Update: Penn West Receives Additional Waiver Of Defaults

| About: Penn West (PWE)


Penn West obtains waiver of defaults from holders of its senior unsecured notes.

As a result, the cure period for such defaults has been pushed until October 14, 2014.

These matters are a related to an ongoing internal review of accounting practices.

I remain cautious of Penn West’s stock and would avoid it for now.

Investors in Penn West (NYSE:PWE) finally received some good news last week. In an August 21 press release, the company noted that it had obtained waiver of defaults from holders of its senior unsecured notes. These waivers are necessary given the issues related to Penn West's internal review of accounting practices as noted in my recent article.

When coupled with the previous announcement in which the company obtained waivers for its bank facility, the cure period (AKA grace period) for such defaults has been pushed out to October 14, 2014. Penn West expects to complete the restatement of its historical results and file its Q2 2014 results no later than October 14, 2014, which should cure these technical defaults while maintaining the notes on existing terms.

With these waivers, Penn West now has some certainty in regards to its major lending agreements. This in and of itself removes a fair amount of risk with the stock. That being said, I am still not a fan. While Penn West's sins are minor (classifying operating expenses as capital expenditures and royalty expenses), the possibility of a "financial roach motel" has to be considered. However, for those with an ironclad investing stomach, Penn West's current valuation is at bargain bin levels, especially when factoring in its rather successful ongoing turnaround.

Disclaimer: The opinions in this article are for informational purposes only and should not be construed as a recommendation to buy or sell the stocks mentioned. Please do your own due diligence before making any investment decision.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

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