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Pep Boys - Manny, Moe & Jack Message Board

  • shorthighcoverlower shorthighcoverlower Feb 8, 2009 11:15 AM Flag

    senior subordinated notes -cusip # 713278aq2

    PBY's 7.50% senior subordinated notes, maturing 2014 are the way to prosperity.Selling at about $490 a bond and paying a 15% annual payout, the holder can enjoy a hell of a return if he holds to maturity in five years. The holder will get $1000 ( 100% return-he will essentially double his money from the bond) at maturity as well as collect 15% for the next five years (75%) from the coupon payment for a grand total of 175% equating to a tasty 35% per annum return.The bond is of course safer than the common, but its reward is limited to 175%, while the common stock has no limit on its potential and could be up 10 fold within the same timeframe if PBY starts to get its act together, and remember, PBY common shareholders are also receiving more than an 8% dividend yield based on PBY's current price considering its cash payout of 28 cents per year. Although the bond is below investment grade, it represents compelling value.

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