First posted at HVST
The ACAP Strategic Fund's managers see a "significant scarcity of attractive asset allocation choices globally," but also a strong environment for fundamental stock picking. Q2 2021 hedge fund letters, conferences and more According to a copy of the fund's second-quarter investor update, which ValueWalk has been able to review, its managers currently hold a balanced Read More
But first Dave Lutz notes the following
Tutor Perini Corp – Liquidity Could be a Major Problem
• As of Q2, the company had $93.6 million of cash on the balance sheet. However, 79% of that cash is in JVs with access restrictions. TPC runs its unpredictable, negative free cash flow business (ex-JVs) on $19 million of cash on hand.
• With only $19 million of accessible cash on hand and $145.8 million of unused revolver capacity and relatively volatile cash flow, the looming $600 million in maturities due in 2018 (includes full draw on revolver) could be an issue.
• Access to the revolver could be an issue after Bank of America’s numerous amendments and restrictions on the facility.
Will Bank of America say “enough is enough”?
• TPC is subject to recent additional covenants regarding its liquidity, including weekly minimum liquidity requirements (based on specified available cash balances and availability under the Revolver)
• Loan agreement has been amended 6 times in 5 years, ranging from readjusting the leverage covenant higher, due to lower than expected EBITDA to higher fees and moving the maturity ahead of the bonds and lowering additional borrowing capacity.
• We believe these kinds of changes are typical of a credit facility with distressed or CCC rated credits.
• The leverage covenant is currently calculated at 3.6x vs. the covenant stepping down
to 3.25x by 4Q.
Tutor Perini Corp: 1 in 3,000
• TPC’s shareholders have voted “no” in their Say on Pay for six consecutive years
• This is more than any other company in the Russell 3000 index
Pulling It All Together
• Business that can’t consistently generate cash
• Projected earnings growth highly questionable
• Lack of management credibility
• Liquidity could become challenged
Full presentation below