SSRAP remains the best way to buy Sears bonds. It's trading at 12.50 (50 cents on the dollar, par 25 with a 7.25% coupon). The 2027, 2028 and 2032 bonds are all trading at 60 cents on the dollar or higher as of today.
I'm sure the shorts will be deeply offended even by factual articles like this. What's the matter? Doesn't fit your BS narrative that the nat gas is worthless? PRE seems to think it has value. With oil dropping could PRE be planning to sell some nat gas in Peru? Block Z-1 already reinjecting close to 6,000 boepd of nat gas and rising. Lots more to be found in block Z-1 and more onshore. How dare I offend the shorts by posting factual articles - LOL.
Rocket, good point that the new bonds being bought by EL may be in short supply. Seems to me that some owners of those new bonds should sell them and swap into other Sears bonds issues trading at a discount. The 2027, 2028 and 2032 bonds are now all trading at 57 - 62 cents on the dollar. The 7.25% par 25 SSRAP bond trust (holds the 2032 bonds and passes through interest as dividends) is trading near 13 (52 cents on the dollar) which is the biggest discount. Seems to me it would be logical for some bond holders to sell the new issue and swap into others trading at a big discount. Might generate some demand for the other bond issues. You do have a good point though, that the shorts could be stuck trying to get one particular illiquid bond issue and paying interest. Shorts could hedge the interest on the 2019's though by buying the other issues at a discount.
Disc: Long SSRAP. No position in SHLD.
FXENP is currently the top pick in the Panick Value 10. MILL-PC is covered as a watch list issue and was a former top pick back when it trading at much lower levels. Check out the Panick Value Research report if you are interested in this type of serious analysis and trading alerts of microcap high yield issues and undervalued microcap equities. Send yahoo mail to mrpanick for the latest issue.
Both are high yielding energy sector preferred issue. Which is better? At a recent price of 24 mill-pc yields 11.5% as compared to 11.1% for FXENP at a recent price of 20.89. Slight edge to Mill. The conversion option on FXENP is currently worth 2/3 of the trading price of FXENP which is not as far out of the money as for Mill-pc where the conversion value is currently only about 1/3 the trading price. Edge to FXENP. Both issues may be called at par if there is a change of control, but there is more upside to FXENP if it's called at par given the current trading price below 21. Edge to FXENP.
What about balance sheet leverage. The mill common stock 160 market cap is about 1/3 of the company's enterprise value including the debt & pref stock. The fxen common market cap of 150 mil is over 2/3 the enterprise value including the preferred stock. Major edge to FXENP due to far lower balance sheet leverage.
The Panick Value Research report is my newsletter with trading alerts on undervalued microcap distressed high yield issues such as SSRAP. Send yahoo mail to mrpanick for a copy as well as an Excel model with the yield to maturity calculation for SSRAP.
SSRAP is a 7.25% par 25 trust that holds Sears 2032 bonds and passes through the bond interest as shareholder dividends The Sears 2032 bonds have been trading higher along with the rest of the Sears bond issues. This is because Sears has raised cash with the Sears Canada rights offering. Eddie Lampert is buying 2019 bonds at par with warrants in another rights offering. If EL is buying debt at par (if you disregard the warrants) then it suggests that the debt is not going to default anytime soon. The warrants are in the money and of course bondholders would love to see them get exercised providing more cash to SHLD. The debt also traded higher on the REIT plans, which would provide more cash to SHLD.
For those who want to play the SHLD debt, the 2032 bonds last traded at 61.8 with a yield to maturity of 12.4% are not bad. However, you can get the same bonds by buying SSRAP at 13.50 (goes x-dividend later this week) and price today includes 90 cents of accrued interest. Yield to maturity of SSRAP at 13.50 as of today is 15.6%! This is the best way to play, for those who wish to follow Eddie and buy bonds.
Disc: Long SSRAP. No position or opinion on the SHLD common.
- SSRAP - Panick 10
Some selling in SSRAP muted the rally on Friday. There are several SHLD small long term bond issues and trading in them is choppy. Some of the bonds traded Friday at or near their highest levels of the year, while other issues lagged. For example the 2027 bonds closed at 64.90 on active trading which is approaching their year to date highs. The 2028 bonds were a laggard closing at 57. The difficult to trade 2042 and 2043 par 25 quarterly interest bonds were laggards closing at 12.90 and 12.85. The 2032's (underlying issue for the SSRAP bond trust) closed at 62. A very large block (more than $1 million par value) of the shorter term and more liquid SHLD 2018 bonds traded Friday at 91.6 which appears to be a new 1 year high.
