Distressed Debt Case Studies - Joshua Nahas

Distressed Debt Case Studies - Joshua Nahas

Distressed Debt Case Studies Confidential 1 Tronox Case Study Company Overview Situation Overview Tronox Incorporated (TRX or the Company) is the fourth largest producer of titanium dioxide (TiO2) pigments (93% of sales) in the world. Titanium dioxide is used in a range of products for its ability to impart whiteness, brightness and opacity. The pigment product is used in coatings for residential and commercial paint, industrial, automotive, specialty market, plastics such as polyolefins, PVC, engineered plastics, and paper and specialty products such as inks, food, cosmetics. Capital Structure Cash New DIP/Exit Facility 9.5% Sr. Unsecured Notes EPA Claim Other GUCs Face Market Market Multiple of Amount Price Value 2010P EBITDAR $77.0 77.0 425.0 100.0% 425.0 2.2x 370.4 70.0% 259.3 5.8x 270.0 100.0% 270.0 5.8x 100.0 70.0% 70.0 5.8x Enterprise Value 1,242.4 2010P EBITDAR Normalized EBITDAR $190.0 $165.0 Confidential 1,101.3 5.8x Tronox was spun off from Kerr-McGee Corporation in 2006. At the time of the spin-off, the Company was burdened with substantial legacy liabilities that are not related to its operating TiO2 or Electrolytic businesses Legacy liability costs have consumed substantial cash flow, resulting in an inability to continue to service Tronoxs debt. Due to the continued impact from legacy liabilities, exacerbated by credit market conditions and the resulting tight liquidity situation, certain of Tronoxs U.S. businesses and foreign affiliates filed for protection under Chapter 11 of the United States Code on January 12, 2009 Tronox was set to sell the majority of its assets in a 363 sale to Huntsman for $415mm. An ad hoc bondholder group of the 9.5% Senior Unsecured Noteholders has proposed a plan of reorganization in conjunction with Goldman Sachs as replacement DIP and exit lender and the support of the Debtor. In additon the EPA a major other unsecured creditor has reached an agreement to take $115mm cash and 88% of litigation proceeds against Anadarko Petroleum (purchased Kerr-McGee). 2 Tronox Case Study Investment Opportunity Confidential

The 9.5% Sr Notes trades from 40 prior to filing down to 10 post. Secured creditors were concerned about a liquidation and substantial loss of value. This was exacerbated by the lack of access to capital markets in 2009 and the continuing credit crisis. Chemical maker Huntsman had mae a stalking horse bid to purchase the company for the value of the secured debt. Tronox was at a cyclical low in the demand and pricing cycle. If unsecured creditors were willing to put in new capital to bridge the company until a trunaround in the pricing environment. Bondholders could capture the equity value. Tronox bonds traded into the low 70s as a steering committee working with GS prepared to make an offer to finance the company out of bankruptcy. The companies projections were to do $190mm of EBITDAR in 2010 which would create the equity through the Sr Notes at 5.8x. POR Summary Bondholders agreed to backstop a $170mm rights offering that would fund the EPA settlement and GS committed to finance a $425mm replacemnt DIP facility that converted to an exit facility upon emergence. In exchange bondholders would receive 16.9% of the re-organized equity as well as 78.4% of the equity in the rights-offering giving them 95% of the equity in the company prior to dilution from MIP The EPA received $270mm cash Claim Consideration Amount Plan Recovery and 88% ofRollsthe proceeds from into New Exit relating100% DIP litigation against Facilty Andardko $425.0 theNon-Tax TronoxCash spin off Class 1to Priority $1.0 100% Class 2 Secured Claims Class 3 GUCs Class 4 Tort Claims Class 5 Environmental Class 6 Equity Cash 16.9% of Equity and 78.4% of Rights Cash $12mm 12% Litigation Trust, $4mm Insurance $270mm Cash, 88% Litigation trust $50mm Insurance 2-yr Warrants for 5% of Company Strike $1.0 100% $470.6 80%-100% NA NA NA NA $3-6mm NA 3 Tronox Case Study Tronox Disclosure Statement Projections Plan Projections 2009 2010P 2011P

