Slojab, when did you start following this board? No wonder you stopped posting on buzz. You finally found a pink sheet company that is a SEC reporting company.
I have a long position here as a gamble. Know a great deal about this company from 10Q/10K filings and other sources. This company will follow one of three scenarious:
Scenario 1) Banks force it into Bankrupcy. Company already violated covenants once in last 6 months and renegotiated covenants. Another violation of covenants could spell doom. However, banks much more willing to negotiate because from last 10Q, I believe total liabilities exceed total tangible assets: Total Liabilities=$1390,Total Assets less Goodwill and intangible assets)= (1,490-212-90-53)= $1135. Banks would take a significant haircut in a BK. I don't believe current CEO wants BK because unlike the first time he took the company through BK, he has too much to lose this time. The other issue that makes BK unlikely is that Debtor In Possession (DIP) financing would be extremely difficult to get in current environment.
Scenario 2) Suppliers receive Loans. If Suppliers get loans from the government, or possibly pass through Loans from OEMs, then company weathers the recession/depression storm. If company survives this, can have a great future as demand for vehicles spikes due to current artificial supression of vehicle demand (i.e. lack of loans to auto buyers). Company is a major supplier of wheels to all major OEMs across the globe. With increased demand for wheels, share price should recover significantly.
Scenario 3) A change of control occurs. At current Share price it would be easy for an institution or fund to purchase enough stock to take control of the company and replace existing management team. This scenarion can actually happen in one of two ways, buying up bonds and forcing change of controll through BK process, or buying up stock at depressed levels. Because of expense and difficulty of getting DIP financing, I think the buying stock route is more cost effective. Less than $10Mill(assumes appreciation of current price) gets them control. But then they will need additional cash to run business through downturn AND may need additional cash to get captial spending back to levels that allow equipment to be maintained. But I think the cash infusion would be well worth the investment because the upside is huge.
What I am not sure about is if banks have any kind of change of control provisions in lending agreement.
In my opinion, scenario 3 would be best for current shareholders. Current management has inflated SG&A over the last 7 years compared to competitors like Superior (SUP). Prior Hayes Lemmerz management ran company SG&A at peer group average of 4% of sales, while current Management raised it to 7-8%. Company would be in much better shape had SG&A been maintained at 4% of sales over last 7 years. This is a great opportunity for a fund with a cash reserver that can help weather the current industry storm.
