Muddy Waters' New Short: Tutor Perinin

Tutor Perinin Corp TPC is the latest short play for Muddy Waters Capital. In a report on the company, Muddy Waters focuses on the company’s lack of cash flow and questionable balance sheet.

While the firm believes that bullish Wall Street analysts are ignoring Tutor’s issues, banks are not. Muddy Waters claims that Tutor recently became subject to a new set of liquidity covenants, including the implementation of a minimum liquidity requirement. In addition, Muddy Waters claims the company’s loan agreement has been modified six times in the past five years to adjust for weak EBITDA.

“We believe these kinds of changes are typical of a credit facility with distressed or CCC rated credits,” the firm notes.

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Muddy Waters believes liquidity could be a major short-term issue for Tutor as well. While the company reported $93.6 million in cash at the end of Q2, the report points out that nearly 80 percent of that cash is tied up in JVs. That leaves only $19 million in cash for Tutor’s “unpredictable, negative free cash flow business.”

Muddy Waters believes $19 million cash on hand, $145.8 million left in unused revolver capacity and $600 million in maturities due in 2018 is a recipe for disaster.

Tutor shares are down more than 6 percent in early Thursday trading.