2012P 2013P Global revenues % growth 1,071.8 -27.8% 1,168.5 9.0% 1,231.0 5.4% 1,247.7 1.4% 1,272.9 2.0% Gross profit % margin 187.9 17.5% 248.9 21.3% 254.0 20.6% 231.7 18.6% 235.3 18.5% EBITDAR % margin 130.6 12.2% 189.9 16.3% 181.1 14.7% 156.3 12.5% 157.4 12.4% 31.2 78.0 31.1 27.5 23.8 Rent 5.0 5.0 5.0 5.0 Mandatory Amortization 3.4 3.2 2.8 2.3 Interest Confidential Chg WC (99.7) 14.7 (26.2) (17.8) (15.4) CapEx % of revenues 22.0 2.1% 106.0 9.1% 57.1 4.6% 49.0 3.9% 47.5 3.7% Free Cash Flow

177.1 12.3 58.4 54.3 63.5 NWC % Of Sales 258.6 24.1% 282.0 24.1% 297.1 24.1% 301.1 24.1% 307.2 24.1% 4 Tronox Case Study Recovery Estimates at Emergence 15.75 $ 190.00 $ 438.1 16.32 2.00 9.26 $ 350.0 $ Recovery to 9.5% Sr Unsecured Notes 370.4 0.54 2.50 Confidential 100.0 Other GUCs Recovery Value of Value of Multiple of Primary Value of Total Primary Value of Total 2010P Equity Value per Shares for Rights for Value for Recovery Recovery Shares for Rights for Value for TEV EBITDAR Value Share Notes Notes Notes on Face On Claim GUCs GUCs GUCs $ 950.0 62.6% 59.2% 5.0x $ 511.9 $ 31.37 $ 62.6 $ 156.5 $ 219.1 $ 16.9 $ 42.2 $ 59.2 1,000.0 72.5% 68.5% 5.3x $ 561.9 $ 34.43 68.7 184.9 253.6 18.6 49.9 68.5 1,025.0 77.4% 73.1% 5.4x $ 586.9 $ 35.96 71.8 199.0 270.8 19.4 53.7 73.1 1,050.0 82.3%

77.8% 5.5x $ 611.9 $ 37.49 74.8 213.2 288.1 20.2 57.6 77.8 1,075.0 87.2% 82.4% 5.7x $ 636.9 $ 39.02 77.9 227.4 305.3 21.0 61.4 82.4 1,100.0 92.2% 87.1% 5.8x $ 661.9 $ 40.56 81.0 241.6 322.5 21.9 65.2 87.1 1,125.0 97.1% 91.7% 5.9x $ 686.9 $ 42.09 84.0 255.8 339.8 22.7 69.0 91.7 1,150.0 102.0% 96.4% 6.1x $ 711.9 $ 43.62 87.1 269.9 357.0 23.5 72.9 96.4 1,175.0 106.9% 101.0% 6.2x $ 736.9 $ 45.15 90.1 284.1 374.2 24.3 76.7 101.0 1,200.0 111.9% 105.7% 6.3x $ 761.9 $ 46.68 93.2 298.3 391.5 25.2 80.5 105.7 1,225.0 116.8% 110.3% 6.4x $ 786.9 $ 48.22 96.2 312.5 408.7 26.0 84.4 110.3 1,250.0 121.7% 115.0% 6.6x $ 811.9 $ 49.75 99.3 326.7 426.0 26.8 88.2 115.0 1,275.0 126.6% 119.7% 6.7x $ 836.9 $ 51.28 102.4 340.8 443.2 27.6 92.0 119.7 Note: Does not assume any shares allocated to management. 5% to manangement would shave approximately 4pts off recovery. Rights Strike Price Cash Debt Preferred $ Recovery on Claim 59.2% 68.5% 73.1% 77.8% 82.4%

