Icahn Enterprises Shares Soar 15% On Amended Loan Agreement

Shares of Icahn Enterprises were up more than 15% in early trading on Monday after the Wall Street Journal reported that the billionaire corporate raider was getting “breathing room” from his lenders at a time when shares of his flagship IEP have been under scrutiny. 

Icahn has undertaken a substantial refinancing and amended loan agreements with his lenders that, among other things “untie his personal loans from the trading price of his company’s shares” and “increase his collateral and set up a plan to fully repay the loans in three years,” the Wall Street Journal reported. 

At least for now, the market sees this as somewhat of a pressure relief for Icahn, who faced collateral calls after his publicly listed entity came under pressure in May. Shares plunged from over $50 per share in May to plumbing a $20 handle during its lows:

Icahn owns roughly 85% of the company, which had a market value of $18 billion before the report and $10.7 billion as of Friday. The rest of the shares are primarily held by individual investors.

Roughly 60% of Icahn’s IEP shares were pledged as collateral for personal loans made to him, which prompted his lenders to privately call on him to pledge more collateral as the stock fell. 

However, as Hindenburg Research’s Nathan Anderson noted on Twitter this morning, the “breathing room” that Icahn is being offered could also resemble his air supply getting thinner. Anderson commented: “Basically, lenders have required Icahn to max out his collateral, including almost all $IEP units, while forcing full loan repayment over 3 years.”

Basically, lenders have required Icahn to max out his collateral, including almost all $IEP units, while forcing full loan repayment over 3 years.

(Or as the WSJ calls it: “breathing room”.)https://t.co/9nppDTRyAA

— Nate Anderson (@NateHindenburg) July 10, 2023

Additionally, a corresponding 8-K filed with the Securities and Exchange Commission on Monday says that Icahn’s LTV will no longer be accounted for using the market price of his IEP units, which trade at a premium to indicative NAV. Instead, LTV will be calculated using only Icahn’s Indicative NAV:

“The terms of the Loan Agreement require that distributions paid upon, or proceeds from sales of, pledged depositary units be used to prepay the loans or be pledged as additional collateral. Pursuant to the terms of the Loan Agreement, a margin call may only be triggered in the event that the loan-to-value ratio set forth in the Loan Agreement is not maintained. Unlike the previous loan agreements, for purposes of the loan-to-value ratio set forth in the Loan Agreement, the value of the pledged depositary units will be calculated based upon IEP’s indicative net asset value rather than the market price of the depositary units.”

The 8-K filed for Icahn’s amended loans show lenders giving Icahn no credit for the open market’s premium to NAV.

Also, Icahn will be required to use any $IEP distributions or unit sale proceeds to prepay his loans or be posted as additional collateral.https://t.co/uGCJWlAYSw pic.twitter.com/nZ3ogsb63X

— Nate Anderson (@NateHindenburg) July 10, 2023

Short interest in IEP soared beginning on May 2nd, when Hindenburg accused Icahn of “throwing stones” from his own glass house, claiming that shares of IEP were inflated by more than 75% and, while referring to Icahn as a “legend”, said he “has made a classic mistake of taking on too much leverage in the face of sustained losses: a combination that rarely ends well.”

“Confidence games never last forever. We expect Icahn Enterprises will be no different,” the short seller concluded on May 2. The Wall Street Journal reported that Icahn was under federal investigation following Hindenburg’s research.