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Post by wgreystone on Jun 11, 2018 15:28:40 GMT -5
My interpretation: Deerfield believes current SP is low and want to convert debt to stocks now instead of later at higher price.
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Post by gareaudan on Jun 11, 2018 15:49:16 GMT -5
Why are we dealing with debt not due until December 2019? Somwthing else in the works. This is called managing your duration. Duration is a fairly esoteric financial topic that is mainly of interest to fund managers who have long-term liabilities and long-term assets. Without going into detail, the goal for the manager is to roughly approximate the duration of your assets and the duration of your liabilities. For example, if you are a life insurance company with a bunch of policies expected to pay out in an average of 25 years, you don't want assets that mature in 20 years or 30 years because then you have a mismatch. Deerfield can shorten the duration of their asset (the debt due from MNKD) by playing a little hard ball. In recent deals, they have rearranged the timing of MNKD's future commitments so that cash received in the near term is applied to debts that would otherwise be due in the longer term. That reduces the duration of their portfolio and their risk. By moving payments earlier in time, they get the certainty of cash now (or soon) instead of the uncertainty of cash later, and they still have a security interest is the assets of the company. This is equivalent to what happens to a bank when a borrower decides to pay off their mortgage sooner rather than later; if the mortgage was due to run for another 15 years but the homeowner has paid it down such that the remaining balance amortizes over 5 years, the bank has less risk of default but still holds a first mortgage on the value of the entire house. It should also be noted that sometimes debt pools are arranged in tranches, and different people own different tranches. Deerfield is a debt fund, but they get their money from various investors with whom they do business. There may be certain tranche holders that want their money back and have offered to give Deerfield a bonus of some sort for liquidating a particular tranche of payments earlier than planned. Those dealings are between Deerfield and their private investor so we cannot know if such arrangements exist or not, but it would not be uncommon. Wow! Thanks Matt for the clear ans detail answer, very helpful.so if i understand correctly it could be Deerfield that ask for it and not mnkd? That is probably what i was missing. Thanks
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Post by gareaudan on Jun 11, 2018 15:54:49 GMT -5
My interpretation: Deerfield believes current SP is low and want to convert debt to stocks now instead of later at higher price. i like your interpretation 😃. Is There a way to know in a short time?
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Post by babaoriley on Jun 11, 2018 16:03:09 GMT -5
Deerfield went out on a limb for MNKD long ago, perhaps near the the "embarrassment of riches" era, although I'm not sure of that. They wanted a high return, which I can understand based on the risk. Things did not go as planned, and so Deerfield is using its leverage, of which it retains a decent amount, to do what they can so as not to completely disappoint their investors/principals. They would like to get as much cash as possible out of MNKD, and since the company doesn't have it, they needed to get some common shares and convert that to cash, as they have taken all the risk they wish to take with MNKD.
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Post by pantaloons on Jun 11, 2018 21:19:32 GMT -5
I am curious to know why MNKD would make this equity-debt swap earlier than anticipated at the current share price, especially in light of potentially positive developments in the very near term (eg, partnerships for TrepT, STAT study results). The timing seems odd. I'm sure there are many details unbeknownst to investors, but on the surface, this offering for MNKD seems to make most sense for MNKD's best interests, if they do not expect significant increases in share price in the near term. Please enlighten me if I am missing something here. TIA.
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Post by mnkdfann on Jun 11, 2018 22:00:16 GMT -5
Why are we dealing with debt not due until December 2019? Somwthing else in the works. This is called managing your duration. Duration is a fairly esoteric financial topic that is mainly of interest to fund managers who have long-term liabilities and long-term assets. Without going into detail, the goal for the manager is to roughly approximate the duration of your assets and the duration of your liabilities. For example, if you are a life insurance company with a bunch of policies expected to pay out in an average of 25 years, you don't want assets that mature in 20 years or 30 years because then you have a mismatch. Deerfield can shorten the duration of their asset (the debt due from MNKD) by playing a little hard ball. In recent deals, they have rearranged the timing of MNKD's future commitments so that cash received in the near term is applied to debts that would otherwise be due in the longer term. That reduces the duration of their portfolio and their risk. By moving payments earlier in time, they get the certainty of cash now (or soon) instead of the uncertainty of cash later, and they still have a security interest is the assets of the company. This is equivalent to what happens to a bank when a borrower decides to pay off their mortgage sooner rather than later; if the mortgage was due to run for another 15 years but the homeowner has paid it down such that the remaining balance amortizes over 5 years, the bank has less risk of default but still holds a first mortgage on the value of the entire house. Spencer's latest article (excerpt below) notes that Mannkind's agreement with Deerfield limits what debt it can address. (Perhaps that is what your second paragraph is addressing, I'm not sure.) "One question I'm already getting is why the company paid $3 million each to two different notes vs. paying sums on what's coming due earliest. The answer to that question may be known to my regular readers, but not known to newer readers. MannKind, in a previous negotiation with Deerfield, agreed to certain terms whereby debt is paid in alternating cycles of near term and longer term." I think his is a good article, worth clicking on for the rest of his insights: seekingalpha.com/article/4180869-mannkind-uses-shares-pay-deerfield-debt
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Post by mnkdfann on Jun 11, 2018 22:18:31 GMT -5
I am curious to know why MNKD would make this equity-debt swap earlier than anticipated at the current share price, especially in light of potentially positive developments in the very near term (eg, partnerships for TrepT, STAT study results). The timing seems odd. I'm sure there are many details unbeknownst to investors, but on the surface, this offering for MNKD seems to make most sense for MNKD's best interests, if they do not expect significant increases in share price in the near term. Please enlighten me if I am missing something here. TIA. The only positive spin / interpretation I can come up with is that the ADA meeting is so late in the month that the timing to make a better deal after the ADA but before payments were due to Deerfield would not have worked. But realistically and / or pessimistically (depending on one's beliefs), I suspect Mannkind knows in its corporate heart that the ADA news isn't going to be the game changer some imagine.
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Post by LosingMyBullishness on Jun 12, 2018 15:20:56 GMT -5
Roughly $40 million. Could be retired qucikly with a strong partner an up front & milestone payments. Sure. The important word is "could". They are out there but Mike simply can not decide with whom they should dance : Just too many and each with tons of upfront money.
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Post by LosingMyBullishness on Jun 12, 2018 15:38:17 GMT -5
Deerfield went out on a limb for MNKD long ago, perhaps near the the "embarrassment of riches" era, although I'm not sure of that. They wanted a high return, which I can understand based on the risk. Things did not go as planned, and so Deerfield is using its leverage, of which it retains a decent amount, to do what they can so as not to completely disappoint their investors/principals. They would like to get as much cash as possible out of MNKD, and since the company doesn't have it, they needed to get some common shares and convert that to cash, as they have taken all the risk they wish to take with MNKD. Deerfield wants to derisk, has the stronger hand and MNKD pays with money from their investors. Not sure that the share program for MNKD employees will be in great demand.
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