Wondering if I should dump these shares in a TFSA or hold for 3-5 years.
thanks,
Paul
NFI’s balance sheet is still highly leveraged, with net debt of $1.3B, and the company was burning cash in the trailing-twelve-months of around negative $197M. NFI has liquidity of $82M in cash; the minimum liquidity requirement is around $25M. Net debt/EBITDA is 12.3x, which is quite a high leverage level. The company has just finalized a recapitalization plan, however, worth $440M. This buys it time and extends maturities, and also waives some financial covenants. It also raised more than $200M in new equity. This has put it on sounder footing, but still not solid footing. Although fundamentals show improvement in recent quarters, we are generally cautious of companies that get into trouble through being overleveraged. The stock has bounced 30% this year, and won some new contracts. In a recovery scenario investors care less about debt, and earnings leverage is very high. But, overall, the fianancial risk is still quite meaningful here, and we would not endorse the shares for anyone except the most aggressive investors.