrupt cy  Avoid large number of competing bids



Difficult to accomplish in complex situations

 Large vendor list ings  Publicly list ed equit y

(27)

Chapter 7 vs. Chapter 11

 Distressed opportunity typically arises when a company, unable to meet all its debts, files for Chapter 11 (reorganization) or Chapter 7 (liquidation) bankruptcy

 Chapt er 7 involves shutt ing a company’ s doors and parceling out it s assets t o it s credit ors

 Chapter 11 gives the company legal protection to continue operating while working out a repayment plan, known as a plan for

reorganizat ion, wit h a commit t ee of it s maj or credit ors

 These credit ors can be banks who’ ve made loans, ut ilit ies and other

vendors owed for t heir goods and services, and invest ors who own bonds

 Stock holders are also among the constituents, though when it comes to

dividing up the assets of the company they are paid back last and usually very lit t le, if anyt hing

– If in a bankrupt cy, a company does not have sufficient assets t o repay all claims, t he st ock holders will get wiped out as t hey are last in line t o receive any of t he proceeds from t he liquidat ion or reorganizat ion

(28)

Chapter 11



Equit y nearly always wiped out



Intense pressure to sell the Company

 Most restructuring advisors are bankruptcy or M&A specialists 

High risk of change of management



Lawyers control process with constant court appearances

 Most restructuring advisors are bankruptcy or M&A specialists 

Average time in Chapter 11 is over 12 months



Extremely costly in fees with $3 mm to $10 mm in fees for

lawyers and advisors in large assets

(29)

Company Overview



Samsonit e is t he worl d’ s largest designer and manufact urer

and distributor of luggage products

 Only global luggage brand

 Approximately 31%market share in Europe and 19%in US in 2002  Competed in a highly fragment ed market against much smaller

regional companies



Products marketed under Samsonite and American Tourister

brands - 90%brand recognit ion in t he U.S. and over 70%in

Europe; 80%American Tourister brand recognition in U.S.

 Expanded product line to include casual bags and computer cases 

Europe market share – 31%in 2002 CAGR of 11%growt h in sales

since 1996

 Asia sales growing at CAGR of 19%f rom fiscal 1997 to 2002  US market share fell from 30%in 1996 to 17%in 1999 due to

product and marketing, st rat egic decisions t aken by management

(31)

Background and Sit uat ion in Lat e 2002/ early

2003



Company’ s capit al st ruct ure has had many issues:

 Company stock was virtually illiquid at the end of 2002

– Traded an average of under $5,000 per day and t he bid ask spread is approximately 65%of the bid price

– Absence of inst it utional support / coverage for common st ock

 Total obligations (debt and preferred stock) senior to the

common stock have a face value of approximately $800 mm

 Existing preferred is increasing through PIK dividends at such a

high rat e t hat it grows by approximat ely $50 mm per year

 Onerous terms of the Existing Preferred Stock increasingly

causing significant earnings dilution for common shareholders and could precipitate a Company-sponsored exchange offer or

bankruptcy

 Overall leverage is too high

1. Lack of financial f lexibilit y t o mit igat e pot ential short fall in earnings performance

2. High risk/ low probabil it y of execut ion of Company’ s five year business pan and forecast without a de-leveraging event

(32)

Background and Sit uat ion Assessment

 Balance Sheet and t he report ed financial st at ement losses continued t o affect Company’ s business and relat ionships wit h t he Company’ s suppliers, vendors and other constituencies

 Management stock option plan is not able to provide incentive to management in a way to benefit common shareholders

 The impact of t he downturn in the economy and the Company’ s industry

 Company’ s revenues and EBITDA were highly dependent upon performance of international operations and global travel industry

 Current geopolit ical and economic cli mat e puts downward pressure on t ourism and t ravel relat ed indust ri es, and adds uncert aint y t o the Company’ s business model and operating forecast going forward

 US war with Iraq

 Terrorism concerns and is effect on international travel  Spread of SARS virus

 Continued global economic softness

 These issues have led t o anot her significant decline in t ravel

beginning in early 2003, which have impacted the Company beginning in February-March 2003

(33)

Obj ect ives of t he Recapit alizat ion Transaction



Recapitalization Transaction incorporates a financial

restructuring which accomplishes the three principal

obj ect ives set by the Company t o reduce t otal debt and

preferred stock of the Company

 Convert preferred stock into common or convertible securities  Reduce leverage through issuance of equity securities

 Address senior debt, particularly with respect to maturity as the

(34)

Summary of the Recapitalization Transaction



Equit izat ion of t he balance sheet - $160 million Convert ible

Preferred Stock

 $106 mm of new equity investment in cash  $35.3 million contribut ion by Bain Capit al  $35.3 million contributed by OTPP

 $54 million of additional New Preferred Stock via conversion by

Existing Preferred Stockholders



Terms of New Preferred Stock

 Dividends: 8%(PIK option) compounded quarterly, with upward or

downward adj ust ment s aft er year 8 depending on “ control issues”

