Wednesday, November 25, 2015

Titan Needs Q3 Net Income to Increase 180% To Stay Compliant With Terms of Wells Fargo Bond

Pressure is on Titan Machinery (NASDAQ: TITN $12.31) to report a stellar 3rd quarter financial report for the period ending October 31,2015.

Titan Machinery was on the brink of going out of business in April 2012 when Wells Fargo loaned the company $150 million  (3.75% May 1,2019 maturity) save the day.

Indenture

  • The Notes were issued pursuant to an indenture, dated as of April 24, 2012 (the “Indenture”), between the Company and Wells Fargo Bank, National Association, as trustee.

    The Notes are general unsecured and unsubordinated obligations of the Company, and interest will be payable semiannually at a rate of 3.75% per annum. The Notes mature on May 1, 2019, unless earlier converted, redeemed or purchased by the Company in accordance with their terms. The Notes will be convertible at the option of the holders of the Notes under certain conditions described below. Upon conversion, the Company will pay cash up to the aggregate principal amount of converted notes and pay or deliver, as the case may be, cash, shares of Company common stock or a combination thereof, at the Company’s election, for any conversion obligation in excess thereof, subject to certain limitations described below.  The initial conversion rate for the Notes is 23.1626 shares of Company common stock per $1,000 principal amount of notes, and is subject to certain adjustments as set forth in the Indenture.


On March 9,2015 shares of TITN were halted when the company pronounced  FY2015 numbers and Titan Chairman David Meyer announced earlier this year that the company was non-compliant with the terms of a Wells Fargo covenant on January 31,2015. Titan's corporate bond was at a low of $66.50 with a 14.88% yield.

Suspicious Trading on March 9,2015 during the day. The overall market was up that day and Titan shares traded down 6%. After the close is when the Company pronounced the FY2015 year end warning and announced store closings. I am thinking inside information was leaked to someone who capitalized on the privileged news.

According to the footnotes in the 10K filed on April 15,2015, on April 10,2015 Wells Fargo made a 6th Amendment (4th in 12 months) amending the Bond covenants and revised the terms of the January 31,2015 violation so that Titan would be compliant. Bonds gained 21% by May 17,2015 closing at $80.

Terms of the 6th Amendment states Titan Machinery needs to earn $1 million in net income for the 9 months of FY2016 ending October 31,2015. For the first six months of FY2016 ending July 31,2015, Titan has already reported a loss of -($5.7 million).
TITAN Q3 report is due out anytime within the next three weeks and the company will have to earn a minimum of $6.7 million net income just for the 3rd Quarter alone or else they will be NON-Compliant with the net income covenant terms of the Bond!

A year ago the company reported 3rd quarter net income of $2.4 million. Titan will need to report a net income increase for their most recent Q3, 180% higher than a year ago Q3.

This morning John Deere announce their most recent quarter and NET INCOME declined 46%.

Equities Research Remains Bearish Titan Machinery.

Titan has a $265 million market capitalization @ $12.50.

In an SEC filing On May 7, 2015 the founder of Titan Machinery was not on the ballot for re-election to the board of directors for the June shareholder meeting. No formal announcement or 8K filing was filed announcing his plans to step down from the board. I found out simply by seeing his name was not on the ballot.

On May 11,2015 the founder announced he was resigning as president. 

3 of 8 Titan directors have resigned since May.

 October 28,2015 8K Credit Agreement Amendment 

Exhibit 10.1 of 8k  the term "Bankruptcy" appears 15 times


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