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Allied Capital Corporation Alli Message Board

  • deepvalueboy deepvalueboy Mar 26, 2010 11:43 AM Flag

    You now own Ares Capital debt

    I am shocked the price of the Allied exchange traded debt is not moving up on today's announcement. Post merger vote the risk of the debt I believe is materially less which should translate into a price increase.

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    • Are the bonds going to be called? I would think they have to be cancelled and re-issued if the underlying company (ALD) no longer exists. Or can ARCC buy them on the open market (at the $19-$20 they're trading at)?

      Whatever happens, it doesn't seem like it can be bad and it could be very good for bondholders. I have the AFC bonds and I just wish I'd bought more.

      • 1 Reply to bonzoal
      • I don't think the bonds get called because they are low coupon bonds (6.88% of 2047) with duration. That said, despite the pre-merger run up in price form $16 to $19.40 I think the bonds have room to tighten further. They are now yielding about 9% to maturity in 2047. I think they have room to tighen further another 100-150 bps which would translate into a yield to maturity of 7.5%-8% or a price of 22 to 23.50 from the current price of 19.70. I bought some at 19.40 today. I think they could move quickly to my target price. Expect the Allied debt to potentially be upgraded to investment grade soon by Moody's since Ares is investment grade (BBB). They are already on positive watch.

26.21+0.51(+1.98%)Oct 25 4:00 PMEDT