$200m (+15m) sen unsec cb coming tonight from MER: Terms: 7yr, 3.5-4% up 30-35%, full protections. UOP = buyback unsec debt. If you like recovery plays, then you’ll like this: Mfg biz suffered in recession but now seeing upturn. Liq is issue (50% debt secured, credit facilities due this yr, little cash on b/s fcf -ve). LTM ebitda = 80m, fcf = -49m, lev 5.9x, pf cash = 72m debt =474m
we’d use L+650. No leaps, 2 yr 90d 10%/50 ile =50/67 but adv = 314k. so given that + – gamma, we’ll cap vol at 35%. Theo = 105.5
Again, it;s a credit turnaround play so x/over inerest is evitble. going to keep this one short – BUY
GBX is a leading rail car mfg in NA and Europe. Also in refurb & svc biz (>50% rev) & leasing mgmt services, provided stability as mfg biz was hard hit by downturn w/sales down > 50%. Seeing indications of upturn w/expected FY11 deliveries 9k-11k, vs FY10 actual 2.55k. Lev high due to debt funded acq prior to downturn. All secured credit fac come due this year. Co burning cash as mfg ramps up & cap-ex on rise after several yrs constrained.Liquidity is a concern. Nearly 1/2 debt secured.
COMPANY
* GBX is one of the leading designers, manufacturers and marketers of railroad freight car equipment in North America and Europe, a manufacturer and marketer of ocean-going marine barges in North America and a leading provider of wheel services, railcar refurbishment and parts, leasing and other services to the railroad and related transportation industries in North America.
NEW CONVERT DEAL
* This morning, GBX announced a proposed offering of $200MM ($15MM shoe) Convertible Sr. Notes due 2018.
* 144a, 3.50-4.00%, 30-35% prem, NC-life, no puts, div and t.o. protected, proceeds for tender offer (see below), GS & ML books.
TENDER OFFER FOR 8.375% SR. NOTES
* GBX also announced today that it has commenced a cash tender offer for any and all of its $253MM outstanding 8.375% Sr. Notes due 2015.
* Offer will expire on 4/27/11. Holders who validly tender by 4/12/11 will receive $1,031.67 per $1,000 in principal. Any Notes validly tendered after 4/12/11 but before expiration will receive $1,021.67 per $1,000 in principal.
* The offer is contigent on GBX receiving the $200MM in proceeds from the new convert deal.
EQUITY DEAL
* On 12/16/11, GBX closed a public offering of 3MM shares of common stock. The Co received net proceeds of $62.9MM, which may be used for capital spending and/or repayment of debt.
CREDIT STATS (as of 11/30/10, pro-forma for the equity deal, the new convert deal, and assuming all 8.375% Sr. Notes are tendered with cash balance)
Cash & Equivs = $80MM
Availability = $96MM under $100MM Sr. Secured Revolver, expiring 11/2011
Property, Plant & Equipment, net = $139MM
Debt = $507MM, consisting of:
* $10MM Sr. Secured Revolving Notes, expires 11/2011
* $68MM 2.375% Sr. Unsecured Converts, putable at par 5/2013
* $214MM Sr. Secured Term Loan, majority due in 2015
* $215MM New Sr. Unsecured Converts, due 4/2018
Debt Maturity Schedule (as of 8/30/10, pro-forma for new convert)
2011 = $5MM
2012 = $76MM
2013 = $72MM
2014 = $85MM
2015 = $55MM
Thereafter = $215MM
Q EBITDA = $19MM
T12 EBITDA = $86MM
FY10 (Aug) EBITDA = $84MM
FY11 EBITDA Consensus Est. = $117MM
FY12 EBITDA Consensus Est. = $152MM
Q FCF (CFO – CapEx) = $(59)MM
T12 FCF = $(49)MM
MktCap = $672MM (stock is down 4.2% today)
Debt / (Debt + MktCap) = 42.9%
Debt / Ann. EBITDA = 6.7x
Debt / 2011E EBITDA = 4.3x
EBITDA / Int Exp = 2.2x
(EBITDA – CapEx) / Int Exp = 0.9x