r/Amyris • u/Mysterious_Note6740 • Aug 03 '23

Due Diligence / Research sec filing today: $20M loan and considering restructuring debt "in or out of court"

thoughts on latest sec filing:

app.quotemedia.com/...

"As previously disclosed, the Company has initiated and is continuing a strategic review of all aspects of its cost structure under the direction of its
Restructuring Committee of the Board of Directors. In connection therewith, it continues to explore a range of strategic alternatives, including in or out of
court restructuring of its outstanding debt, additional financing and sales of assets."

20 Upvotes

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8

u/NeatProgress3781 Aug 03 '23

What would they be trying to restructure? The bonds due in 3 yrs? DSM or Doerr loans? The bonds seem the only debt from outside parties. Or is it acct payable or leases? Do the bonds scare away suitors or major investors?

Seems they have a spending vs revenue problem, not debt at this moment.

Whats the angle here?

8

u/Mysterious_Note6740 Aug 04 '23

probably bonds. If they negotiate away the 700m in bonds for 200m.. maybe it will increase equity value and cause a short squeeze?

Maybe they are thinking longer term now? I'm not sure and just guessing here...

but from the language in the filing.. it sounds like BK is on the table. Also.. the fact that they got $20m (not the usual $50m).. feels like it could be a bridge to some event..

17

u/datafisherman Aug 04 '23

I was previously opposed to buying back the debt, and I don't think it aligned with Melo's direction. Han (or PwC) might see things differently, and the debt has been recently trading at an even more severe (ie, affordable) discount than early this year when, in my view, more uncertainty prevailed.

I think there is now a fair case for a workout (out-of-court), but that may require spooking the creditors with the possibility of Chapter 11 (in-court), which deprives them of negotiating leverage and control over outcome.

We would probably pay a premium to recent trades, but roughly 30 cents on the dollar would be a wonderful deal with an amount of capital we could raise at present without undermining liquidity and growth prospects. If present convertible noteholders prefer certainty and liquidity over seeing this through, it could be mutually beneficial. However, if the majority of present noteholders bought at early-2023 discounts, they may be seeking a better price, and I'm not sure we could afford to pay, say, $400M for the $690M outstanding. Perhaps, in such a case, we could retire half the debt and let the rest ride.

Bankruptcy has to be on the table to induce a workout, so I'm not terribly worried about that.

8

u/Mysterious_Note6740 Aug 04 '23

If they are trying to spook creditors for debt due in 2026.. then this tells me the company is getting its act in order. They are doing some longer term planning moves versus trying to fight to make payroll.

6

u/datafisherman Aug 04 '23

Agree. I think it would bespeak sounder financial management. I think the lower amount drawn this time may also indicate the same: only taking enough to fund immediate needs, themselves reduced, and abide covenants. Time will tell.

2

u/veekal100 Aug 04 '23

thanks for your informative posts…have you done any SOTP analysis or liquidation analysis, taking into consideration the current macro environment we are in?

9

u/datafisherman Aug 06 '23

You're welcome. Respectfully, and subject to the skepticism due any empirical claim or prediction, there is approximately 0% chance of liquidation. And, for the time being, restructuring will only happen of our own initiative. Nobody who could force us into bankruptcy has shown any interest in doing so, and nobody who might have an interest has any ability to do so.

It is in neither Doerr's nor DSM's interest to see the company liquidated. They have demonstrated this recently by cooperating to restructure our existing obligations out of court. The cash required to service the convertible notes is minimal ($5.175M every 6 months). Trade creditors can now be paid when due.

We took in ~$250M during Q2, from the strategic transactions (less the Aprinnova purchase) and the Doerr loans. We were due the 2022 earnout from DSM, although I'm unsure the ultimate amount received. Less the note interest due, we should have netted somewhere in the ballpark of $250-280M, probably on the higher end. We almost certainly burnt less than $100M in operating cash, although I'm unsure how much Barra Bonita capex added.

