Real Industry Inc (NASDAQ:RELY) Files for Bankruptcy Protection

Real Industry Inc (NASDAQ:RELY)

Real Industry Inc (NASDAQ:RELY) voluntarily filed for Chapter 11 bankruptcy protection, sending its stock down over 45% less than a week after the stock lost over 60% in a single day. RELY shares are currently trading around $0.30 on volume over ten times the daily average.

Real Industry Inc (NASDAQ:RELY)ban

Real Industries Bankruptcy

Real Industry Inc (NASDAQ:RELY) U.S. operations have experienced a loss of liquidity during the past year. This was mostly due to the lack of acceptable credit terms which would have enabled the company to refinance its $305 million 10% senior secured notes due January 2019. The Chapter 11 with enhanced liquidity in the form of Debtor-in-possession (DIP) financing which will include the continued use of the company’s $110 million asset-based lending facility, and up to $85 million in incremental liquidity provided by certain holders of the Senior Secured Notes.

The DIP financing also includes the conversion of $170 million of Senior Secured Notes into new notes. Subject to court approval, this DIP financing combined with funds generated from ongoing operations will be used to support Real Alloy’s normal operations during the reorganization effort under Chapter 11. Real Industry Inc (NASDAQ:RELY) has filed the customary motions in order to make operating payments during the Chapter 11 proceedings and expects to receive such approval shortly.

[Note: Not included in the Chapter 11 filings are Real Alloy’s operations in Germany, United Kingdom, Norway, Canada, and Mexico and its Goodyear, Ariz. joint venture.]

Sherman Oaks, CA-based Real Industry Inc (NASDAQ:RELY) is a holding company that seeks to create a sustainably profitable business acquiring companies that meet strict metrics with regards to value and structure. Our business strategy also seeks to take advantage of Real Industry’s U.S. federal net operating loss tax carryforwards of $916 million.

The company, through its subsidiaries, is involved in aluminum melting, processing, recycling, and alloying activities in the United States and internationally. The company operates in two segments, Real Alloy North America and Real Alloy Europe. It processes scrap aluminum and by-products. It manufactures wrought, cast, and specification or foundry alloys.

RELY Stock Performance

Real Industry Inc (NASDAQ:RELY) reported sales of $1.25 Billion for 2016. However, the company has a market capitalization of less than $20 million. Earnings have been negative since 2012 when the company posted a per share loss of (-$0.34). By 2016, that loss had grown to (-$3.71).

In mid-2016, RELY shares were hitting resistance at $9. A steady slide in the share price ensued and by August shares were meeting support around $1.75. Year-to-date, RELY stock has lost over 90% of its value. In the past week it has lost over 70% of its value.

I have no positions in any of the stocks mentioned, and have no plans to initiate any positions within the next 72 hours. All information, including any data, is provided without any guarantees of accuracy.

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About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading. Steve keeps his head in the game by looking for, and writing about, small companies that often get overlooked by the big investment firms.

Why Stone Energy Corp. (NYSE:SGY) Rocketed Today

Stone Energy Corp. (NYSE:SGY)

Stone Energy Corp. (NYSE:SGY) SGY shares closed Tuesday at $6.95 and opened today at $30.00 on the back of a 1-for-5.674558 reverse stock split. The shares quickly rose to $32.39 before retreating to the $27 handle. Prior to today’s price action, the independent oil and gas firm had not traded at these levels for about a year.

Yesterday Stone Energy Corp. (NYSE:SGY) announced that it had closed on its sale of its Appalachia properties to EQT Production Company for $527 million. The sale was forced by its plans to restructure itself and successfully come out of bankruptcy. Accordingly, yesterday the company also announced that it successfully completed the conditions precedent to emerging from chapter 11 reorganization. The reorganization includes pre-petition unsecured noteholders receiving common shares equivalent to 95% of the total outstanding shares. Pre-petition common shareholders are receiving 5% of the total outstanding shares. Additionally, the pre-petition stockholders are receiving warrants to purchase 3,529,412 new common shares, or approximately 3.529412 warrants for each 1 new common share.

The real news that sent shares skyrocketing was the release of the production report which revealed that Q4 production was about 12% better than Q3 production but a whopping 81% better than Q4 of the previous year. The market seems to have been surprised by the productivity yielded from the resumption of production at the company’s “Mary” field. Overall, Stone Energy Corp. (NYSE:SGY) reported Q4 revenues of $113 million which was about 2% better than analyst expectations.

This morning, Stone Energy Corp. (NYSE:SGY) shares were upgraded one level by both National Securities and Capital One. This follows a tough 2016 for the company when eight firms downgraded SGY shares. Prior to today, not a single analyst have the firm a rating better than “Hold”.

3/1/2017
Ticker Symbol SGY
Last Price a/o 12:30 PM EST  $                    27.83
Average Volume                1,390,000
Market Cap (mlns)  $                    37.25
Sales (mlns) $374.90
Shares Outstanding (mlns) 5.36
Share Float (mlns) 4.65
Shortable Yes
Optionable No
Inside Ownership 3.50%
Short Float 22.98%
Short Interest Ratio 0.77
Quarterly Return 63.92%
YTD Return -2.80%
Year Return -55.16%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy. 

About the author: Steve Clark is a 23-year Wall St professional with stints in M&A, risk management, and algorithm trading.