George be Nimble

by Matt McCleery

The moral of the story of Alpha’s restructuring is that a majority bondholder which has a cost basis in the neighborhood of scrap can afford to be generous. In a document longer than War and Peace and heavier than Bunker C, Alpha’s unsecured notes magically become secured, many of its aging ships become marketable commodities and the elimination of trade debt becomes part of the job description of CSFB’s most enthusiastic, incentivized and competent partner, George Economou.

We note up front that this deal has not yet been signed and that there will be an amendment filed shortly with the SEC which modifies the deal, though we do not know to what extent. *

As we see it, CSFB probably told George that it wanted to get 37 cents back on its bonds as quickly as possible, and that he was free to use any upside to help him finance in the bank market. The structure of choice is detailed in the chart on the following pages. The executive summary is that the fleet has been divided into two “parts” based on their perceived appeal to George. The idea is that George cannot exceed a certain ratio of one group to the other in an effort to prevent him from cherry picking. By incentivising George to buy back the fleet at a deep discount to current values, CSFB will not only get their price, they will get it as quickly as possible. And time is money.

This is only an excerpt of George be Nimble

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