Still at 84 cents on the dollar for the 7.125% due in 2011. Those are the ones I'd be buying if I were MNI. Especially since Uncle Ben looks poised to slash the fed funds rate another .75% in March. MNI's overborrowing to fund the KRI deal is being rewarded by the mortgage mess... possibly saving them another $7.5 million this year. The law of unintended consequences... MNI benefits as the dollar is turned into toilet paper... who'd of thought that.... but now banks are putting floors on loan deals so a company like MNI won't be able to pay 3.5%(their new rate post Ben's next cut on the billion they have floating) anytime soon again. Bought some with an $8 handle today... won't dip in again unless I see $7... maybe next week ex-dividend?
Let me understand this. In the face of plummeting cash flow, you would have the Compnay engage in a massive use of cash to retire three year notes at 84 cents per dollar of face. I understand the beneficial effects upon interest coverage and leverage. But ... the cash flow picture (which we thought was bottoming a few months ago) now depicts unendidng deterioration. MNI may soon need the cash you would spend on debt retirement. I would suggest cost cutbacks -- albeit carefully accomplished. Unfortunately, the unions may have a say on this subject. My small investment was a bet that the cyclical aspects of revenue deterioration would turn around relatively soon. I realized that, due to debt covenants, MNI does not have the financial capability to withstand a lengthy recession. Unfortunately for me, that bet now looks like a loser. Indeed, it looks like we will have (or are having) a major recession. MNI cannot withstand any further deterioration in cash flow without severe consequences for shareholders. An 84 cents on the dollar debt buyback may look like a good deal based upon the numbers six to 12 months back. Given the numbers we have today (and deteriorating), maybe 60 or 50 cents on the dollar would be a better price. You might want to keep your powder dry.
Spette, MNI has certain covenants which they have to meet under the terms of the credit facility which extends out to 2011. Would you rather have them pay down the credit facility which will carry a 3.5% interest rate or use the money to retire debt which has a 14% yield to maturity? Paying down the notes allows them to better stay within covenants as it decreases overall debt faster(because of the discount) and increases free cash flow faster because you are reducing higher interest costs. I think you'll do fine on your MNI wager. As far as keeping the powder dry... I agree that 50 or 60 cents on the dollar would be better than 84 cents( which is why a debt downgrade would actually help MNI, now). It's almost as if we are in a bizarro world where bad news( in light of the upcoming tax refund, SP sale, and Miami sale and still strong but deteriorating cash flow) helps MNI. Look for a little bright light in ad sales when all the retailers try to time ads to match the upcoming $600 government giveaway program. When MNI bought KRI they issued 35 million shares to many people who didn't want anything to do with MNI... most of those holders are gone... the bottom fishers ( you and me) are in now and when the tide changes you might find somethig other than muck ( discounted clams with George Washington's Picture??) on your hook. deadcat