I notice that Susan Brunner is doing a brief on Cinram (TSX: CRW.UN). It is in the very boring and low-margin business of printing and distributing physical media such as CDs and DVDs.
I did some fairly serious research on this company earlier this year, and came to the conclusion that while they were likely to continue to be cash flow positive, there was no way that they would overcome their debt situation without a significant recapitalization.
The primary hit in the past year was on February 1, 2010 when 28% of their revenue stream announced they were terminating a contract. The units dove about 2/3rds and got my attention when I did research.
Their big problem is that the company, as of June 30, 2010 has a $379 million bank loan (secured) and only $125 million in cash, with a business that is not generating a whole lot of cash. The bank credit facility expires on May 5, 2011. It is more than likely that the secured creditors will take over the equity, which implies that the current value of $1.00 per unit (total market capitalization about $54 million) is vastly overpriced.
I would only start looking at the company more seriously if they traded below 20 cents, and with the recognition that the catalyst for an equity purchase would be a bank giving them a sweetheart extension deal that wasn’t too punitive to unitholders. At this point you are really gambling as opposed to investing, which is why I am not really going to look at Cinram in the future other than as a curiousity to see how their story resolves.