With major bank stocks striking new lows, it takes a special kind of pain to be outperformed by the likes of Bank of America
Several readers inquired about the company recently, wondering whether opportunity is concealed by lingering debt concerns. Teck's massive restructuring continues, but a $607 million net loss for the fourth quarter and a credit rating demotion from Moody's to junk grade at Ba3 present challenges that may require more drastic measures to come.
Teck has moved quickly to sell its portfolio of gold assets, but the company's tenuous position has provided little leverage in the pricing of those sales. Kinross Gold
Unlike some of the more questionable deals within the banking sector, Teck could scarcely have imagined the events that turned an exciting acquisition into a recurring nightmare. Unfortunately, as alternatives fade, Teck may be forced to sell a stake in the very same asset which the company sacrificed its fiscal health to acquire: the Elk Valley Coal project. Although painful to consider, such a move could be Teck's only means of survival.
So far, asset sales have offered little progress against the $9.4 billion in remaining debt. Highlighting the degree of pessimism built into the present share price, though, Teck's cash stash of $1.4 billion amounts to more than 92% of the company's entire market capitalization. Like the ravaged bank stocks, Teck Cominco is being priced for failure. As long as the credit markets remain impaired, this Fool is in no position to second-guess that prevailing sentiment, and views any move into Teck Cominco at this juncture as extremely speculative.