EGC - Energy XXI Gulf Coast

[Gregmal]

Opened small position at 8.92. Q3 close, all cash deal, IRR should be at least 12% or so depending on exact close date. Nothing crazy but this isn't some merger deal where you need to hang around 6-8 months to get the spread. 2 months tops.

[Foreign Tuffett]

What about the ex-CEO's malfeasance? Am I right in thinking it shouldn't have any bearing on the transaction closing? At first glance I don't see any reason to disagree with the company's PR.

https://ir.energyxxi.com/press-releases/detail/340/energy-xxi-gulf-coast-inc-provides-comments-on-todays

[Gregmal]

What about the ex-CEO's malfeasance? Am I right in thinking it shouldn't have any bearing on the transaction closing? At first glance I don't see any reason to disagree with the company's PR.

https://ir.energyxxi.com/press-releases/detail/340/energy-xxi-gulf-coast-inc-provides-comments-on-todays

Correct. Schiller was a bum, and ran the previous company into the ground. But he was removed from his position and has nothing technically to do with the new post bankruptcy company.

[Gregmal]

Update: Sold at 9 for 1% in 2 days. Remaining .6% per month is not worth my capital. Would look to re-enter mid 8.90's.

[writser]

Did you? Stock trading at $7.07 now after the 10 September filing in which the deal date was extended and Cox waived several termination clauses. Hard to handicap what is going on - most likely explanation is that Cox Oil has some problems financing the deal? Or does anyone have an alternative explanation?

Basically impossible for me to judge a) what is going on based on a three sentence filing and b) the value of EGC as a standalone company - never looked at it and oil is not my expertise. So I'm on the sidelines for now.

Market seems super skeptical about the deal closing. Interesting setup.

[Gregmal]

Did you? Stock trading at $7.07 now after the 10 September filing in which the deal date was extended and Cox waived several termination clauses. Hard to handicap what is going on - most likely explanation is that Cox Oil has some problems financing the deal? Or does anyone have an alternative explanation?

Basically impossible for me to judge a) what is going on based on a three sentence filing and b) the value of EGC as a standalone company - never looked at it and oil is not my expertise. So I'm on the sidelines for now.

Market seems super skeptical about the deal closing. Interesting setup.

Yea moved on and kind of forgot about this. This is another situation similar to RSYS. Don't blame the market. I'll have to look closer at this but as of now I have zero insight here.

[writser]

This is another situation similar to RSYS.

Nah. In the RSYS case there was no news at all - stock just went down after the merger announcement. In this case the filing from September, 10 definitely suggests that there are some problems. If everything was going according to plan Cox Oil would have closed the deal shortly after getting shareholder approval (as was the initial plan). At best there is a delay because lenders want to do some additional due diligence or the paperwork isn't quite ready yet. Worst case Cox wants to bail out or can't get financing at all.

[Gregmal]

This is another situation similar to RSYS.

Nah. In the RSYS case there was no news at all - stock just went down after the merger announcement. In this case the filing from September, 10 definitely suggests that there are some problems. If everything was going according to plan Cox Oil would have closed the deal shortly after getting shareholder approval (as was the initial plan). At best there is a delay because lenders want to do some additional due diligence or the paperwork isn't quite ready yet. Worst case Cox wants to bail out or can't get financing at all.

RE: RSYS I mean the background. Lots of negativity around the company, perception of dishonesty. Investors getting wiped out. I can't see how Cox can't get financing as this isn't a large deal. Perhaps they have gotten cold feet.

[writser]

I can't see how Cox can't get financing as this isn't a large deal.

With Cox Oil being private it's hard to say (at least for me) how big and how levered they are. Deal size is always relative to the acquirer. Just saying I'd be a bit more careful here. Might still be a good bet but there are some warning signs and for me it's basically impossible to handicap this situation given the lack of information and my ignorance on valuing EGC post-deal-fail.

[Gregmal]

I can't see how Cox can't get financing as this isn't a large deal.

With Cox Oil being private it's hard to say (at least for me) how big and how levered they are. Deal size is always relative to the acquirer. Just saying I'd be a bit more careful here. Might still be a good bet but there are some warning signs and for me it's basically impossible to handicap this situation given the lack of information and my ignorance on valuing EGC post-deal-fail.

Like RSYS, you want no part of a stand alone EGC IMO. Basically a deepwater SD.