mr1derful, if you have read my posts you would know that I have modeled the entire 36million in past due AR as a write off. They could take it all in Q4 and reduce book value or they could ration it out over Q4 and 2013 quarters and it would likely reduce earnings but not reduce book value. I also model that only 1/2 of the remaining 125million in AR would need to be collectible for PSN to pay off its Line of Credit debt. And this is a business that scales down cost easily. These elements are the case for PSN to survive, and that is the basis from which I look at it. The upside will take care of itself when the current cyclical downturn in drilling reverses.

I am not saying that only 2% of receivables will default. That, as I posted, is the approximate overall default rate in Junk Bond companies in the US. And the US comprises 80% of PSN's business. As mentioned, you would have to break out the oil/gas sector of the Junk market and see what that sector default ratio is. And that covers roughly 62% of PSN's customers, as the other 38% are rated investment grade of BBB or above. And further, it would be important to know if their largest customer, which I think comprises 13% of their business, is a BBB or above credit or a junk credit. .

If PSN was to write off the entire 36 million in past due AR, and then collect anything less than 1/2 of the 125 million in non past due AR, that would be received well by the market. And further, I think they will collect some of that 36 million and much more of the 125 million than 1/2.

As you and Canadian Buck posted, my concern as well is revenue recognition. How aggressive were they, what will they have to write off and restate--that is the primary question.

And for those concerned about fraud, revenue recognition can legally run the spectrum from very conservative to very aggressive and NOT be illegal.

Yet the stock is trading a hair above book value--with all of this uncertainty surrounding it.

What will book value be when we get a more clear picture, and what multiple of book value will PSN trade at?

Depending on the news, we could well see it trade at a discount to book value before turning the corner.  But I am looking at what it takes for PSN to survive, and I think the prospects for survival is very good.

If we get clarity that PSN survives, it wil likely trade at a multiple of book value, and if some dividend at some point is reinstated, that will impact favorably as well. And, most important, when the cyclical downturn ends and a cyclical upswing takes hold things will be much brighter on the financial front for Poseidon.