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Hecla Mining Co. Message Board

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  • axzl axzl Dec 30, 1999 7:58 AM Flag

    cumulative preferred

    HLPRB I read the HL board with great interest. I
    agree with you that it would make sense for HL to buy
    back as much of the preferred as they could get at
    these levels; but what puzzles me is why you would
    rather buy HL bonds(debt) that would pay 8 or 9% when
    you could buy HLPRB today that yields over 15%? If HL
    goes belly up, neither one will be worth much, not
    that I think HL is even close to going belly up or to
    defaulting on the HLPRB dividends.

    When HL recovers,
    HLPRB will show good capital gains in addition to the
    great dividend. Please explain your investment
    reasoning since I obviously am in the dark having bought
    HLPRB at 33 3/4 after watching it decline from
    $48.

    If HL survives, HLPRB is a great buy at these levels
    IMO; granted not as good as e-stocks if one can pick
    the right ones. IMO HL has a better chance to survive
    than most of the e-stocks, but then what do I know.
    I'm down 33% if I sell today which I won't.

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    • axzl,

      The bonds I proposed were backed by
      the precious metals themselves. Presumably Hecla has
      some real, producing mines that could put metal aside
      to deliver in the event of calamity. They might be
      able to get better terms than 8 or 9 % with this kind
      of arrangement. Perhaps a joint issue with a refiner
      like Englehard would make the issue even sweeter for
      all concerned.

      I might put a security like
      this in my IRA where I value safety and can't write
      off losses. I'm really just proposing ideas to tide
      the company over until the inevitable turning of the
      tide. There are so many artificial forces retarding
      prices now that survival is the key to play again
      another day. Issuing more common at dogmeat prices would
      simply reveal how uncreative the management is. It would
      also bury hopes that substantial investors might take
      some of the common supply out of circulation and play
      for some real money. I'll look to learn more about
      the basic metal side of HL's business at the club
      site I saw in another post. Good luck with HL_pb. I
      think you will be OK in the end but might have to sweat
      through some ommitted, cumulative dividends as a worst
      case scenario. Oh yeah - I'll be sweating with you.

      • 1 Reply to phantasm08037
      • phantasm08037, proposing to set aside any kind of
        asset including precious metals themselves that can't
        be reached or attached in the event of corporate
        clamity such as going belly up probably is not possible.
        If I remember my corporate accounting correctly, in
        the event of corporate bankruptcy any remaining
        assets are applied first to satisfy bills owed to common
        creditors first, second to pay bond holders debt
        obligations, third to pay preferred stock holders, and last to
        distribute remaining value to common
        shareholders.

        For your scenario to play out, HL would have to issue
        bonds in addition to the preferred stock which already
        exists which isn't very likely IMO since issuing debt
        instruments creates another permanent interest paying
        obligation even more binding requiring timely payment of
        interest than cumulative preferred dividends.

        The
        only way that I can see that HL common shareholders
        could benefit is if HL filed the proper notifications
        and had extra cash to buy back their preferred stock
        now in the open market at these bargain prices which
        would free the company from those preferred dividends.
        That's not very likely since they have very limited cash
        available.

        There are no free lunches to investors in public
        corporations. One has only to look at what happened to
        shareholders in RYO(Royal Oak Mines)during this past year. The
        only answer for all of us is for HL management and BOD
        to keep their act together during these tough times.
        Because of HL's diversification beyond precious metals we
        have a better chance than most precious metal
        shareholders IMO.

 
HL
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