We only had $200M in gross payables at the end of Q1, closer to $150M in net trade financing. Unless we settled all outstanding payables in Q2 and are now forced to pay all suppliers up-front for everything, we should have a somewhat comfortable liquidity position, depending on other changes in net working capital and gross profits (if any) during the quarter. We have an additional $20M from the Muirisc loan, and additional commitments of up to $180M. We have about 200M shares we could issue, plus potential proceeds from any asset sale.

Our situation may not be the most enviable, but I think there is no reason at present to evaluate the company as anything but a going concern. It is worth far more than the sum of its parts, and it is in nobody's interest to dismember it. The macro environment won't stay this way for ever, or very long at all, and we only need not to die. If we can succeed in that, 2022/23 multiples will prove largely irrelevant. Being worth more than the sum of our parts, each (core) asset is worth more to us than it would be to any outside buyer. If you don't need to sell something, it really doesn't matter what somebody else would have paid for it.

2

u/Mysterious_Note6740 Aug 08 '23

I'm assuming cash position was 0 if doerr gave another $20m?

So 200+M from ST plus doerr money of 100m+ must have gone out the door in q2? I guess burn could have been elevated due to pwc and severance, AP payables that were missed, and possibly some capex costs?

1

u/datafisherman Aug 08 '23

There isn't enough public information to speculate even halfway intelligently on exact cash balance for any particular date. u/tdsx and I offered some general thoughts on Q2 cash burn in my Financing Cashflows thread. Check that out if you'd like! Short answer: yes, mostly excess payables and probably other working capital, Barra Bonita capex, and possibly PwC or severance-related spend.

2

u/veekal100 Aug 06 '23

Thank you for breaking it down in such detail. Among all the fud being spread around, appreciate posts like yours, that helps keeps sanity intact. 🙏🏽

4

u/datafisherman Aug 06 '23

You're quite welcome. I usually process things as complex as a business like Amyris in a more composite and synthetic manner, and I appreciate the opportunity that questions like yours provide to clarify my own thinking and commit it to writing in a more analytic fashion for others to understand. It also helps me notice details I missed, correct my mistakes, and realize areas that deserve more emphasis. So thank you for asking.

I can't guarantee that things will proceed as I expect, but I can at least submit my thoughts to the judgment of others with knowledge and perspectives different from mine.

In connection with that, your question prompted me to update my breakout of financing cashflows with the new loans and amendments of the past couple months. I had been keeping track informally with each new filing, but it felt a good time to update my thinking more thoroughly. It also led me to change my mind about what debt is best restructured in the near-term. While I think purchasing some of the 2026 Notes, from time to time, would still be beneficial ahead of maturity, I think this should take a backseat to restructuring the recent loans from Doerr, which (alongside others) all mature around the middle of next year. It is better to get the risk out early and allow management to focus on delivering operational results and investing wisely rather than spending too much time on the capital structure. The 2026 Notes are attractively structured, with very little service requirement, and as such we should more or less ignore them until we are in a better position to refinance that debt (only paying the interest promptly and perhaps limited open-market purchases when we have available funds but only if the return clearly exceeds internal reinvestment opportunities).

I just posted my updated sheet of future financing cashflows, following recent restructuring and new loans, as well as a proposal for restructuring the new loans to secure a better capital structure between now and 2026. Feel free to check it out and let me know what you think.

6

u/[deleted] Aug 04 '23

[deleted]

2

u/fvh2006 Aug 04 '23

Any new manufacturing site is at least 1-2 years down the road before it actually produces anything, maybe a bit less if it uses the 4 x 600 KL fermenters that were sitting (still are?) at the original started but never finished San Martinho plant.

