It's clear if this company gets through the downturn that there is significant value in the equity, if nothing else from deleveraging. Only explanation I see for the current price is that people fear the current debt load will force the company into bankruptcy. The only covenant that looks at risk is the keeping total debt to cash flow below 6 (5.2x today). If cash flows deteriorate substantially, they could approach 6x later this year. Normally, you might assume the banks would be flexible and renegotiate covenants b/c this is a decent cash flow biz, but these are not normal times, and lenders are not acting rationally. That seems like the only scenario under which the current price makes sense. Otherwise, this is multiple bagger over next 12-24 months. Most posters appear to share that view. Any followers believe the bankruptcy case is likely? I'm curious to understand the bearish view better if there is one.
I think your take is exactly right. Even if they violate teh covenants, the cash flow is going to be too strong to NOT grant them waivers, and/or a renegotiated deal.
The Fields are going to continue to do EVERYTHING in their power to keep the company in compliance with the covenants; the desperately want to be able to continue to buy back stock, and, in the select situations where they can, to buy back debt at a discount.
so let me get this right: AIG, LEH, citigroup, BSC, countrywide, WFC, and Wachovia couldn't straighten out their finances and are gone, but the Fields can? what happens if they can't renegotiate and/or continue to buyback stock? in an environment like this, why does ETM survive when other much larger, more well capitalized, 100 year old companies couldn't? how can you say you have anything more than hope and prayer to go on? GM is down for the count, but ETM is a buy? don't know what you're smoking, but it must be some good stuff