Breather For Carl Icahn: Revised Loan Agreements and Recovery Strategy Post Short-Seller Attack

Activist investor Carl Icahn has been struggling to recover after a short-seller attack led to a 40% drop in his investment company's shares, Icahn Enterprises L.P. IEP, alarming major banks that had loaned him money as their collateral value fell.

Hindenburg Research stated in a report that IEP shares were trading at a premium of over 200% to the reported value of its assets.

Icahn and these banks have finalized amended loan agreements, disconnecting his personal loans from the trading price of his company's shares, increasing his collateral, and establishing a plan to repay the loans within three years.

It remains unclear how long IEP will continue its $2 quarterly dividend. Icahn receives his dividends in shares instead of cash.

Also Read: Cramer Calls Carl Icahn's IEP 'Too Dangerous For Me,' Says He Wants 'To See More Information'

The only factor that could trigger a margin call is the movement in the net asset value of his company's investments, reducing pressure on the share price by mitigating concerns of forced sales to meet margin calls, Wall Street Journal reported.

Icahn owns approximately 85% of IEP, worth $18 billion before the report and $10.7 billion as of Friday. Individual investors mostly own the remaining shares.

About 60% of Icahn's IEP shares were pledged as collateral for his personal loans, which led his lenders to ask him to pledge more collateral as the stock fell, the WSJ writes.

The episode highlighted an unusual period of weakness for the influential investor. Forbes estimates that his net worth has decreased by approximately $8 billion this year.

Icahn has $3.7 billion in loans and has not liquidated investments to meet margin calls. Instead, he has provided additional collateral, which now totals around $6 billion and includes his personal funds and IEP shares.

Icahn has also agreed to a repayment plan with his banks, involving a $500 million payment in September, eight quarterly payments of $87.5 million, and a final balance payment of $2.5 billion in three years.

IEP's holdings encompass an oil refinery, a meat-casing producer, and an investment unit housing Icahn's significant investments in several companies, including Illumina Inc ILMN, Xerox Holdings Corporation XRX, and Bausch Health Companies Inc BHC.

Price Action: IEP shares are up 12.10% at $32.36 during the premarket session on the last check Monday.

Photo by Insider Monkey via Flickr Creative Commons