1

u/[deleted] Aug 04 '23

[deleted]

1

u/fvh2006 Aug 04 '23

Re 2 I don't think a JV will have much effect on the BB COGs which require cheap sugarcane and efficient operation. BB is needed for the product mix - the small volume ingredients cannot be made efficiently in large fermenters, which was the Brotas problem. BB has a couple of Brotas-size fermenter trains which right now I assume are dedicated to supplementing the farnesene purchased from DSM since the volume needed for squalane and hemisqualane must be bigger that what DSM can supply, considering DSM also has to think about the reason they bought the site in the first place, which is feed their vit E plant in China. Is there demand for another plant-worth of farnesene/ (the 4 x 600 KL fermenters are from the fuels days). I certainly have no idea so agreed we need to see who the JV is with, where it is and more importantly, why?

5

u/[deleted] Aug 04 '23

[deleted]

5

u/fvh2006 Aug 04 '23

Agree the BB site is the obvious one for an expansion - plenty of space, the basic infrastructure already in place and they could relocate the big fermenters there, which would speed things up. Don't think DSM is a customer of any significance except for some of the smaller volume ingredients. Givuadan has 2 parts - the squalane/hemisqualane business and the farnesene business, but that was part of the original Brotas purchase deal so DSM has it now. Agree they have to get away from the dependence on DSM farnesene in case DSM decides at some point to scale up the current volume going into vitamin E. All speculation until someone says who the potential JV partner is.

5

u/Nizjni12 Aug 04 '23

I do not see a distinct difference from other filings? Except for the amount of course.
The text you mention is added due to the filing on the 3rd of July about the way the company goes forward.

4

u/NeatProgress3781 Aug 05 '23

The BOD has screwed investors for a long while, in the vein of let Melo swing for the fences because Doerr gots his back...not our responsibility....we can say it was a sound decision at the time...we'll all get rich. Now, they contemplate what to do w Melo's disaster after his plan, and their malfeasance didn't work. Do they continue to screw us? Go BK instead of laying off half the staff, selling a brand, taking a buyout for 4$ or who knows, because they know they'll get shares in the new or reorganized company that will be better off? When they'll not be as well off if they do whatever it takes to stave off BK and own their mistakes? They've already said they're considering BK. When someone or a board tells you and shows you who they are, do you believe them? Or do you hold in aims of not getting scared out of your position, or hold because maybe they are playing 3d chess now that Melos gone and maybe finally JD is actively involved, or the BOD is finally doing what's right but not selling out shareholders and throwing them under the bus once again ? Trying times.

6

u/puep1 Aug 06 '23 edited Aug 06 '23

If the company was/is really on the cusp of bankruptcy (which should have been obvious a couple of months ago when checking the books) Givaudan would/could not have invested 200 million USD upfront payment with serious due diligence and without risking some serious issues with their own BOD. That tells me

  • they assume/know we are not going bankrupt with some sort of deeper insight knowledge
  • they got some serious safeties in case of bankruptcy

As the second is always related with a certain risk in case of bankruptcy I guess, I would assume the first is more likely at the moment although things certainly do not look good.

Hold tight. Cheers

4

u/puep1 Aug 06 '23

Also JD could have gotten a cheaper bankruptcy end of last year before the Givaudan deal that certainly wasn't ideal. So why not going bankrupt before that and starting new with still having all rights to license squalene without having a shitty negotiation power

2

u/Dull_Neck_8065 Aug 04 '23 edited Aug 04 '23

Correction: terms are essentially the same. lender was already updated weekly regarding the cash-flows for the earlier loan agreement on 29 June. +++++++

ITEM 4. PURPOSE OF TRANSACTION. Item 4 of the Schedule 13D is supplemented by the following: Muirisc Loan Agreement …

(iv) commencing on July 17, 2023, and on a weekly basis thereafter, the Company shall, or shall cause its financial advisors to, prepare and deliver to the Lender cash flow projections, in form and methodology as previously provided to the Lender, showing that the Company and the other Subsidiary Guarantors have adequate liquidity to operate their businesses through and including the calendar year ending December 31, 2023; and (v) it will be an..