87.1% 91.7% 96.4% 101.0% 105.7% 110.3% 115.0% 119.7% $14.46 30.0 468.1 15.0 5 Tronox Case Study Tronox Financials Post Emergence For the Fiscal Period Ending 2005A 2006A 2007A 2008A 2009A 2010A 2011A 2012E 1,375.2 5.6% 1,421.8 3.4% 1,426.3 0.3% 1,245.8 (12.7%) 1,070.1 (14.1%) 1,217.6 13.8% 1,651.0 35.6% 1,816.0 17.7% Gross Profit Margin % 229.9 16.7% 175.5 12.3% 121.0 8.5% 112.4 9.0% 137.7 12.9% 221.2 18.2% 499.7 30.3% - EBITDA Margin % 191.0 13.9% 171.6 12.1% 115.9 8.1% 1.5 0.1% 119.1 11.1% 259.4 21.3% 435.4 26.4% 594.0 32.7% EBIT Margin % 87.9 6.4% 68.6 4.8% 3.6 0.3%

(74.2) (6.0%) 66.0 6.2% 209.3 17.2% 353.1 21.4% 504.0 27.8% Earnings from Cont. Ops. Margin % 46.4 3.4% 25.0 1.8% (105.1) (7.4%) (145.5) (11.7%) (28.7) (2.7%) 4.6 0.4% 873.0 52.9% - Net Income Margin % 18.8 1.4% (0.2) (0.0%) (106.4) (7.5%) (334.9) (26.9%) (38.5) (3.6%) 5.8 0.5% 872.8 52.9% 469.0 25.8% 1.89 NM 0.61 (67.7%) (2.58) NM (3.55) NM (0.7) NM 0.11 NM 49.135 44,568.3% 28.95 87.3% Total Revenue Growth Over Prior Year Diluted EPS Excl. Extra Items Growth Over Prior Year Confidential 6 Tronox Case Study Recovery Estimates 2 Years Post Emergence 15.75 $ 550.00 TEV $ 2,475.0 2,612.5 2,750.0 2,887.5 3,025.00 3,162.50 3,300.00 3,437.50 3,575.00 3,712.50 3,850.0 3,987.5 4,125.0 $

438.1 Multiple of 2010P Equity EBITDAR Value 4.5x $ 2,036.9 4.8x 2,174.40 5.0x 2,311.90 5.3x 2,449.40 5.5x 2,586.90 5.8x 2,724.40 6.0x 2,861.90 6.3x 2,999.40 6.5x 3,136.90 6.8x 3,274.40 7.0x 3,411.90 7.3x 3,549.40 7.5x 3,686.90 16.32 Value per Share $ 124.81 133.23 141.66 150.08 158.51 166.93 175.36 183.78 192.20 200.63 209.05 217.48 225.90 2.00 9.26 Value of Primary Value of Total Shares for Rights for Value for Notes Notes Notes $ 249.1 $ 1,021.5 $ 1,270.6 265.9 1,099.5 1,365.4 282.8 1,177.5 1,460.3 299.6 1,255.5 1,555.1 316.4 1,333.5 1,649.9 333.2 1,411.5 1,744.7 350.0 1,489.5 1,839.5 366.8 1,567.5 1,934.3 383.7 1,645.4 2,029.1 400.5 1,723.4 2,123.9 417.3 1,801.4 2,218.7 434.1 1,879.4 2,313.5 450.9 1,957.4 2,408.4 Current Capitalization (Millions of USD) Currency Share Price as of Apr-02-2012 Shares Out. USD $179.0 15.1 Market Capitalization** - Cash & Short Term Investments + Total Debt + Pref. Equity + Total Minority Interest = Total Enterprise Value (TEV) 2,698.7 154.0 427.3 2,972.0

