Chiggels, u just made the most common mistake In valuing a company. You forgot to take into account the $400 million debt that BKN has. Here's how I value bkn. According to their annual report they had $536 mill in assets. Now minus the $400 million in debt that is owed on these assets and bkn has an equity value of about $136 mill. That figure is actually around what BKNs current market cap is at today's shareprice, so the market is pricing this about right. The bigger problems are that BKN is in real danger of breaching debt covenants which are set at 3.5x earnings. With yesterday's bombshell that business has softened further with EBITDA guidance of around $110 mil , by my calculation 3.5 x $110 mill =$385mil of maximum allowable debt, yet their debt is $400 mill putting them in breach!!!! They won't get called on this until the end of the financial year though, so if they can sell off some surplus assets they may be able to pay the debt down below the breach level. Make no mistake BKN is not cheap at today's price and it is a risky proposition. Take care and don't bet the farm on this one.
