BWNB - Babcock & Wilcox: Should You Buy The Bonds Or Preferred?

2024-04-08 13:35:51 ET

Summary

• Babcock & Wilcox's financial headwinds caused a selloff in its bonds and preferred stock, resulting in deep discounts and high yields.
• The company's net loss for its fiscal 2023 fourth quarter was $54.3 million, a significant deterioration from the previous year's net income of $2.5 million.
• A new $150 million revolving credit facility, a record low multiple to sales, and pending Fed rate cuts set BW up for a possible near-term rally.

A going concern notice issued by Babcock & Wilcox ( BW ) last month sparked a selloff in its publicly traded bonds ( BWNB ) ( BWSN ) and preferred stock ( BW.PR.A ) that has embedded deep double-digit discounts to their liquidation values and outsized yields that reflect the risk posed by the loss-making company. BW as of the end of its fiscal 2023 fourth quarter held a total debt balance of $379.5 million , up by $27 million over its year-ago comp and set against a cash, cash equivalents, and restricted cash balance of $71.3 million. BW placed the notice on liquidity challenges from losses realized on its solar contracts, with the company's net loss for the quarter at $54.3 million, a marked deterioration from a net income of $2.5 million in the year-ago comp. What's the play here?...

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