You sure don't want to be on the other side of these guys. They come with both guns a blazing.
What one needs to do is see what they're shorting and tag along. With releases like the below, it's hard for any company to stand up.
Asensio & Company: Winstar's Debt Collapse Reflects Its Cash and Operating Crisis
NEW YORK, March 19 /PRNewswire/ -- The following was issued today by Asensio & Company:
On Friday, March 16, 2000 Winstar Communications, Inc.'s 12.50% Senior Notes due 2008 (Nasdaq: WCII, $6) traded at a record low price of $400 per $1,000 bond. Winstar's senior notes traded at a current yield of 31.25% and a yield-to-maturity of 36.8%. Winstar's senior notes traded at a 60% discount to face despite being subordinate to only approximately $2.4 billion of its $6.5 billion in debt and liabilities. This price indicates that the bonds have commenced to discount Winstar's questionable accounting practices and its actual inability to service its debts.
Winstar has $1.35 billion in credit facility debt. Participations in Winstar's credit facility are traded privately and transfers were reported last week in the low 70s. This credit facility is secured by substantially all of Winstar's current and future assets, excluding assets financed by the Lucent Technologies Inc. (NYSE: LU, $9.99) credit facility. The market for Winstar's credit facility debt is indicating a total enterprise value of approximately $945 million. At $6 per share, Winstar's common stock price indicates a total enterprise value of over $7.1 billion, equal to 7.5 times the total enterprise value indicated by the credit facility sale. Winstar's accounting practices materially impact its reported results. Holders of Winstar's credit facility participations have far better information including details of asset values and receivable collections than equity analysts. We believe that the astonishing variance between the market value of Winstar's debt and its common stock results from equity analysts mistakenly relying on reported results without making the necessary accounting policies adjustments.
Winstar has recognized revenues that created a slew of uncollected items, including undisclosed receivable amounts held in other assets. Its revenues also include sales to related parties and non-core items such as equipment sales and installation services. Winstar's reported EBITDA excludes $1 billion of expenses capitalized outside of property and equipment and over $772 million of capitalized expenditures contained in property and equipment in excess of actual reported property and equipment purchases. Winstar's balance sheet includes investments in now-distressed companies carried at cost and receivable amounts from these same companies. Winstar has commingled $1.8 billion of dividend paying preferred obligations with the accounts of common stockholders, which effectively hides the dollar amount of preferred obligations, its common stockholders' actual capital deficit and the dilutive nature of the toxic preferreds. We believe that analysts have not reasonably adjusted their cash loss estimates to compensate for these accounting practices. As a result, Winstar's investor must now independently deal with these expense capitalization, revenue recognition, asset valuation and dilution issues.
Asensio & Company, Inc. is a New York-based institutional investment bank specializing in corporate valuations and equity research. Asensio & Company also specializes in investigating stock promotions and publishing research on companies it identifies as grossly overvalued, as defined. A complete documented history of Asensio's published work with securities transactions, and the firm's definition of gross overvaluation, is available on the Internet at www.asensio.com . Asensio & Company is actively engaged in short selling and advises its clients on securities it believes are overvalued. Short selling involves certain risks not associated with the purchase of stock including, but not limited to, unlimited losses and stock borrowing risks. Additional information available upon request.
Asensio & Company is a member of the National Association of Securities Dealers, CRD number 31742.
SOURCE: Asensio & Company, Inc. |
