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LB Foster Co. Message Board

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  • Eggplant101 Eggplant101 Mar 6, 2007 12:08 PM Flag

    Still some problems, Bilboba

    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.

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    • 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.

 
FSTR
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