looking for clues it seems quite clear in my opinion that when
$GME counters or amends their purchase offer of
$EBAY there will be a rather significant change in the deal structure.
the key to the financing is TD Bank seeing an "investment grade" credit rating. if you do the math you know that this is not possible under the current terms because it would bring the combined company's leverage to somewhere around a ~9x ebitda.
I think that is pretty far out and would not meet "investment grade". this has been documented and I highlight it because I do think the credit rating will be achieved. how could the offer be amended to be <5x ebitda? I think there is one realistic pathway and it is through forming an investor group or a private equity co-investor.
what if a deal sponsor enters with a large cash infusion into
$GME? in exchange they could get a large minority stake of the company in shares, be issued preferred shares or convertibles. the reason for it is in corporate credit agreements rating agencies look at private equity cash injections as equity/ownership and not debt. so lowering the leverage vs. ebitda becomes simple you have someone that sponsors the deal for x amount of dollars and the company doesn't need as much from TD Bank and the bond market.
i.e. for half cash half stock they need 28 billion in cash. PE or a friendly investor shows up with an 18 billion investment to be a part of the deal, the need from TD Bank comes down to 10 billion and voila! a debt multiple to ebitda <5.
I still believe that we will see GameStop issue bonds but it won't be the only way they raise funds. I wonder if there is anyone out there who sees value in big dog?
“with foresight, the excitement was palpable.”
bonds. by the time everyone else realizes GameStop will not have to deplete 88% of their balance sheet cash, excitement will be off the charts.
bonds are not notes.
$GME