Monday, January 23, 2012

Energy Conversion Devices ($ENER) - What Are the Notes Worth?

The real questions with ENER from a bondholder perspective are: at what rate do they continue to burn cash, how long will they continue doing so, and what are the plant & equipment worth?

They are burning cash more slowly now that they have halted production. Unfortunately, they are investing money in new equipment to keep the dream alive. As a bondholder I do not view that as a good investment.

Still, the bonds trade at less than my estimate of the current liquidation value. However, I cannot see any possible (p>.05) scenario where the bonds receive par upon maturity next year. This implies that the stock is overpriced.

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