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School Specialty Inc. Message Board

  • roeftheboef roeftheboef Feb 2, 2013 8:47 AM Flag

    Great post from Ihub about value common shares

    By Newtechinvestor

    Saturday, February 02, 2013 3:41:33 AM
    Re: None

    Post # of 217

    From company Investors website:

    "2. What value will School Specialty’s common stock have in the future?
    School Specialty cannot predict what the ultimate value of its securities may be and it remains too early to determine whether holders of the common stock will receive any distribution in the sale and Chapter 11 process. Please contact your professional investment advisor for further information."

    It's rarity for a debtor to issue that type of statement to its shareholders in light of bk proceedings. In almost all cases, debtor usually projects "no recovery" to common shareholders.

    Company had EBITDA of $34mil for the last quarter and $0.75 per share in earnings. Company is projecting $48mil in cash flow in 2013. Because of the seasonality of their business the company ran into cash problem due to onerous lenders and its debt covenants.

    Company certainly did have major headwinds due to macro economy affecting funding for schools. Everyone knows the tax receipt is down for the states and local municipalities. With that said if residential real estate has bottomed in some areas and the home builders are projecting recovery in real estate markets evidenced by appreciation in home builder stocks, then tax revenue for local government and thus funding for schools will improve. When schools needs supplies, they do not go to Wal-mart or Amazon, instead they buy from companies like School Specialty, which dominates the sector.

    School Specialty is not a bankrupted company. It is cash generating business that has cash management problem. The company's product reaches 70% of schools in the country. That is tremendous base of customers to run a profitable operation. I am certain Bayside Capital is trying to steal the company. But bankruptcy trustee and so far bond holders are objecting. Bayside will not get their way. With assets well in excess of liabilities, there is cause for formation of Equity Committee. Whether EQ is formed to press the case for recovery for common shareholders remains to be seen.

    As bk Judge Carey said, JUDGE CAREY: "It is pretty clear to me that all the parties participating here today believe there is value here to be preserved in this company." Again whether the value reaches the common shareholder remains to be seen, however preliminary numbers suggests there is potential for subtantial recovery relative to current value of equity holders.

    Sentiment: Strong Buy

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