Hi - please dont get me wrong. IMHO I believe Amanda will succeed in a CDR turn around. However whilst there are some positives to date, it really is early days to be declaring success. Positive cash flow is a great start - that will enable them to begin to service their debt.
However the debt is very large - I expect to see Amanda to try and restore confidence in CDR's ability to 1/. recover 2/. operate and continue to grow as a growth stock.
Once there is some light at the end of the tunnel the SP will reflect that. Once the share price is up, I then expect CDR to raise funds to reduce their debt obligation and improve the balance sheet - yes the share holders will pay - but better the shareholders get the future profit than the banks via excessive debt interest.
This all said I think CDR is under valued and once it shows some sign of recovery - even with share dilution - it will reach 50 - 60c. Great returns from current SP - but so it should be given the risk.
astoria As far as - "Do you think the banks would have rolled over $250mil of debt on the basis of a punt ?"
No I dont - but I dont believe the banks have much choice in the matter. CDR has very little current assets to cover the debt - 785 mill with 334 million of intangibles which typically aren't worth a lot with a liquidating business. The banks interests are far better served in allowing CDR to trade its way out the current difficulties - They get the bonus of receiving a large chunk of CDR's profit through interest payments over a long period. Liquidating CDR will be a huge loss of business for the banks - Easy choice really.
CDR Price at posting:
0.0¢ Sentiment: None Disclosure: Held
