Tutor Perini Corp - Big Ego, Big Projects, No CF: Muddy Waters

Muddy Waters On Tutor Perini Corp – Big Projects, Bigger Ego, No Cash Flow [SLIDES]

Muddy Waters On Tutor Perini Corp Big Projects Bigger Ego No Cash Flow [SLIDES] from Sohn San FranciscoConference yesterday – good notes on that from Market Folly

First posted at HVST

H/T Zach Kouwe

But first Dave Lutz notes the following

John Rende of Copernicus capital – Bullish BMRN · Neal Kauffman, Hillair capital – Bullish SYRX · Joel Drescher – Drescher capital – Bullish on SIG · John Melsom – Omni event fund – Bullish SYT [drizzle]· Marcato’s McGuire – Bullish BWLD · Pimco’s Mihir Worah – Buying REITs relative to the S&P / Long Nat Gas trade / volatility going up · Social Capital’s Chamath Palihapitiya – Bullish WDAY · Harvest Capital – Jeff Osher – Bullish SATS · JFL Capital – Joe Lawlor – Short IPO.LN · Muddy Waters’ Carson Block – Short TPC · Grantham, Mayo’s Arjun Divecha – Bullish Indian financials · Sun Valley Gold’s Peter Palmedo – Bullish Gold · ValueAct – Bullish MS

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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.

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Banks However…
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.

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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

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Pulling It All Together
• Business that can’t consistently generate cash
• Projected earnings growth highly questionable
• Lack of management credibility
• Liquidity could become challenged

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Full presentation below

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