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Strategies & Market Trends : Value Investing

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From: E_K_S	3/6/2006 9:21:02 PM
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Is this a "Value" play or a "Value" trap? The stock I am looking at that has potential value is Dana Corp. (DCN)http://finance.yahoo.com/q?s=dcn. Yes it is at an all time low, but some very interesting events are about to take place which will make this company an extreme "Value" play or a "Value" trap. If you look at their balance sheet, specifically their book value - $7.00/share their free flow cash flow is negative, debt is huge and the company has large potential long term liabilities in pension benefits including health care and other guaranteed benefits. The stock hit a low of $0.66/share assuming the worst as the CFO retires and in now a consultant, Ted Stenger Chief Restructuring Officer was appointed (Stenger will report to Dana's Chief Executive, Mike Burns), Mike Burns has a vested interest in seeing the company through bankruptcy (http://biz.yahoo.com/t/54/158.html) and the wild card is what GM has promised and will deliver in providing the company with retiree benefits? I believe GM will guarantee Dana Crop those retiree benefits promised in an earlier agreement or some "new" negoatiated agreement to provide Dana Corp with funds place in a separate trust account that will pay Dana retirees a percentage of those guaranteed benefits. What does this mean for Dana Corp.? They have secured $1.45 billion in funds (http://www.ohio.com/mld/beaconjournal/14032056.htm) so that they can operate during the bankruptcy from Citigroup, Bank of America NA, and JP Morgan Chase Bank but need the GM agreement described above to make this work for the longer term. What's the payoff? There could be as much as $6.00/share in potential equity if this restructure works and plays out over the next 18 to 24 months. The risk is $0.66/share. (http://quote.bloomberg.com/apps/news?pid=10000103&sid=a6I_XTCVHya0&refer=news_index) Is this a "value" trap or a "value" play? EKS

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