Confidential $ 350.0 $ 370.4 Recovery to 9.5% Sr Unsecured Notes Recovery Recovery on Face On Claim 363.0% 343.0% 390.1% 368.6% 417.2% 394.2% 444.3% 419.8% 471.4% 445.4% 498.5% 471.0% 525.6% 496.6% 552.7% 522.2% 579.7% 547.8% 606.8% 573.4% 633.9% 599.0% 661.0% 624.6% 688.1% 650.2% 0.54 2.50 $ 100.0 Other GUCs Recovery Value of Primary Value of Total Shares for Rights for Value for GUCs GUCs GUCs $ 67.3 $ 275.8 $ 343.0 71.8 296.8 368.6 76.3 317.9 394.2 80.9 338.9 419.8 85.4 360.0 445.4 90.0 381.1 471.0 94.5 402.1 496.6 99.0 423.2 522.2 103.6 444.2 547.8 108.1 465.3 573.4 112.7 486.3 599.0 117.2 507.4 624.6 121.7 528.4 650.2 Recovery on Claim 343.0% 368.6% 394.2% 419.8% 445.4% 471.0% 496.6% 522.2% 547.8% 573.4% 599.0% 624.6% 650.2% 7 Tronox Case Study Recovery Estimates 2 Years Post Emergence 190.00 170.00 150.00 130.00 110.00 90.00 70.00 50.00

1 2 2 2 2 1 1 10 010 0 11 011 011 011 011 011 011 0 11 0 11 01 1 011 011 011 011 011 01 0 01 2 01 20 1 201 201 201 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 2 3 2 3 3 2 5 2 3 4 4 3 4 5 3 1 2 2 3 3 3 1 0 -0 1 -2 1 -1 -0 -2 -1 -1 - 0 b- 2 - 0 b- 2 -0 -2 l-1 g- 0 g-2 p-1 ct- 0 ct-2 vr- 1 pr-0 pr-2 r- 1 n n n c n c c c y b b u a a o a a u u e a e e e J J A A J J O O N J F F M F F M De De Au Au Se De De M Tronox Inc. (OTCPK:TROX) - Share Pricing Confidential 8 SemGroup LP Company Overview

Confidential Prior to filing for Chapter 11 SemGroup was a privately held limited partnership engaged in midstream energy services including pipelines, storage, propane distribution, gas liquids extraction and energy marketing and trading. These assets included the White Cliffs Pipeline, a critical component of the wests energy infrastructure as the only pipeline from the oil rich DJ Basin in Colorado to the strategic storage hub in Cushing Oklahoma where the company had approximately 3mm barrels of storage capacity The companys energy marketing and trading operations were personally controlled by SemGroups CEO who entered into naked call options on the belief that crude prices would remain stable. Large trading losses occurd forcing SemGroup to post $2bn in collateral to support the trades putting a sever strain on the companys liquidity. In July 2008 Barclays took over SemGroups trading book as the result of substantial losses and liquidity demands. This resulted in a $2.4bn loss. On July 28 the company filed for Chapter 11 bankruptcy protection Pre Petition Capital Structure Face Amount Secured Working Capital Agreement Secured Revolver Series B-2 Loan SemEuro Credit Agreement White Cliffs Credit Agreement Total 1st Lien Secured Debt 8.75% Senioir Notes Total Debt 1,740.0 665.0 200.0 45.0 120.0 2,770.0 610.0 3,380.0 Chapter 11 Summary SemGroup was able to secure post petition financing and stabilize operations. It had considerable litigation related to contracts with its crude suppliers that utilized the White Cliffs Pipeline. SemGroup sold non-core assets, focused on managing its fee based assets and dramatically curtailed energy marketing activities As a result the company was able to accumulate approximately $650mm in free cash as well as another $400mm in restricted and subidiary cash as well as $150mm in cash from asset sales. The company was rejected or restructured over 1,600 uneconomical leases and contracts 9 SemGroup LP SemCrude Strategic Positioning SemCrude SemGroups assets are strategically located in resource rich geographic areas including the Bakken, Niobara, Duvernay, Montney Shales and the Mississippi Lime formation In addition, SemGroup is 51% owner of White Cliffs pipeline, a FERC pipeline and 4.2 mm barrels of oil storage capacity located in Cushing, OK. White Cliff's is an oil pipeline serving the DJ Basin / Wattenberg and Niobrara Shale and is the only pipeline connecting DJ Basin to the strategic storage assets in Cushing, OK 48% was sold during to Plains All American, Anadarko, and Noble Petroleum to help pay down debt. Strategically, these partners are incented to use White Cliffs as much as possible The majority of the volume for White Cliffs comes from Watterburg Shale - a stable oil/gas field that is breakeven at $50-60 WTI. However, the adjacent Niobrara Shale is a high quality emerging gas/oil shale that has enormous potential and is being compared to the Bakken Shale The North Dakota System, which consists of the Bakken Shale and Williston Basin, offers growing demand for take-away capacity to provide gathering, storage and processing to the hub in Clearbrook, Minnesota SemGroup is positioned to potentially increase its capacity on the Enbridge pipeline in the North Dakota System and expand with additional growth in take-away

