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.
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