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Strategies & Market Trends : Value Investing

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To: E_K_S who wrote (52708)	11/5/2013 12:10:11 AM
From: Spekulatius	Read Replies (1) of 78748

Re GSE - did you read the CC transcript in seekingalpha? I don't know why you think their debt is manageable, they violated the loan covenant and that only got amended under the condition that they raise 30m$ in subordinated capital. They only had ~10% of their credit line in headroom (~15M$ out of 180M$, if my notes are correct). I looked at this when the stock was @2$ a few weeks ago, but decided that raising subordinated capital (probably preferred debt with convertible feature) will lead to tremendous dilution for shareholders. Worse, if the investment bank can't raise 30M$, i think GSE might file. One good thing about GSE is the new CEO, who came from Houston wire & Cable. That is a pretty good company and has been well managed. Even when GSE were not under financial duress, it still would be a crappy business. Their gross margins are only -about 20% and now dropped to 12%. Even the new CEO admitted that the business is lumpy and probably always will be. Low gross margins + lumpy business us just an extremely lousy combination, imo.

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