RIG currently trades for less than 40% of book value, has nearly $3 Billion in cash and has a current ratio of nearly 2. It's cash flow is negative $250 million, or less than 10% of cash. If half the company's value were written off tomorrow, they would still be selling below book. (The reason they just beat on earnings is because they were doing more work at higher prices than analysts realized.) They also have a multi-billion-dollar order backlog that would provide years of work even if half of it were cancelled. I fail to see how Deutsche Bank arrives at their conclusions, though based on some of their other ratings that I've seen recently, Deutsche ratings may have become a contrarian indicator. This reminds me very much of the"analysis" being issued on RRD two years ago, just before I doubled my money on them while they paid me a 10% dividend as I waited for that to happen. (I bet with Icahn--long RIG.)
After studying today's fiscal numbers for 2104 and projections for 2015 I am betting they will survive and come out of it meaner and leaner than before.
Walter Energy has two main problems: debt and low met coal prices. According to Walter Energy's estimates, interest expense for this year will total $310 million, of which $265 million will be in cash, down from the previous estimate of $285 million in cash. Next year, cash interest expense is going to increase. This will happen because Walter Energy refinanced its debt this year several times, and the new rates were higher than the previous ones. I think that Walter Energy's 2015 cash interest expense will be at least $285 million. For the next 3 years, interest expense is the only problem that Walter Energy would have to deal with on the debt side. The first major debt repayment is scheduled for 2018, when the company will have to repay its term loan B of $978 million. However, short term agenda dominates Walter Energy's story, and 2018 is just too far away to consider. First, Walter Energy must get there as a going concern.
I am calling BS : WHERE IS A LINK TO THAT "ARTICLE" Walter Energy Seen Filing for Bankruptcy in 2015: BB&T
By Arie Shapira
Dec. 2 (Bloomberg)