RAIL. My now favorite cigar butt
Can you elaborate on RAIL? To me it looks like that cigar butt is all smoked up, or soon will be. I couldn't find any equity , and this from the 10-K gives me pause:
In May 2021, the Loan Parties entered into Amendment No. 2 to the Credit Agreement (the “Second Amendment”) with Lender and the Agent, pursuant to which the principal amount of the Credit Agreement was increased by $16.0 million to a total of $56.0 million (the “Additional Loan”). The Additional Loan closed and was funded on May 17, 2021. The Company incurred $0.5 million in deferred financing costs related to the Second Amendment which are presented as a reduction of the long-term debt balance and amortized on a straight-line basis to interest expense over the term of the Second Amendment. As of December 31, 2022, the interest rate on the Second Amendment under the Credit Agreement was 17.2%. The Credit Agreement contains customary affirmative and negative covenants and events of default, and is secured by a pledge of all assets of the Loan Parties.
Pursuant to the Second Amendment, in the event that the Additional Loan was not repaid in full by March 31, 2022, the Company was to issue to the Lender and/or a Lender affiliate, a warrant (the “2022 Warrant”) to purchase a number of shares of Common Stock equal to 5% of the Company’s outstanding Common Stock on a fully-diluted basis at the time the 2022 Warrant is exercised. The Company believed it was probable that the 2022 Warrant would be issued and recorded an additional Warrant liability of $7.4 million during the third quarter of 2021. The 2022 Warrant was issued on April 4, 2022 with an exercise price of $0.01 and a term of ten (10) years. As of December 31, 2022 and 2021, the 2022 Warrant was exercisable for an aggregate of 1,473,726 and zero (0) shares of Common Stock, respectively with a per share exercise price of $0.01.
Railcars ought to be a profitable business. The train operators seem to be doing well, and the cars wear out and need replacing, even if their main use seems to be ferrying piggybacked containers back and forth.
So maybe TRN, but 18 PE and 2x book seems expensive for a perpetual laggard with a boring business. And GBX has GAAP earnings, without cash flow. |
