By the end of 2014, according to ammended covenants, the company will have to have paid down debt to 4.25x from estimated leverage of 4.87x at 12/31/12 which equals approximately $59M in required debt pay down over 8 quarters. With $3.6M per quarter of free cash generating only approximately $29M over that time, the company will have to source an additional approximately $30M of cash (or $25.2M after giving consideration to scheduled principal repayments of the term loan) from other sources (generally excluding overseas cash). If this required capital comes from equity at today's price of ~$4.00, it represents approximately 33% dilution (before offering expenses). It the required capital from debt, which would have to subordinated per the Credit Agreement, it would likely carry a very high yield. At 10%, it would require $3M a year in interest payments, or approximately 17% dilution to sharheolder earnings on an after tax basis.
1) i agree with this year EBITDA guess at $95M, but i have that going up $5M per year through 2015 as they finish their plant rationalization. this also assumes europe does not fall into the ocean and die.
2) covenants are not going to be an issue, if the above happens then given the below, this thing is a double digit stock within a year or two:
CREDIT FACILITY AMENDMENT
To facilitate the above restructuring activities, on June 28, 2012, we entered into an amendment to our senior secured credit facility. Among other revisions to the credit facility, the amendment allows for additional add backs to Adjusted EBITDA annually through 2015 up to the lesser of $15.0 million or the unused portion of our allowed annual capital expenditure limit; increases the maximum leverage ratios between September of 2012 and December of 2013; amends the definition of the leverage ratio to reduce debt by unrestricted surplus cash held by the Company and increases the interest rate on the term loans by 0.75% annually for eighteen months.