Friday, December 08, 2006

Northwest Airlines (NWACQ) Hires Evercore for possible M&A Deal

Reports from Dow Jones News, Northwest Airlines Corp. (OTC: NWACQ) hires Evercore for possible M&A transaction.
Remember in the past, hedge fund Owl Creek Asset Management said NWACQ could be worth $19.75-$33.50 per share in a merger deal with Continental Airline (NYSE: CAL) LINK

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Blogger Aamir said...

This stupid stock is up almost 40% today. Owl Creek Asset Management was holding a huge position in this stock BEFORE it went bankcrupt. I'll bet anything that Owl Creek is NOT adding to this losing position by purchasing shares of a bankcrupt stock. Most of the people who are bidding this thing up 40% a day are crazed, speculating individual investors. The facts are:

1. Owl Creek is full of sh*t when they say that NWACQ.PK is worth $20-$33 a share; their just talking their own (losing) position.

2. Owl Creek wants an Equity Holders Committee for the REORG plan. Even if the judge approves such a committee, it does not mean that equity holders will get $33 a share or $5 a share or anything at all for that matter.

3. A merger with Northwest is unlikely. Delta is the current takeover target, and that is not likely to happen either. It is doubly unlikely for Northwest to be taken out. Airline mergers are rare, improbable, costly, difficult and foolish.

4. Northwest has NOT hired Evercore. Northwest is SEEKING PERMISSION to hire Evercore. The court COULD deny this request.

5. Evercore does not only advise on M&A deals. Evercore also advises bankcrupt companies. Thus the attempt to hire Evercore is not definite evidence that Northwest management is looking for an M&A deal.

6. Even in the event a merger or takeover, current Northwest shareholders are likely to get nothing. It is the debtholders who have claims on Northwest's assets, not the equityholders (since the company filed Chapter 11). So if someone like US Airways want to buy Northwest, they have to make a deal with Northwest debtholders, not equityholders.

7. Based on historical bankcruptcy cases, there is a 99% probability that current NWACQ shareholders will get $0.00 for their investment or near $0.00. Northwest was trading at $5 a share before it entered bankcruptcy, last year. Now, today, Northwest's bankcrupt stock is trading near $5!!! This is crazy. People buying these shares should go to Las Vegas instead, where they'll have a better chance at booking a profit.

8. Northwest stock is not an good buy. The risks/reward profile is FIRMLY stacked against the longs. However, at nearly $5 a share (which is close pre-Chapter 11 levels), this stock is a great short selling opportunity. If you can find a borrow on this stock, short it now; there is a very high probability that the stock will lose 90% or more of its value by mid 2007 (when the REORG is complete). High probability of outsized short-term gains is a sweet deal. The only difficulty is finding a borrow on this stupid stock.

1:47 PM  

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