Description
This is a relatively simple opportunity to earn 15-20% in about 3 months.
MMC Energy is in liquidation. The company announced plans to sell their core operations a couple weeks ago. After the sale is finalized (it's not subject to any financing and is a relatively small purchase for the buyer) the only assets left to be liquidated are 2 GE turbines. I will discuss these below.
The company has made this writeup pretty easy having put out a proxy on Friday detailing their estimates of final cash distributions to shareholders:
Estimated Distribution to Stockholders
The following table shows management's estimate of cash proceeds and outlays our ultimate distribution to stockholders as of the date of this Proxy Statement. Our independent registered public accounting firm has not performed any procedures with respect to the information in the following table and, accordingly, does not express any form of assurance on that information. The following estimates are not guarantees and they do not reflect the total range of possible outcomes. The table assumes that we will complete the proposed Asset Sale by August 31, 2009, and that we will complete our liquidation and dissolution by September 30, 2009. Our current intention is to file the certificate of dissolution soon after the completion of the Asset Sale, but in no event earlier than 10 days after the closing of the Asset Sale. Subject to the consummation of the Asset Sale and to stockholder approval of the Plan of Liquidation, we anticipate that an initial distribution of liquidation proceeds, if any, will be made to our stockholders within 30 days after the consummation of the Asset Sale. As we liquidate our remaining assets and pay off our outstanding liabilities we will distribute additional liquidation proceeds, if any, to our stockholders as our Board of Directors deems appropriate. A creditor could seek an injunction against the making of distributions to our stockholders on the ground that the amounts to be distributed were needed to provide for the payment of our liabilities and expenses. To the extent the closing of the Asset Sale is delayed beyond September 30, 2009, we anticipate incurring additional operating expenses of approximately $45,000 per month.
The estimated distributions to stockholders shown in the table below vary greatly depending on the assumptions made regarding the proceeds received from the sale of our Turbines. The amount, if any, that we will ultimately distribute to stockholders following liquidation, is heavily dependent on the consummation of the Turbine sales.
The following table is not a guarantee of the final result of the potential contractual liabilities referenced above, but rather, merely presents possible outcomes in the amount to be distributed to our stockholders depending on certain possible outcomes related to such turbine sales and contractual liabilities.
|
Assets
|
|
Hi (1)
|
|
|
Lo (2)
|
|
|
Proceeds of Asset Sale
|
|
$ |
4,865,500 |
|
|
$ |
4,865,500 |
|
|
Proceeds of Turbine Sales
|
|
$ |
33,000,000 |
|
|
$ |
31,000,000 |
|
|
Asset and Turbine sale transaction costs
|
|
$ |
(578,655 |
) |
|
$ |
(558,655 |
) |
|
Cash & cash equivalents at closing
|
|
$ |
3,681,765 |
|
|
$ |
3,758,689 |
|
|
Collections on A/R (3)
|
|
$ |
1,150,626 |
|
|
$ |
702,533 |
|
|
All other assets
|
|
$ |
0 |
|
|
$ |
0 |
|
|
Total Assets
|
|
$ |
42,119,236 |
|
|
$ |
39,768,067 |
|
| |
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
GE Debt (secured lender)
|
|
$ |
6,438,989 |
|
|
$ |
6,438,989 |
|
|
TD Banknorth Debt
|
|
$ |
1,703,670 |
|
|
$ |
1,740,708 |
|
|
Accounts payable
|
|
$ |
100,000 |
|
|
$ |
500,000 |
|
|
Wind down liabilities (4)
|
|
$ |
3,065,000 |
|
|
$ |
3,740,000 |
|
|
Wellhead EBITDA share (5)
|
|
$ |
635,046 |
|
|
$ |
292,514 |
|
|
Total Liabilities
|
|
$ |
11,942,705 |
|
|
$ |
12,712,211 |
|
| |
|
|
|
|
|
|
|
|
|
Net cash available for distribution
|
|
$ |
30,176,531 |
|
|
$ |
27,055,856 |
|
|
($ per share based on 14,161,325 fully-diluted shares outstanding)
|
|
|
2.13 |
|
|
|
1.91 |
|
|
Fee
|
|
$ |
6,035 |
|
|
$ |
5,411 |
|
(1) The Hi price assumes a closing on August 31, 2009 and a 50% EBITDA share with Wellhead, such that we receive the net benefit of 50% of the EBITDA during the peak summer months of July and August, as well as the highest price expected for the Turbines, and least amount of liabilities.
(2) The Lo price assumes a closing on July 15, 2009 and a 100% EBITDA share with Wellhead, such that we receive no net benefit from the EBITDA during the peak summer months of July and August, as well as the lowest price expected for the Turbines, and highest amount of liabilities expected.
(3) The variance on accounts receivable, and EBITDA share, represent variability in assumptions on energy and ancillary sales prior to closing. 100% of the receivables actually recorded are expected to be collected.
(4) Wind down liabilities include primarily the estimated severance costs of $2.34 million, and a range of estimates on additional expenses including tail period director & officer insurance, the remaining payments under our lease, legal fees associated with the wind down, and operating expenses at the rate of $540,000 per annum for 3 to12 months.
(5) The portion of EBITDA accruing to Wellhead under the Asset Management Agreements of either 50% or 100% at their election, as described above under Transition Asset Management Agreements.
The big delta between the low end and the high end is the proceeds for the turbines. They paid approximately 15.5 Million for each turbine. GE is currently selling these turbines for 18.5 Million. I spoke to a couple turbine dealers and came away with confidence they will be able to liquidate the 2 turbines for at least what they paid for them. Also, the company has basically validated that research by putting the $31 Million as their "lo" estimate.
Regarding timing, I estimate that we receive 90% of the liquidation proceeds by September 30th. They will have to hold back a small amount of money for 60 days while they tie up remaining liabilities like their NY lease. All of this is detailed in the proxy that came out on Friday. You can access it here:
http://www.sec.gov/Archives/edgar/data/1312206/000114420409031327/v151668_prem14a.htm
Basically, your two risks are that the Wellhead deal doesn't close and they don't get 15.5 Million for each turbine. Not a sexy idea but 20% for 3 months.
Happy to answer any questions you might have.
Catalyst
Wellhead deal closes. Announce sale of turbines.