One of 2 scenarios for you to decide (before market decides for...

One of 2 scenarios for you to decide (before market decides for you)

1/. Pac Brands will lose big earnings due to the bad press that it has received. Their EBIDTA will fall by 20-30% and they will not meet their debt covenants. If they are unsuccessful in renegotiating their covenants, they will go in to receivership or sell off big asset division (ie underwear division); Therefore, I believe that shareholders would still receive most if not all of their money back at current book prices (P/B ratio = 0.06!!)- even in this market!

2/. This witch hunt, media beat up will only affect earnings by small amount. PBG restructuring plan will be implemented and cost savings will ensure that profit margin increases. Debt will be paid down, by which time economy will recover, people will want to make money again, and will see that PBG is WAY underpriced.

Let me put it this way, you could (theoretically) buy all of the company's shares for $75m. They have more than this in cash. Therfore, the company is free at current SP!. Market is saying that debt is too big a problem, but with cash flow as good as theirs I see it as a very small downside risk. I am only slightly concerned about ramifications of this bad press, but if I had to bet today; I think that it will pass!! Only time will tell.

Either you will make a packet in 2-3yrs time on this one, or it could conceivably go belly-up. There is NO middle ground here. Win or lose, it is that simple.