As long as the current private debt is outstanding, the new deal prevents ALD from buying AFC.
ALD can buy the other public debt, but under pretty significant restrictions. It looks like ALD has to have over 100% of all obligations due in 6 months or 50% of all obligations due in 12 months on hand in cash at all times, whichever is greater. Since the first set of private notes is due 6/15/10 (within 12 months), ALD will have to wait until it accumulates half of their face, plus all other obligations due in 12 months. And it has to do it before 12/15/09, when the obligation goes to 100%. Check out 12.3 of the agreement - can be accessed through SEC on ALD's website.
That's quite a difference between 36% and 9% don't you think? I'll just assume Clarabelle is your pet pig and you're putting lipstick on. Try Koolmagoo's ploy and explain you're a "retired financial executive" while your posts show a distaste for reality and any understanding of what you discuss.
I can't refute the number, but the question is, how relevant is it given the writedowns that have occurred?
The operative words in the WSJ blog on your link are "at cost." "At Cost" includes the horrific investment in Ciena, which, I think, everybody not wearing a tinfoil hat has written down to nothing.
"At Cost" also obviously doesn't take into account the accumulated unrealized depreciation in the portfolio. Now, in theory they could write down/off the principal amount of every loan that goes non-performing in order to keep that percentage low, but the "income from operations" number can't be faked for the auditors; if you go back and look at either the 10-Q or Allied's Q2 press release, they break out the cash received from proceeds and maturities. And while it sucks that Allied made some bad/poor/untimely investments, the implication that all Allied's cash flow is from sales or liquidations is just false, and that was my original point. Ohhh, you say, "Allied's management is a bunch of criminals." Well, I wasn't long the stock at 25 or long the bonds at par.
Two other related points. S&P and the other raters have been behind the curve throughout "the crisis" at every turn, to the point, IMO, of damn near irrelevancy. Should everybody have run away or stayed away from the Allied public debt issues (when they were trading at twenty cents on the dollar) in the wake of S&P's downgrades? Perhaps not.
Also, the WSJ blog, as far as the "ballooning" of the non-accrual at cost, given when the Ciena writedown occurred, that's some wonderfully irresponsible journalism. I guess if it goes on a blog it doesn't have to be vetted by an editor or fact-checked.
Wish me luck tonight, Clarabelle's coming over, and she loves it when I apply makeup to her face.
Of course they have "cash flow." But it is not from income. I call it from "liquidation" - just like the company called it in its last conference call. It is mostly from sales, but it is also from scheduled maturities. But it is liquidation none the less. There will be less interest and dividend income, less interest payments, and less net income for the foreseeable future. Not that bad for debt holders, but a lot less upside for equity holders.
I'm just going to state this plainly, no emotion, no vitriol.
With regard to "There is no cash without selling something," you are just wrong. Say it in your best Arthur Fonzarelli face..."I was wwwwrrrrrruuueeeennnnnngggg." Allied's investment portfolio consists of both equity and debt/loans. Loans constitute the majority of their portfolio. The non-performance ("non-accrual") ratio on their loan investments is something like 9%. (Sorry I don't have my 10-Q and my slide deck from the C/C in front of me.) As koolmogul has stated, they get a bundle of cash every quarter - from the payment of interest and principal on their loans (although I believe the majority of their loans are term loans with no amortization of principal).
Presumably with the 2011-maturity notes now trading in the low 80's, ALD is facing some interesting choices with the cash they are receiving, to wit, since the YTM on the 2011 bonds is now at about the same level as what they can get in coupons on mezzanine financing, they may choose to focus more on making new investments than repurchasing their debt...although with corporate spreads being what they are, if Allied can regain their Investment Grade rating or better, they could presumably go back to the debt markets to get another low-coupon deal - possibly to even refi these 9%+ bovine scatology coupons they are paying to the extorting insurance companies.
"There ain't gonna be a rematch."
One thing to note - in addition to liquidations, ALD's portfolio debt holdings simply COME DUE. When they do, we get either paid off, or we refinance under today's tough terms. Either way, we win, and no need to sell anything.
Just in case you wondered...