In case we really are headed towards bankruptcy - that's still not very likely but is nonetheless a possibility - I was wondering what happens to severances and any similar payouts? Do people who are laid off during a bankruptcy receive a severance? And what happens if somebody was laid off before or accepted a VSP and had still not received their payout? Is that frozen as well? Considered null and void?
15 replies (most recent on top)
In Chap 11 your OXY shares become less valuable than a snack size bag of cheetos.
What happens to EEs unvested RSUs if a company files Ch. 11? What about vested RSUs that have not been cashed out?
What happens to Oxy shares held in EEs 401ks in event of Ch. 11? Are supplemental retirement plans still honored?
Scary times and only more questions
In terms of bankruptcy y’all are comparing apples and oranges.
Zero chance or close to it of Oxy being liquidated (chapter 7)
Significantly larger chance of Oxy being reorganized (chapter 11).
If VH and Icahn factions (mediated by Chazen) can’t make a deal then chapter 11 invoked and then a trustee makes the decisions. No defaults, but some bond holders may accept equity for renegotiation of terms. Low oil prices for longer time more likely for filing chapter 11. Magic price for Oxy about $40 to $45/bbl?
From the original question about severance payments, chapter 7 might put some portions at peril, chapter 11 less likely. Overall, might be best to get all severance paid as a lump sum rather than paid out over a year? Depending on taxes.
Not a big fan of Oxy’s VH and EC’s financial decision making so far but new BOD may be more clear-eyed and efficient. Icahn wants his money back with a profit.
That’s right - if you think the chances of an Oxy BK are higher than what the price of the default swap indicates, you should buy the default swap. You will then get rich if Oxy defaults.
The question posed was what is the chance of Oxy bankruptcy - the current market says it’s a lot less than most commenters here think. They can put their money where their mouths are (if they have any left) and place their bet.
- Takes into account ESTIMATES of all future risks....
Happy now? That’s how financial markets operate - go back to school and take Finance 101
“... takes into account all future risks...”
If you believe that I have a bridge in Brooklyn for sale.
If you know that for a fact you should be a multi-trillionaire by now.
How about default risk assessments in 2008-2009?
Odds of bankruptcy can be estimated by price of Oxy credit default swaps. I don’t have a Bloomberg in front of me but I know the CDS price for one and five years is way below 25% chance of default. A bankruptcy filing would happen after a credit default.
- S.: the CDS pricing takes into account all future risk (probability distributions of oil prices, potential events, etc).
douchebags are going bankrupt. feel sorry for some folks but middlemen deserved this!
@vuz+151IoPdX Don't take your hope high. Saudi cannot afford a new war. They have 30k spoiled useless members of Saud family to feed. Their oil should be flowing constantly at $80pb for those guys to have their belly full! So OXY needs to come up with a better plan than hope for a war.
Read this article on "Will I get my severance if company goes bankrupt"...
https://www.bankrate.com/finance/debt/collect-severance-from-bankrupt-employer.aspx
Quantification of how “not likely” that Oxy will go bankrupt?
All depends on oil prices and how fast oil prices rebound or not. Oxy needs minimum of $40/bbl to barely survive, $50/bbl to get to paying off any of the $6.5B in debt due in 2021.
And Chapter 11 is not total liquidation. Whether Oxy does Chapter 11 or not, they still need to sell off some assets (e.g., OxyChem? to Buffett to cancel out his $10B in preferred shares and $200MM per quarter interest payments) and then trade some equity to bond holders to forgive debt. Thus diluting shareholders even more.
I’d put Chapter 11 filing odds at 25% to 30% by 2Q 2021. Not likely but not good either. That should allow all severances, VSP, COC to all be paid out.
Oxy also not doing a very good job of selling APC assets, delays have hurt their upside. No buyers in current environment.
Also, if bankruptcy happens bond holders have much more recourse and access ( lawyers) than severed employees. Employees have to file claims to get paid. Lawyers aren’t free and they delay, delay, delay... to get paid even more.
As an ex-Oxy EE, it makes me unhappy to see the fate of Oxy being decided by a contest between the proven incompetent VH (and her EC) and corporate raider Icahn. Icahn’s history with Hertz (still going on) is a cautionary tale for Oxy. Neither group gives a day-old, dried pigeon c-ap about the employees.
Icahn wants his cash back with a tidy profit.
Buffett looks like a kindly old dude but he made a deal with VH that would make a loan shark envious.
Unfortunately, the best hope for Oxy would be a war in the Middle East between Iran and Saudi Arabia.
As it stands now, all the outstanding bond debt is unsecured. Therefore severance would not “stand behind” this debt.
Also, Oxy is not “likely” to go bankrupt. If that were so, the unsecured bonds would not be trading for 70 to 80 cents on the dollar, and the equity market cap would be closer to zero, not $13 billion.
It amazes me how many folks don't realize this. This is their way of fleecing employees out of normal severance agreements. Ask for as much as you want, but in the end they're just going to lay off whomever they were going to already, only for much less money.
I was laid off in the Enron bankruptcy and we got no severance. When a company files for bankruptcy, the employees go way down on the priority list. We got random checks over the following few years from class action settlements, but most checks were way less than $100. Don't count on any severance, and bankruptcy is pretty darn likely for Oxy the way things look now. The reason they are asking y'all to bid on severance now is because they can't even afford to lay people off under the current severance policy. If they could, they would do it in a heart beat. That is why people asking for 24 months of severance is ridiculous. You may deserve it, but they "ain't got it" to pay you.
OP
Check out earlier thread on “CoC in Bankruptcy—LAPC” that was posted 4-5 days ago.
Lots of “iffiness” in the bankruptcy laws, but all VSPERS, laid-off employees owed severance, etc... are unsecured creditors who get behind all secured creditors, bond holders...
Only shareholders are behind “unsecured creditors.”
According to previous post, laid-off employees are can have some “priority”unsecured creditor funds reserved for them but only up to maximum of $13,650.
Note that unsecured creditors have to file a request with bankruptcy court to make their claim valid.
The bad news is that unsecured creditors often get only pennies on the dollar and any payments takes years.