Taking off from that Godforsaken rock — Unitek gets an upgrade

As it is the case for all postings in this blog, my standard disclaimers apply for this posting.  However, since this posting discusses investments, I urge you to review the disclaimers laid out in the About section with extra diligence. Moreover, even if you have already reviewed these disclaimers in the past, you need to review them again, as they are subject to change without notice.  Do it now, and remember that whatever I say in this blog posting is simply my opinion — it is not science, it is not advice, and it is not an attempt to make you act in any way whatsoever.

General excitement

Apollo_11_first_step44 years ago, on July 21th, 2013, Apollo 11’s Command Module commenced trans-Earth injection, firing its Service Propulsion System engine for 2 1/2 minutes, setting the spacecraft on a trajectory that would roughly intersect the Earth (a course correction was needed on July 22nd, 2013.)

The day before, six and a half hours after landing the Lunar Module on the moon, Mr. Neil A. Armstrong stepped onto the moon surface and uttered:

“That’s one small step for man, one giant leap for mankind”

I have followed Unitek Global Services for a long time, and over the last six months, or so, it has not been easy with the market taking a rather dim view of the company’s outlook on the back-end of an announcement by the company that it had encountered fraud issues in one of its divisions (read about this here,) severely punishing UNTK, the company’s equity. The standard securities class action law suits followed and general chaos broke out around the relationship with the company’s lenders and DirecTV, its largest customer.

Recently, however, the tides may have turned, and Friday, after the market close, S&P engaged the thrusters that hopefully will, once and for all, take UNTK away from the magnificent desolation that it has found itself in this year.

When Apollo 11’s Command Module left orbit it had to travel 238,900 miles before it would touch-down in the Pacific Ocean and be recovered by the USS Hornet. Naturally, after the touch-down, there were plenty of celebration and NASA’s status soared.

Although 238,900 miles sounds like a lot, it was not so great a distance, when you consider that the entire mission included travels of 953,054 miles, including orbits.

UNTK does not have to go quite so far, but it does have some distance to go. However, as with Apollo 11, there is considerably less distance to go than what has been traveled and there is potential for accolades — and substantial profit.

Recently, the company announced that it has received a commitment letter for a $75 million asset-based revolving credit facility, and last Friday it announced that it had reshuffled its term loan, which is the financing equivalent to the tricky step of getting the Lunar Module off the moon and connecting with the Control Module. S&P’s upgrade, in turn, is the equivalent of the firing of the Service Propulsion System engine, pushing Unitek Global Services and UNTK towards home.

Yes, we may need a course-correction, but, clearly, the company and is now solidly on the way to complete recovery.

If you want to look at the map of the steps in recovery, you can read my earlier posting (here.)

Update

On July 26th, 2013, Unitek Global Services boosted its return velocity, announcing that it had has completed its financing efforts by amending the term loan with a maturity date in 2019. Moreover, the company announced the commitment by DirecTV to Unitek Global Services’ business, through the re-establishment of the master services agreement between the company and DirecTV, effectively commit large amount of business to Unitek Global Services for the foreseeable future.

Both of these steps were critical for the company’s return to normalcy and the market reacted positively with, among other things, an institutional buyer securing approximately 250 thousand UNTK shares on July 30th, 2013, temporarily, over an hour, or so, pushing the per share price up a staggering 12%.

So far, no course change needed….

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