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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Allen Furlan who wrote (12063)	2/17/2001 7:42:04 PM
From: TimbaBear	Read Replies (1) \| Respond to of 78702

Alan....Alterra Preliminary look gives a negative NetNet valuation of -$16.72/share. The good news is that they have been actively embarking on a scaling back of expansion. Holding for sale some of the completed and operational units along with some of the units still under construction. Also they are apparently in the final stages of selling out their share of some very costly joint ventures. The bad news is that they are extremely burdened by debt. I get 1.0954 BILLION in debt plus 893.7 Million in "Sale/Leaseback and synthetic lease financings" which would mean to me that they are acting as the bank and holding the mortgages on some of the units they have sold. I have a projected interest expense (on the Long Term obligations only) of about $93.85 Million. For the 9 months of their last 10Q they had gross revenues of $341.18M on which they lost money with only $52.3M in interest payments for that 9 month period. So this is a debt expressway to more debt. I don't know how much reduction in debt can be achieved through the sale of the "for sale" assets, but this is definitely a high risk speculation you have here. I don't know the complete terms of your bond. But, apparently they are convertable at 34.8 shares/thousand dollars. So, let's see.... at a current share price of $1.20, that makes $41.76 dollars back for every thousand dollars of bond face value. Or about 4 cents on the dollar. Also, the 10Q says that the debt instruments have a default clause that basically means if one is in default, they all are. Looks like a house of cards to me. If I could buy the bonds at less than 4 cents on the dollar....maybe. But I may be looking at this all wrong, I'm not a bond speculator. Timba.

To: Allen Furlan who wrote (12063)	2/18/2001 4:50:08 PM
From: TimbaBear	Respond to of 78702

Just an update....I went back through my stuff and found some formulas for bond-related info. I don't know if they are of any real value for your situation, so please don't base your actions on anything other than your own due diligence. Bond Ratio = Long Term Debt divided by Total Long Term Capital (This just gives the ratio of bond debt to total capitalization) Net Tangible Asset Bond Coverage Ratio which is (Tangible Assets - Current Liabilities)/Bond Debt (This ratio indicates what kind of bond debt coverage you have if assets are liquidated at their carrying value on the books....I would think you would want this somewhere above 1.5) Bond Interest Coverage Ratio which is (Total Operating Income + Non-Operating Income) divided by Bond Interest Expense (This gives you an idea of how much of a squeeze the interest debt is going to put on earnings....I think conservative guidelines(I might have read this in Graham) would call for 3 to 5 times coverage) Using the above formulas, I get the following numbers for ALI:(Please keep in mind that I make many mistakes, and these numbers may be totally incorrect, so please do your own calculations) Bond Ratio = .592 Net Tangible Asset Bond Coverage Ratio = 1.65 Bond Interest Coverage = 1.23 Also keep in mind that ALI has much more interest debt from here on than was reflected in the latest 10Q and you should read the "Managements's Discussion" section of the filing to see what they are saying about current and future prospects for their company. Hope this helps. Timba