GMXR Preferred Redux
Last year I wrote a blog about GMXR Preferred. See here:
Since then it kept paying its dividend and the stock was floating in the $14 range. The company sold some assets and used the proceeds to payoff early maturing notes and swapped out for later ones. They then did a reverse stock split in order to get its common price back up.
Things seemed to be going fine then all of a sudden come this Tuesday the company got taken to the woodshed. Reading through the newslinks the only thing I could find is the company is still short on funds for its 2013 capex, but it has grown its funds and production and is sitting on about 35.6 million BOE proved reserves. I guess what then caught other people's eyes was this:
"The Company is continuing to explore and evaluate options for its capital needs, as well as continuing to evaluate and finalize its 2013 budget for capital expenditures based on its available liquidity. In connection with its evaluation, the Company plans to retain a financial advisor to assist the Board and senior management in its ongoing exploration of a variety of financing alternatives, including a potential restructuring of the Company's balance sheet in light of its current liquidity and cash needs."
So then the rumors of BK hit and the shorts came out in full force just crushing the longs. Shades of ATPG. But if one actually runs the numbers this company is sitting on $30 million with only 6 million common outstanding. That is $5 cash per share. Their debt has been knocked down to about $400 million. Even on a firesale I have to believe their reserves would more than cover this debt.
So I bought some more preferred in the low $10 range. It closed over $11 but that is still a nice rate of return.
Actually if they liquidated, the preferred would be paid $25 a share since I see only excess funds left over for even the common. And if they sell some more assets off to improve liquidity you still are getting a great yield.
I would only use speculation money here.