Clec

I own a small amount of CLEC and it's nice to see this 13% pop (I own it from 4) but I'm wondering if anyone can fill me in on how to put a value on this buyout?

I guess I can just watch it close and see what the market values it at, but is there anyway to put a number on it?

Thanks

 

its tuff since paetec is private
and we dont know their financials other than their stale s1

 

My brother knows paetec inside and out. I'll give him a shout. He's a rock star in that industry.

 

Thanks, riskarb.
The % gain is nice but I'd hate to dump it here or even at $6 and then see it at $10,$15, or $20 in a couple months.

 

My Bro's response:

As the years go on my observations are more out of date. Paetec was a real company with good people and solid backing (Madison Dearborn in Chicago). USLEC was smoke and mirrors---recip comp junkies taking a long walk off a short pier. The new money must be taking out MDP, because I know those guys would not want a piece of a company enslaved to Deutsche Banke Securities, Merrill Lynch & Co., and CIT Group. The management team from Paetec is conspicuously missing from the announcement of the future. So my guess is that US-LEC just figured out how to ditch their negative good will and purchase some revenue. MDP was probably growing impatient (venture capitalists are always looking for the “exit strategy”, but even more so after seven years), and the Paetec management team is probably burned out.



Now to your question. F*ck no.



“Cost-saving synergies are a significant element of the strategic rationale for this merger.” You’d think that with Bernie Ebbers on his way to jail, people would stop using the words he coined. None of these guys knows the first thing about affecting cost savings in this industry, nor do they have a check book big enough to pay for people who do, nor do they have the willingness to make the hard decisions or do the hard work of integration (like turning off low GM revenue).



“The combined company, he said, by 2008 expects to have EBITDA around $200 million and ‘clearly that can cover cap ex (estimated at $60 million to $70 million) and that leaves you about $140 million which more than covers the interest. We’re just refinancing as opposed to putting an ungodly amount of debt on our books. We’re not taking out new debt per se; we’re refinancing current debt.’”



Dance boy, dance! And who exactly did that “estimate” of yours? Was it someone willing to be paid with EBITDA instead of cash?



The combined company will have an average debt load of $17,000 per customer. It is highly unlikely the NPV per customer breaks into five digits. This is a bankruptcy waiting to happen.