capacity White Cliffs Pipeline 10 SemGroup LP SemCrude The DJ basin is key development area and in February of this year Chesapeake Energy announced an investment from CNOOC for $700mm for a 33% interest in DJ and Powder River Basin leasehold interests Noble Drilling, Chesapeake, and Anadarko have all spoken favorably of the Niobrara and are increasing their exploration of the area Nobles Q1 conference call the company stated . We've now identified over 2,000 potential drilling locations on our 400,000-acre Wattenberg position are containing unrisk potential of 600 million barrels equivalent net to Noble Energy's interest. We're accelerating the program where we continue to see strong well results in the core and on the edges of the field. SemGroups Cushing is a critical Hub for oil storage / Nymex delivery and gets the highest oil prices in the region. Therefore, transportation into Cushing is a highly valuable asset 95% of the storage capacity leased to 3rd parties with 35 year contracts. SemGroup announced in the 4th quarter of 2010 that it was expanding storage by 1.96mm barrels, all of which has been leased on long term contract Contango market is bullish for storage SemCrude Strategic Positioning Kansas Oklahoma Gathering System 11 SemGroup LP Investment Overview Confidential SemGroups asset footprint is located in the Liquids Fairway, which is the MidContinent region stretching from Western Canada to the Gulf Coast. These areas are liquids rich shale plays. SemGroup is well positioned in the large, rich producingbasins of North America, such as the Mississippi Zone, Bakken, Wattenberg, Niobrara, Montney, and Duvernay plays. Producers are committing significant resources to these opportunities. The flow of hydrocarbons throughout this region creates an opportunity to utilize SemGroups assets which are also located near demand centers and connected to liquidity points where the Company can provide customers access to broader markets. By purchasing SemGroups Secured Working Capital Facility at approximately 50% an investor would be creating assets at over a 50% discount to their replacement cost in area of critical energy infrastructure An investor would also have the benefit of reintroducing the company to the public markets post-reorg in addition to the potential conversion to an MLP post reorg and capitalizing on the higher multiples as a result of their tax efficient pass-thru status POR Summary Distributable value in the Estate was $2,446bn and consisted of: $1,111 in Cash $300mm in a new 2nd lien TL $1,035 in Common Stock and warrants SemGoups Secured creditors received in consideration for approximately $2.9bn claims: $524mm in Cash Pro rata share of 9% 2nd lien TL 95% of the equity in the reorganized company 60% of the interests in the litigation trust

Blackstone valued the reorganized Debtors EV at a mid point of $1,500bn or 8x 2010P EBITDA Implied Exit Capital equityStructure value at the mid point was $1,035 or about $10.35 Cash per share on a fully diluted 70.0 basis. $500mm Exit Facility on current shares $24 based White Cliffs Financing SemEuro Financing 2nd Lien Term Loan Total Debt Implied Equity Value Enterprise Value 100.0 35.0 319.0 454.0 1,035.0 1,419.0 12 SemGroup LP Post-Reorg Milestones Confidential December 2009: SemGroup Emerges From Bankruptcy October 2010: SemGroup sells 49% interest in White Cliffs Pipeline to Noble Energy, Plains Exploration and Anadarko Petroleum for $141mm before purchase price adjustments. Proceeds were used for deleveraging November 2010: SemGroup lists on the NYSE ticker SEMG December 2010: SemGroup sells its SemCanadaCrude marketing business for $60mm May 2011: SemGroup announces refinancing of its credit facility via RBS June 2011: Announces formation of MLP structure Refinancing (1) Cash (2) $350mm Revolver L+325 $100mm TLA L+325 $200mm TLB L+450 Capital Lease/Other Total Debt Net Debt Common Stock (SEMG) Shares Out Equity Value Enterprise Value 2011PF EBITDA Liquidity Cash LCs Outstanding Revolver Total Liquidity Face Amount $71.0 133.2 100.0 200.0 10.2 443.4 372.4 $18.28 42.2 771.4 1,143.8 142.4 2011E EV/EBITDA 3.1x 3.1x 3.1x 2.6x Rating B1/B B1/B B1/B 8.0x 71.0 (109.0) 216.8 287.8 SemGroup was able to access the capital markets and dramatically lower its cost of debt and increases its

