% | $
Quotes you view appear here for quick access.

LB Foster Co. Message Board

  • used2bhers used2bhers Mar 5, 2007 11:47 PM Flag

    Still some problems, Bilboba

    Wow, if DM&E is the biggest thing FSTR has going for it, it's in a world of hurt! DM&E insider Bilboba talks as though FSTR stockholders will assume only profits, not huge debt, from the DM&E boondoggle. Consider the FRA's stated concerns leading to rejection of DM&E's loan request:

    (1) �DM&E�s highly leveraged financial position and the sufficiency of the collateral to secure the loan.�

    (2) �The risk that DM&E�s projected revenues could be impaired by changing market conditions in the railroad industry and the energy sector.�

    (3) �The risk that physical capacity constraint hurdles will not be easily resolved, thereby negatively impacting projected coal tonnage and system efficiency.�

    (4) �The risk that high operating costs could impact DM&E�s repayment ability, particularly when combined with tonnage limitations or the inability to increase pricing with inflation.�

    (5) �Substantial uncertainties related to the scope of the PRB construction project, including the potential for cost overruns and timing uncertainties.�

    Not a pretty picture for anyone trying to attract investors.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • If DM&E is highly leveraged, then even with a high enterprise value--bilboba2004 postulates $1b or more--then the equity value might be only a sliver of that. Is there a way to find out how must debt rests on DM&E? Perhaps it was disclosed with their FRA application? A determined investor might be able to get to it.

      Also, unless one epxects the core FSTR business to grow substantially in the next few years, the current price is simply too high, unless there is substantial value also to be had from the DM&E business. I am just trying to figure out what is a fair price.

      I simply can not rely on Gendell for all my due diligence, because he will enter and exit a position, and I will find out about it long after the fact. Also, he sometimes can gain a 'private' discounted entry that is not available to the rest of us. I will need to find my own exit point, and plan accordingly -- seeing Gendell on the holders list doesn't give me that. However, I recognize that Gendell's presence here is a positive.

      • 1 Reply to Eggplant101
      • Eggplant - good questions. $280 million in debt on $1B+ in enterprise value is NOT over-leveraged in my opinion. The FRA debt took out 100% of DM&E's mezzanine debt which was used to finance the IMRL acquisition in 2002 - all available through FRA documents and press releases. This leaves at least $1B in common value, of which FSTR owns 13.4%, and assumes no value for the $6-7B PRB project which will be privately financed now that the FRA has passed.

        The existance of smart money like Gendell and Keeley is not a reason for buying this name, but it doesn't hurt either. The reason for buying FSTR is the amazingly cheap value of the underlying business after stripping out FSTR's holdings in DM&E.

    • Besides, if its such a bad long term hold, why is John Keeley in this deal not only with his mutual fund (other people's money), but with $44 Million of his own money? I haven't seen Jeff Gendell bail out yet either, I wonder why that is? I think "long20K" makes a great point. These guys have the full complement of advisors and I'll bet they're here for a reason. Any guesses on what it is? I'll give you a hint, "long term asset management" (or is it "asset play").

    • How would you know? You don't own any of FSTR's stock remember! Like you have a clue about the quality of the asset play and the ROI. The FRA also said that it met the statutory requirements of 4 out of 5 of the required criteria. I think its a pretty attractive investment otherwise I wouldn't be here.

12.51-0.14(-1.11%)Nov 27 1:00 PMEST