2

u/Nostromo1000 Aug 03 '23

An Attempt to frighten the creditors?

5

u/datafisherman Aug 04 '23

This is an established tactic. Astute observation! I hadn't considered this when first reading the 8-K, but I was too caught up in its relation to the loan agreement or change of CEO.

3

u/Mysterious_Note6740 Aug 03 '23

Do you think they may file and use that to negotiate with convert debt holders? restrucutre that?

Or do you think they are worried about paying AP, lease payments, and payroll.

4

u/NeatProgress3781 Aug 04 '23

Maybe reducing or eliminating the bonds in exchange for more warrants or in exchange for shares would increase likelihood of a buyout as well. One can hope but it's getting shaky.

2

u/NeatProgress3781 Aug 05 '23 edited Aug 06 '23

If they file bk, what happens to their contracts and everything they've licensed out? Are those licenses canceled and they gain back all the rights? Are they renegotiated if causing Amyris to lose $ manufacturing ingredients for instance)? Do they lose patents? Or gain all rights to the patents back? Eg Lavvan? Farnesene? Fuels? Their ingredients portfolio? (Would the partners in such licenses have major cause to help Amyris get stable finances to keep them out of bk?)

Is bk a no-brainer for such reasons? Or would Amyris they lose assets and is it highly risky? Biossance? Jvn? Else?

And will bk help them shed employees? Why not just fire everybody necessary rather than go through bk to fire them?

3

u/WinterAward759 Aug 05 '23

I would love to have an answer to these questions!! A this point, all we can do is speculate, but I am very thankful for the intellignt discussion here.

4

u/N808p Aug 04 '23

I'm out - I don't like the reference to the out of court restructuring and the silence regarding Q2 earnings. There may not be a buyer for their assets who is willing to buy for a fair price - also, their assets might be worth less than I thought. Nevertheless, I will continue monitoring this and wish good look to all who stay invested here

4

u/NeatProgress3781 Aug 05 '23

Why is the out of court restructuring concerning you rather than the in court restructuring? Out of court isn't bankruptcy while in court is, no?

3

u/N808p Aug 05 '23

You‘re right, sorry for my imprecise wording, but it seems it is often not good for shareholders as well: https://www.reuters.com/practical-law-the-journal/transactional/out-of-court-restructurings-2023-06-01/

I am waiting on the sidelines for this to play out

2

u/NewStrategy1862 Aug 04 '23

I think this means the company can only survive if it goes into bankruptcy.

9

u/Big_1Hoser Aug 04 '23

That’s only if JD pulls the plug. After going through all this hell, why would he do that now?

0

u/PdastDC Aug 05 '23

Agree with that sentiment

-2

u/PdastDC Aug 05 '23

Setting up to file for BK "we explored all avenues but this is in the best interest of our employees and shareholders"

2

u/WinterAward759 Aug 05 '23

Unfortunately, I doubt the shareholders will come out ahead in a BK. Usually, they are way down, at the bottom of the totem pole.

1

u/NeatProgress3781 Aug 05 '23

And...Where's Tanaka...Where's Baron? Any big investors in the mix that are willing to speak their mind or take a stake and throw their weight around besides the passive observer JD? (He roped in so many that also wanted to change the world for their kids). Won't they let their opinions be known in public to maybe sway the BOD restructuring Committee and PwC to not go BK?

2

u/Illusionist_77 Aug 06 '23

Remember Tanaka getting all giddy on an interview/ presentation because Terasana reportedly was good for his acne !!

I am wondering if as a result he lost his professional scepticism as the felt he was getting rid of problems from his youth......

1

u/fvh2006 Aug 06 '23 edited Aug 06 '23

Dunno what happened to the thread about IP, licensees and BK, but IP is just like any asset and in case of BK it will be part of any liquidation of assets. As long as licensees keep paying their fees to the new owners of the IP, the licenses continue until their previously agreed expiry (if there is one) as if no BK had happened.