Big downgrade by TD, but still "HOLD" Here's their summary:
While Q1/13 adjusted EBITDA was essentially in line with
consensus, it was below our forecast. Further, we were disappointed by: 1)
the quarter's negative organic revenue growth rate (both on a reported and
adjusted basis); 2) IBI's continued elevated level of investment in working
capital; 3) higher net debt than we had anticipated; and 4) what we see as
limited progress in reducing headcount and improving staff utilization levels.
We are raising our risk rating to HIGH and maintaining our HOLD
recommendation. Our target price is lowered to $3.50 from $6.50.
Also of note:
Upcoming Debt Maturities: We calculate that IBI has at least $67.1 million of debt maturing by the end of
2014. While management provided little in the way of details in response to a question about its debt
maturities on the Q1/13 conference call, it did indicate that the company is considering a number of
alternatives regarding how to approach these maturities and will deal with them over the ensuing quarters. At
the end of Q1/13 IBI had $34.5 million available under its $120 million credit facility, which also has an $80
million accordion feature. Given the related party nature of the $10 million loan from the IBI Management
Partnership maturing this July, we expect that its maturity date will be extended. We note that share issuances
have historically accounted for a large portion of the settlement of the company’s notes payable (i.e., 56% in
Q1/13). While it remains to be seen precisely how IBI elects to deal with these debt maturities, we believe
that there is risk that the dividend could be further reduced in an effort to preserve cash/repay a portion
of the firm’s maturing debt.