It was not that long ago that GAMCO INVESTORS INC. saw its credit rating hurt by an S&P downgrade, sort of. S&P put the parent of Gabelli Funds credit rating outlook at Negative. And today, we just got an SEC Filing showing that GAMCO was filing to sell up to $400 million in securities.
When S&P cut the rating, it cited lower assets under management and therefore a reduction in revenue with weakened its cash flow and interest coverage. S&P Noted that if GAMCO cannot improve its cash-flow margins and interest coverage, it could lower the ratings. Simultaneously, it did affirmed its ‘BBB/A-2’ counterparty credit rating.
This is a mixed securities shelf for Debt Securities, Preferred Stock, Common Stock, Stock Purchase Contracts, and Stock Purchase Units. The filing noted that these securities registered may be sold separately, together, or as units.
The filing noted the use of proceeds “will be used for general corporate purposes. These purposes may include, but are not limited to, working capital, including the expansion of our business through new investment product offerings, enhanced distribution and marketing of existing investment products and strategic acquisitions as opportunities arise.”
No underwriters were mentioned, nor were any terms and conditions.
Gabelli’s shares are down close to 2% today at $43.99 and its 52-week trading range is $21.66 to $68.52. For a comparison, the stock’s market cap is now $1.22 billion. Interestingly enough, its most recent balance sheet seen (March 31) showed some $393.8 million in cash and an additional $243.8 million in long-term investments. Those liabilities were broken down as a total of $254.68 million, and of that total some $204.1 million was listed as long-term debt.
The short interest is a bit high considering the size, and this is important considering the value of the stock. It was listed as 566,085 shares, which compares to 57,337 average daily volume and is a day-to-cover ratio of 9.87 days. There have been some who have been puzzled by the premium values over at GAMCO compared to other investment manager firms.
This new filing may be to address some of the S&P issues brought up. If not, we can’t figure out what the firm needs the funds for. Not unless Mario Gabelli and friends are looking at an acquisition.
Jon C. Ogg
July 27, 2009