You're absolutely spot on...home builders don't buy home construction lumber from HD...Only the lumber yard dealers...HD's customers are fix it...remodel it people. So the amount of lumber they are supposedly going to carry can hardly service the interest on the debt which we all know.
Now..most here want to believe that HD is going to save the day (and its exactly what the CEO wants them to believe) and be the power house behind their exit from the gutter and their escape from the loan sharks. So the bets are on HD....and now no one yet here knows how big or small this order for fix it joe construction through HD and they have no clue on ECOB's selling margins and there is not data or anticipation of numbers on sell through. So the bet is based on all FLUFF that HD is storming and an throwing ECOB (Whom they could care less about other than a set of supplier standards they have for all vendors) a life preserver for their financial survival. Talk about a pig and a polk? This is a gamble I wouldn't make with anyone elses money.
Here's a scenario...I'm a sizable Sr. VP of a lending institution that has just witnessed a travesty in the building/ realestate mkts the likes of which we haven't seen since the great depression. ECOB's CEO gives me a call to come in and talk.... I schedule an apt. In the days before I do some banking home work to be prepared for the mtg regarding financing. Well it probably takes less than 5 mins to determine that there is nothing there for any bank much less his. So in walks the CEO on the apt day. Tells the emerging line of BS about the business...I cut to the chase and ask him for his balance sheet and then comes the big FLUFF story regarding the HD relationship. The banker stares at the balance sheet and respectfully says he can't take this before the lending comm because there is nothing there but debt. The CEO pleads with the bank...but its HD... The bank says I'm sorry but the order and margins are unknown...the future with HD is unknown...we deal with what we know.
You get the gist...so if the banks don't trust this company and have denied them...because the banks have heard every good story line there is already in spades. So why should any shareholder trust this company as their performance has been measured and they fail.... whats left to trust?
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