So what's going on here? I think we are seeing the whole illiquid debt group move up in a choppy fashion as buyers "find" different issues. More liquid issues (like the 2018's) are moving first. I believe the bond trades well above 60 are indicative of where the group is headed. Bear in mind that 60 on the 2032 bonds is equivalent to roughly 16 on SSRAP (including accrued interest). Note that SSRAP has a higher coupon than the underlying 2032 bonds thanks to derivatives and other black magic skillfully employed by Morgan Stanley when they setup the SSRAP trust.
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- XKE - watch list
I'm raising my Risk Rating on XKE to 8 (speculative) and have become even more negative on the issue. Although the company has good short term liquidity, the bond market bond trading has gotten even worse. XKE is the microcap trust that holds Toys R Us 2021 bonds and passes through the interest as dividends. At 6.40 it's trading at a yield to maturity of 17.4%. The 2018 Toys bonds closed Friday at 58.7 to yield 24.3%. Friday's close appears to be the lowest the bonds have traded since the financial crisis in 2009.
So given the "disagreement" between XKE and the bond market bonds, how do you decide which price is "correct"? I tend to think that the larger more liquid issue is likely to be "correct" and the smaller less liquid issue is "wrong". XKE is traded mostly by retail investors and has a market cap at par of 13 mil. There are $400 mil par value of the 2018 bonds outstanding. The bond issue is traded mostly by institutions. They have Bloomberg terminals on their desk, are reading the latest analyst reports and looking at how the bank loans (not available to me) are trading. Mr. Retail investor is buying XKE because the yield is high and his wife says the Toys R Us parking lot is crowded.
Even if the professional investors are "wrong", it's likely that XKE is going to trade lower over the next couple of months (unless the bonds rally) as it "catches up" to the drop in the bonds.
I can't believe that I'm actually saying something positive about Obama, but the sanctions against Russia have been somewhat effective. Sure Putin acted tough and laughed. Since then Russia's currency, stock market and reserves are all dropping like stones and the country is headed for a recession.
PRE's corporate presentation talks about how deals and acquisitions have helped them to grow production, I think it's more likely that we'll continue to see PRE as a buyer than a target.
It indicates that Doral needs less deposits as their balance sheet shrinks. Does Attiva even know that regulators closely restrict what rates DRL can offer (based on the local market rates) as part of the consent order? Is Attiva concerned about liquidity instead of real issues they should be watching such as regulatory capital, asset sales, the PR tax case and the Q3 operating loss? Liquidity is barely in the top 5 things I'd be watching.
I have to say that I have some doubts about Attiva. Weren't they against a US mainland asset sale? That's the major reason to own the stock. Didn't they more recently tweet about CD rates from DRL which is indicative of nothing? DRL has plenty of liquidity. I would worry about the regulators, the PR tax case, asset sales, profitability and tier I capital levels. They seems to be focused on the wrong metrics.
Red is exactly right. The DRL common and even the preferred issues are highly speculative. Long or short. I give them a Risk Rating of 9 on a scale of 1 to 10 in the Panick Report and cover them as highly speculative issues. On that scale 1 is a company with no debt and strong cash flow. 10 is reserved for trading issues that are actually in bankruptcy. If the bank closes a US mainland asset sale or successfully collects a big chunk of cash from PR, then it might move out of the speculative category. Until then, it's clearly speculative.
I can see how the market takes that as a positive. When you bring in a new CEO ahead of an earnings report there is always concern it's going to be a real stinker. Results (at least from a bondholder's perspective) were stable as net debt / annualized EBIDTA has been remarkably stable over the last 3 quarters. Debt and adjusted EBIDTA are falling at about the same rate.
fb, I have the combined par value of DORLN, DORLO, DORLP and DORLL at 402 million (not counting the DORLL deferred dividends). They issues are trading around roughly 35 cents on the dollar, so we are talking about 140 mil market cap. The preferred is about 5X as big as the common.