capital flexibility 13 SemGroup LP Share Price Performance Post Emergence 40.00 35.00 30.00 25.00 20.00 15.00 0 1 0 1 1 2 1 1 2 2 0 0 1 1 0 0 0 0 1 1 1 0 1 10 11 01 2 01 201 20 1 201 2 01 2 01 2 01 2 0 2 01 20 1 201 201 2 01 201 20 1 201 2 01 2 01 2 01 2 0 2 01 20 1 201 201 2 1 2 3 3 1 0 1 2 0 9 -0 9 -1 0 - 09 - 11 -11 -11 -1 0 l-12 - 10 - 09 - 10 0 8 -0 8 -1 0 - 09 - 12 -1 t vr r-1 y-1 un-1 ul-1 g-1 p-1 ct-1 o vr c n n c n y b b g p u c a ar ar p p o a u a e a J J A J O N J A J O N Ja M F M Fe M Au Se De Au Se De M M SemGroup Corporation (NYSE:SEMG) - Share Pricing Confidential 14

Recently Viewed Presentations

  • A451 GCSE Computing | Hardware| Required knowledge Hardware

    A451 GCSE Computing | Hardware| Required knowledge Hardware

    Puff-suck switch. Braille keyboard. Secondary storage. Magnetic hard disk. Optical disk. Flash memory. Considerations for selecting storage: ... Durability. Reliability. John Von Neumann. Author: Stephen O'Callaghan Created Date: 04/19/2015 06:15:33 Title: PowerPoint Presentation Last modified ...
  • 10 Proteins are found floating in the This

    10 Proteins are found floating in the This

    The cell membrane is the outside layer ("skin") of the cell. ... Analogy: This is like the offensive line on a football team. The line wants to keep the defensive players from getting through at all costs, but they WANT...
  • Which Theory Best Explains Human Behavior?

    Which Theory Best Explains Human Behavior?

    As long as harmony in the group occurs, self-actualization is not needed. Behavior Theory. We behave the way we do because we were reinforced at a young age to do so through rewards and punishments. ... Which Theory Best Explains...
  • Neural correlates of processing musical meaning (semantics) Stefan

    Neural correlates of processing musical meaning (semantics) Stefan

    Music can activate representations of meaningful concepts The N400 receives contributions from neurons located in the temporal lobe Affective priming paradigm Electric brain responses to word (A) and chord (B) targets BOLD responses to word (A) and chord (B) targets...
  • Element #1: Shape

    Element #1: Shape

    Element #1: Shape. A shape is … a two-dimensional line that is enclosed . Geometric shapes. Organic shapes. Negative shapes. Shapes that guide. How is shape used in art?
  • International Banking and Capital Market

    International Banking and Capital Market

    Mitchell Crafton International asset trades can be exchanged for many different types of assets. Many of these assets are traded in the international capital market as bonds and deposits denominated in different currencies, shares of stock and other financial instruments...
  • Older Peoples Services/Care of the Elderly Pharmacy team: BCH ...

    Older Peoples Services/Care of the Elderly Pharmacy team: BCH ...

    BCH Direct Pharmacy Service. BCH Direct is an Assessment and Treatment Unit. Part of the IMPACT work programme and developed by Frail Elderly Workstream. Two fulltime (Band 7) pharmacists (18 month secondments from January and February 2015)
  • Eureka Research Workbench: A Semantic Approach to an Open ...

    Eureka Research Workbench: A Semantic Approach to an Open ...

    Foundational building block of a Global Research Network. What should anELN be? Semantics is the study of meaning-> We need to give meaning to what is created in an ELN. Described in computers using the Resource Description Framework (RDF) which: