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 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.