 Conversion Price: $0.42 per common share 

Senior Debt

 Approximately $60 mm of new revolver availability 

103/ 4%Senior Subordinated Not es due 2008

 $323.4 million of Existing Notes remain outstanding after the

(35)

Summary of the Recapitalization Transaction

 137/ 8%Senior Redeemable Exchangeable Preferred St ock (Exist ing Preferred Stock)

 $320.3 million face value of Exist ing Pref erred St ock wit h liquidat ion

value of $333.5 million as of March 15, 2003

 Holders will elect t o exchange t heir Exist ing Pref erred St ock f or eit her

New Preferred Sock or common st ock or a combinat ion of both, subj ect t o a prorat ion in t he event t hat he holders of Exist ing Preferred Sock

collectively elect to receive more than $54 million in New Preferred Stock

 $129 mm converted into $54 million face value of New Preferred Stock

– Valued at 41.9%of liquidat ion preference ($54 million/ $129 million)

 Remaining $204.9 million of Existing Preferred Stock converted to

common stock at $1.00 per share (equivalent number of shares to valuing at 41.9%of face and converting into common stock at $0.42 per share)

 Aggregate implied valuation of Existing Preferred Stock is $140.1 million

 Common St ock

 Proposal involves a conversion of the New Preferred Stock into common

stock at a conversion price of $0.42 per share

 Common shareholders would initially own approximately 3.3%of the

Company pro forma the proposed Recapitalization Transaction

(36)

Alt ernat es t o Recapit alizat ion



Issues with status quo with new senior credit facility

 Management issues  Capital structure issues

 Refinancing difficulties of new facility



Issues with sale process with other parties

 Prior sale process yielded no or low interest  Effect on business while conducting sale  Management issues will st ill remain

(37)

IS, BS and Old Capit al St ruct ure

 Let us model the historical income statement and balance sheet for year ended January 31, 2001, 2002 and 2003

 Information is available in Samsonite 10K for January 31, 2002

and 2003

 Make sure we check our data after we complete the income statement

 Net Income ties in to the NI from Income St at ement barring any

unusual or non-recurring items we took out

 Asset s = Liabilit ies + Shareholders Equit y

 Income Statement

 Observe t he drop in revenues and EBITDA in 2002 vs. 2001

 See how the Preferred Stock dividends (37.5 mm dividend in 2002

are impacting t he Company’ s Net Loss every year

 Balance Sheet

 Observe how t he redeemable preferred is increasing from $240.0

mm to $320.3 mm from 2001 to 2003 as it is PIK interest (paid in kind –a t ype of bond t hat pays interest in addit ional bonds or interest is added to the principal, as opposed to cash payouts )

(39)

Sources and Uses



Let us prepare sources and uses for the recapitalization

transaction



Pay down old term loan and revolver



Fees paid t o bankers, lawyers and miscellaneous expenses

is $20mm



$106 mm of new preferred equity is being put in by private

equit y invest ors



Use the January 31, 2003 numbers



Keep t he cash balance t he same as before at $22.7mm



Sources equal uses and the balance will be the new

(40)

Pro Forma Balance Sheet and Capitalization



Let us make a pro forma balance sheet for January 31, 2003

incorporating t he sources and uses for t he recapit alizat ion



Capitalize $5 mm of the $20 mm of fees and the other $15 mm

get expensed



Uses t he sources and uses t able t o make t he adj ust ments



In the pro forma capitalization see how the following ratios

change as a result of t he recapit alizat ion – look at t hese ratios

before t he recap and aft er t he recap



Total Debt t o EBITDA

(41)

Pro Forma Ownership



What %of t he Company do t he Exist ing Common Shareholders

and the Preferred St ockholders get aft er t he recapit alizat ion?

 Conversion price of preferred shares to common stock is $0.42 per

share

 Find the current common shares outstanding for Samsonite from

the most recent 10K or 10Q (January 31, 2003)

 Find out how many shares and %of the Company the common and

preferred shareholders get (Old preferred and new pref erred shareholders)

 The private equity investors end up owning more than 50%of the

Company after the recapitalization for the $106 mm equity

investment they made as they owned some of the old Preferred also (41.7%as the result of the $106 mm investment and over 10% from the Old Preferred shares)

Distressed Securities Class Presentation

D

D

i

i

s

s

t

t

r

r

es

es

s

s

ed

ed

S

S

ecur

ecur

i

i

t

t

i

i

es

es

Valuation

Valuation

Table of Contents

Table of Contents

Table of Contents

Table of Contents

Distressed Securities

Distressed Securities

T

The

he ye

yea

ar

r o

of

f tt he

he vu

vult

lt ur

ure

e

““

2007 w

2007 wa

as

s a

a tt a

alle of

e of tt wo ha

wo hallves

ves

W

W

ha

ha

t

t

A

A

r

r

e D

e D

i

i

s

s

t

t

r

r