Yesterday, we delved into the gloomy past of parking management company Central Parking
Central's latest plan for corporate salvation comes in two parts: restructuring, announced earlier this month, and a stock buyback plan, unveiled late last week. The buyback will be conducted in the form of a self-tender. Central has retained Bank of America
Unfortunately, Central is hardly in a position to spend cash on share buybacks. At the prices and share volume envisioned, the transaction could cost the company $64 million to $74 million at the very least. With $217 million in net debt already and zero free cash flow according to its recent earnings report, how can Central finance this purchase?
Admittedly, the buyback is only part of a wide-ranging and ambitious plan for restructuring the company, streamlining its operations and selling off unprofitable assets. Those are all admirable and necessary actions, but they'll still cost money to accomplish. In this Fool's opinion, Central should focus on its restructuring and get its business back on the road to positive free cash flow -- but leave it at that. By simultaneously trying to boost its stock price with a costly buyback plan, this garage operator is trying to go a bridge too far.
Park yourself for further Foolishness:
- Central Parking Hires Financial Advisor
- Gridlock at Central Parking
- Has Central Parking Stalled?
- An Imperial Sellout
Fool contributor Rich Smith has no position in any of the companies mentioned in this article.