Enviva Bankruptcy: Going On My Watchlist

seekingalpha09-12

Bankruptcy exits can offer opportunities; Enviva's restructuring proposal suggests potential value, but exact ownership and cash payments are still uncertain.Post-exit, EVA will have significant debt ...

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Enviva's restructuring proposal suggests potential value, but exact ownership and cash payments are still uncertain.Post-exit, EVA will have significant debt ...</p>\n\n<a href=\"https://seekingalpha.com/article/4720674-enviva-bankruptcy-going-on-my-watchlist\">Source Link</a>\n\n</div>\n\n\n</article>\n</div>\n</body>\n</html>\n","isBrief":false,"type":0,"news_type":1,"symbol":"EVA","symbol_name":"Enviva Partners, LP","start_time":0,"source_url":"https://seekingalpha.com/article/4720674-enviva-bankruptcy-going-on-my-watchlist","article_id":"2466187270","we_media_id":null,"thumbnails":["https://static.seekingalpha.com/cdn/s3/uploads/getty_images/168634804/image_168634804.jpg"],"rights":null,"url":"https://stock-news.laohu8.com/highlight/detail?id=2466187270","pubTimestamp":1726146181,"columns":[],"sourceInfo":{"source_id":"seekingalpha","name":"Seeking Alpha"},"weMediaInfo":null,"summary":"Bankruptcy exits can offer opportunities; Enviva's restructuring proposal suggests potential value, but exact ownership and cash payments are still uncertain.Post-exit, EVA will have significant debt ","collect":0,"end_time":0,"defaultTopTitle":"seekingalpha.com","property":[],"viewcount":null,"language":"en","relate_stocks":{"EVA":"Enviva Partners, LP","BK4156":"煤与消费用燃料"},"translate_title":"Enviva破产：列入我的观察名单","themeId":null,"isJumpTheme":false,"ttsUrl":null,"symbols_score_info":{"EVA":1},"content_text":"Bankruptcy exits can offer opportunities; Enviva's restructuring proposal suggests potential value, but exact ownership and cash payments are still uncertain.Post-exit, EVA will have significant debt but targets $270M EBITDA and $220M unlevered FCF by FY26, implying potential equity value.Concerns include the low liquidation value of PP&E and potential risks from political shifts affecting the wood pellet business model.Current terms don't make Enviva shares attractive, but I'll watch for improved conditions to reassess potential investment opportunities.   bravo1954 One of my favorite setups in the market is a bankruptcy exit. Usually, you find yourself buying a company as they exit the bottom of a business cycle, with less debt, and less eyeballs. After their recent bankruptcy filing, Enviva (NYSE:EVA) disclosed the bankruptcy plan of reorganization. At first glance, it seems favorable to the stub equity outstanding – let's take a look at the restructuring proposal:   Enviva Bankruptcy Docket  Enviva Bankruptcy Docket You can see above that the exact percentages of ownership, cash payments, and rights offering participation are still up in the air, and will shift depending on elections made by the interested parties. Nevertheless, I want to take a stab at the go-forward cap table to understand the structure as it might look post-exit. I think we’re looking at something like this: Secured Claims & DIP: Paid off from new $1B credit facility $1B of 2026 notes, green bonds: combination of cash and equity. Recovery is described as 7.7-7.9% on page 19, as follows:   Enviva Unsecured Payoffs Non-bond GUCs: $13-18m of cash (p.21) and share of reorg equity. Equity: 5% of shares and another 5% tranche of warrants Lazard pegs the reorganized enterprise value at $1,250 to $1,750m, implying the equity will be worth between $471m and $971m. We will assume for the rights offering purposes that $750m is the agreed-upon valuation.   Author's Estimates This is overly simplistic, as the actual percentages will depend upon the final agreed distributions, but I want to pencil something out to see if there’s potential value here. Running an options calculator for the warrants and assuming $400m of initial recovery for the unsecured and a $1B strike for the unsecured bonds to get a “full” recovery, I think the equity gets handed another 20-25% of “value” at exit. So, I’m ballparking the current EVA shares value at exit around $25m. Valuation   Enviva Projected Income Statement  Enviva Projected Cash Flow Statement It looks like Enviva is targeting $800m or so of net debt, so it will remain a fairly levered company upon exit. Projections of ~$270m of EBITDA and $220m of unlevered FCF by FY26 seem pretty good, so if they hit their targets, I think you’ll do well here. I estimated above that existing equity holders will end up with about 3% of fully diluted equity, plus warrants. If the business can generate $270m of EBITDA and trade at a 6x multiple, that implies (6*270-800)*.03 = $25m of equity value again, perhaps $30-35m with warrants added in. Therefore, you’ll need both execution on the exit plan and >6x multiple for current buyers to get a meaningful return. Concerns On page 382 of the restructuring agreement, the liquidation analysis provided suggests that Enviva’s PP&E could be liquidated for 6-8% of the $1.7B it is carried. This is punitive enough to be concerning, as there much be a legitimate concern about possible buyers of their assets to mark them so low, even in a fire-sale scenario. I don't have a particular view on the value of Enviva's properties, but I think this deserves more attention if you are considering a position.  To understand the issues that led to Enviva’s bankruptcy, it’s worth reviewing the Blue Orca short report from 2022 when Enviva had almost a $4B market capitalization. I don't have a strong view on the viability of the wood pellet business model, but it seems like Enviva takes advantage of some EU loopholes for carbon scoring that could be closed in the future. I prefer to shy away from investments that seem this exposed to future political sentiment shifts.  Conclusion Enviva was a mess of a public company before their bankruptcy filing, and with equity holders getting a sliver of the new business, they have a chance to salvage some value for prior investors. Unfortunately, on the current terms, I don’t see shares as particularly attractive, but will be stashing Enviva on my watchlist in case conditions improve. Think I'm missing something? Let me know why in the comments.  Editor's Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these stocks.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"0","news_tag":"analysis","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2466187270"}