In the decade since, Syncora has been in constant litigation (they scored several huge settlements with banks that issued subprime RMBS) and restructuring mode. Previously a bit of a black box, Syncora last month sold SGI to an affiliate of credit manager Golden Tree Asset Management for $392.5MM with a go-shop period through September 13th. It then re-struct the sale price higher with Golden Tree this past week to $429MM plus the assumption of some preferred share pass-thru securities that wasn't originally included in the deal after receiving an unnamed unsolicited offer (the go-shop was also cancelled). Once the transaction with Golden Tree closes in Q4/Q1, Syncora plans to distribute the sale proceeds to shareholders, all that will remain is $30+MM of cash and miscellaneous assets (valued at $45-60MM total including the cash) plus around $300MM of net operating losses.
Syncora has 87 million shares outstanding, assuming about $20MM in leakage and other deal related expenses, the company will likely distribute cash back to shareholders roughly equaling today's $4.70 share price.
|Assumes no value attributed to the NOL|
Disclosure: I own shares of SYCRF
you could have horrible tax consequences from the distribution so if you are not marked to market be waryReplyDelete
I assume you mean capital gain tax at the corporate level incurred because of the sale of assets. I believe the gain from that transaction could be offset by the $300M NOLs, so no problem.Delete
I think the distribution might be considered an unqualified dividend for US investors since SYCRF isn't "readily tradable on an established securities market in the United States". But not a US tax expert...ReplyDelete
If that's the case, then one could sell the stub post distribution at a big realized loss since their tax basis would be the original amount, essentially offset the dividend. But I think it should be a return of capital, good point to investigate.Delete
Hi, its is curious that the stock price fell heavily on the day the first offer was announcement (but there was also a confounding earnings announcement at the same day so its not clear that all of this can be attributed to the transaction). Outside shareholders might not be happy with the transaction. Can this derail the liquidation? There is no shareholder vote on the transaction though, if I understand correctly (is this because the company is unlisted?)ReplyDelete
The original deal (and the raised offer) were done at a big discount to book value, shareholders were expecting more and it sounds like some of them banded together on the unsolicited offer that drove the raised offer. Potentially shareholders could go hostile on it, but I'd guess that's only a positive for the stock.Delete
Costs seem in line with expectations. Management is looking at tax implications and will release the intended tax treatment before the distribution.
Have you looked at YTRA merger? I think it is an interesting situation.
I haven't - thanks for the idea, I'll take a lookDelete
Really interesting deal - EBIX seems like a black box to me, any thoughts on their credit profile to meet that put option in 25 months?Delete
Any idea if cash ($4.765/share) was actually distributed to shareholders after the sale and stock price drop in late 2019? This was supposed to happen in early 2020?ReplyDelete
Hi - I did receive the distributionDelete