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Foamex International Inc. (FMXI) Message Board

  • highway1rider highway1rider Aug 15, 2005 10:45 AM Flag

    Your input sought on FMXI

    Nice haircut, just a little off the top today. What happens now? At this price how far off are the pink sheets? What impact would converting debt to equity have? Would a reverse split have to happen? Does it make any sense to buy at these levels short term? Also, why the big drop today, when last Friday, this was what most people expected anyway? What changed?

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    • Not that familar with worldcom and Air Canada but K Mart wasn't a pre packaged deal where the existing senior lendors didn't end up with the company...Lampert ended up with the conmpany.

      I was responding to the statement that bk would protect FMXI from suits etc. I know that worlcom had many suits...and enron banks have paid millions.

    • <<Do you really think that management can wash out shareholders and subordinated debt holders in a pre packaged scenerio>>

      Yes. check out worldcom, K-mart, Air canada.

      <<Add to that that current management has never mentioned bankruptcy as an option ... blah>>

      So what? Sue them. See if you can get a penny on a dollar.

      You're too s.... to give out your opinion.

    • This is the same thing as betting on red or black at this stage. There are too many variables that are uncontrollable from a shareholder's point of view. You actually are better off betting on red or black because at least in that scenario you aren't deluding yourself about some other potential dream outcome.

      There is really no way out of this for current shareholders without having the current equity crunched into nothing in exchange for crunching the existing debt into equity and removing the interest payment. Current mgmt was right not to mention the work BK until absolutely necessary as that only serves against them with their suppliers and customers. Mgmt would not be getting a stake in the reorg-ed company. It would be the banks, the new capital that was infused and the bondholders who agreed to swap for equity. Mgmt would simply be working for salary and the remaining equity that wasn't given in the swap would be the dilution that current shareholders had to shoulder in this whole process. A dirty baby's ass is a much better looking situation than the one FMXI is facing at the moment. Take the lumps and roll the rest of the proceeds into a gold stock.

      wigg

    • You might be right that they will file chapter 11 but you're wrong about that limiting shareholder suits and avoiding environmental issues (if there are any).

      Do you really think that management can wash out shareholders and subordinated debt holders in a pre packaged scenerio, feather their own nest and become a private company owned/financed by the existing senior debtholders? Add to that that current management has never mentioned bankruptcy as an option until now and as recently as the second quarter told shareholders that the sale of the carpet cushion and current cash/credit lines were sufficient to meet this August 15 payment.

      Finally there are financial advantages (Sarbane) for private vs public but they are a drop in the bucket to the costs of operating in bankruptcy. The courts control the situation and the banks (senior lenders) lose control no matter what the intention of the pre packaged plan is.

      Debt is really the only problem with this company...they have positive operating earnings and now that Cogan is gone the bloated overhead is being phased out. They don't have any real unfunded pension issues or labor issues...it's all about the debt for now.

      Many have pointed out that long term China will prove to be the ultimate demise of the domestic suppliers and that's clearly a trend but still a way off.

      It's a coin toss but this could be one where there is a suprise....I'm sure that we'll know soon.

    • wrong:

      Foamex has some environmental issues ........BK may resolve those problems

    • Foamex will file Chapter 11. You have to look at more that the debt picture. They save $2Mil being private versus public. The Board is better protected from shareholder litigation/etc. in BK versus any other way. If I remember correctly, Foamex has some environmental issues with closed plants dating back several years and BK may resolve those problems. Any new capital investors will want to wipe the slate clean...basically Chapter 11 is Title Insurance. Shareholders will be washed out. Suppliers and customers will stay with them as long as management is upfront with them. Suppliers may come out close to whole.

    • I agree-buying at this level COULD indeed be rewarding if Chap. 11 is avoided. The risk is, of course, huge at this point. But, you are correct, this is a very speculative play which would bring very large gains if the debt/equity swap works the way you hope it will.

    • Ok non-BK swap then massive dilution and an R/S.

      Risk/reward? I think I'd want close to 20X

      Are you holding or waiting and what is the time frame?


      tia

    • Swartz, why would they be wiped out if there's a debt for equity swap vs Chapter 11? Granted any long term hold has already been wiped out as the share price has gone from $20 to $.16...don't see how those people would ever recover their costs. But buying at this level if bankruptcy is avoided could produce high returns and it should due to the high risk.

    • Highway, quick and dirty analysis....

      FMXI had reported operating earnings of $50 million for 04. Net earnings were negative due to debt expense and they also had a large income tax issue.

      LEG (their primary competitor/peer group) trades at a little over 16 times earnings thus value on operating earnings if debt is converted to equity is $800 million.

      Say they have to give the lenders 95% of the company so the existing shareholders are left with 5% or $40million divided by 24 million current shares outstanding results in a value of $1.67 per share.

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