Walter Energy: The Analysis And Probability Of A Bankruptcy
- Walter Energy's over levered capital structure is becoming too constrained to maintain its rapidly rising interest payments.
- A global supply glut of Met coal will likely take years rather than months to reverse course.
- High yield market is already betting on a restructuring, interest payments alone in the last four quarters have risen from $53 million to roughly $80 million per quarter.
- Debt service payments for fiscal year 2014 will reach an all time high at approximately 23% of revenues.
Staples: Industry Consolidation Leading To 50% Upside
- The poor quarter was negatively skewed by difficult comps against a 53rd week, unfavorable foreign exchange rates, and 109 store closures.
- The market systematically underestimates the speed at which industry consolidation will take place between Office Depot and Office Max.
- The street under appreciates Staples market leading position, as well as its growing e-commerce business.
- Private equity is likely a potential suitor in a non-levered high free cash flow retailer with significant hidden value in its online business.
- Business trades at around 10x LTM earnings, with significant free cash flow levers starting in 2015.
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