Investment Research report

CECO Environmental Corp.

NASDAQ:
CECE
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CECO Environmental Corp.
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Research Overview

INDEX:
S&P 500
Sector:
Industrials
Position:
Short
Date:
Feb 13, 2017

After conducting a forensic financial and accounting review, Spruce Point believes CECO Environmental Corp (Nasdaq: CECE), an environmentally focused industrial company, is experiencing problems with the company's leverage ratio covenant in its credit agreement, which looks at gross leverage and includes much more debt obligations beyond just its term loan. Based on our investigation, we estimate 30% to 60% downside risk, or $4.85 - $7.25 per share.

The report highlights several key concerns with the company, including:

  • We believe that the Company is forestalling a goodwill impairment
  • Evidence that the environmental regime is likely to become increasingly unfriendly under new administration
  • We believe that the Company is mis-portraying its true debt leverage and covenant cushion
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