i recall an interesting read over 30 days ago from ETFtrends site. the blurb is paste below. the contrarian upside move the last four weeks has undoubtedly had something to do with these stats. back in the summer my algo produced TLT net long as a top three idea when it was trading $108 handle. sadly it got lost in the shuffle and look at where we are now.
the long side of this trade is getting a bit overcrowded now at the present and it appears many bears on this trade did not see this move coming. there have been some pretty large bearish "bets" that continue. this will be an interesting battle because clearly supply and demand with respect to the futures arena in particular can be driven by pure insanity vs. technicals or fundamentals. just recall the melt up of oil not many years ago to the $150's.
"Bond investors are building on what some are calling the largest short position ever in Treasury futures, reports Patti Domm for CNBC. Specifically, George Goncalves, head of rate strategy at Nomura, estimates that there are some $29 billion in shorts across the Treasury futures complex, the highest post-financial crisis level."
ebit_duh_marco -- thanks for your post. that is definitely one of my issues. yes yield is great here but its all based on waiting for back end/redemption and getting paid back in actual coin. so still watching for now. are you on the equity side here?
anyone here looked at the debt side as an opportunity here? their bonds - which are senior classified and have an RR of 4 are trading around $84 handle with a YTM = nearly 12%.
looks like most of their debt is contained within this one bond float. current revs are 1.3X debt load and stock price looks like bottomed out. any input or discussion greatly welcomed and appreciated. thanks.
has anyone considered looking at the debt side here? in the last BK apparently bond holders made out just fine. looks like these bonds have a little over $150M in float size. i thought that insiders had a huge percentage on the equity side locked up.
the bonds are not rated by any of the credit agencies so no RR analysis is available on these bonds.
are people referring to the text below? my first thought is this was entered with subsidiaries. what is the relationship in terms of who is backing this loan - is it actually the entity VGR itself or the other sub companies? also unless my math is incorrect, the actual interest rate is pretty stellar/low on this development. i have seen many companies raising new debt or capital and paying hundreds of basis points more even in this interest rate environment.
so could this be possibly a combo of the fact that its pertaining to the subsidiaries and/or they got such a low interest rate - so there are basically some strings attached?
"The Credit Facility contains customary affirmative and negative covenants, including covenants that limit Liggett's, Maple's and their subsidiaries' ability to incur, create or assume certain indebtedness, to incur or assume certain liens, to purchase, hold or acquire certain investments, to declare or make certain dividends and distributions and to engage in certain mergers, consolidations and asset sales. The Credit Facility also requires the Company to comply with specified financial covenants, including that Liggett's earnings before interest, taxes, depreciation and amortization, as defined under the Credit Facility, on a trailing twelve month basis, shall not be less than $100 million if Liggett's excess availability, as defined under the Credit Facility, is less than $20 million. The covenants also require that annual capital expenditures, as defined under the Credit Facility (before a maximum carryover amount of $10 million), shall not exceed $20 million during any fiscal year. The Credit Facility also contains customary events of default."
this is perplexing. they have stellar profit margins. a ton of cash. and annual revs are greater than total outstanding debt. what am i missing here?
i hear you. that number crunching of mine was pretty close granted i did not get down to the exact number of duration days remaining vs. ytm calc. but i still think that when you are contrasting a corp with a definitive holding period vs. a perpetual preferred that you could be holding for who knows how long considerations have to be made relative to your investing disposition. i.e. if you are all in cash then you probably would not be concerned with variable.
bottom line is glad to see you got some D that low. i am really kicking myself for not stepping in on that tremendous walk down on big volume. whats even more irritating is there was allot to eat there shares wise.
normally the D's as you know have wider spreads and are not terribly liquid. so if you want to get in with size you are chasing the ask and it keeps getting pulled from you. but on that big volume day there were allot of shares to be had between $19-$23 range. timing is everything.
by getting those at $23 you should have a really nice yield going forward now. nice.
cath83sails - correct the yield on the bonds was lower today because there was an uptick on them as well.
glad to see the preferred shares have such a dramatic rebound. to answer your other question i think in this case the preferreds came down to such an insanely low spread multiple vs. yield coupled with clear panic selling yesterday on big volume i have to crunch numbers again.
eventhough the preferreds are a 100% perpetual position i dont think its necessarily fair to completely negate the potential spread between face value vs. like yesterdays price when D shares were at $19. all you could eat there on a ton too on big volume. when you have face value of $50 and an asset trades that low, there is reasonably more to consider because again -- based on bond price action this company by no means is in dire circumstances.
if the bonds were trading 40-50 handle that would be a different consideration entirely. you definitely need to track the bonds for potential leading indicator. also the preferreds are great in this situation because they are 100% ROC. so that means no implication on income stream tax side. and if you have carry forward losses, you can basically utilize the divi which will count as cap gain whenever you sell the position against it.
hindsight being 20/20 it was really stupid of me not to scoop up common yesterday. i should have known GE would do something like he did this morning. unlike most companies that just sit on their hands and watch market cap equity get sucked into oblivion these guys have proven in the past they come out and try to get ahead of this types of situations.
thanks for your post. appreciate it. any thoughts as to what happens in 2016 with the bank debt or the bonds in 2017? i do believe with the simultaneous merger and BK, the proverbial worst is behind no?
i have only witnessed one company get into big trouble shortly after a ch 11 BK and that was Saratoga resources. several years ago they were forced into ch 11 reorg BK and emerged but the bond holders made out 100%. but now only a few years later bonds are trading 25 cents on the dollar. its a micro cap oil company so by no means is this meant to be a comparison here.
an important part of this dialogue would be realize that these bonds have an RR of 6 which means in a binary worst case scenario type event you would not recover much of your investment capital. so quite often the common stock offers the best risk reward in terms of if the stock shoots up dramatically in price where the bonds have limited upside.
but as a debt trader i am very interested in these bonds. only a few months ago they were trading 75 handle vs. now at 40 handle.
with the simultaneous BK and merger development i am really curious to hear potential scenarios from astute posters on this board. the bonds are really worth considering when you see them trading at 40 cents on the dollar. one good thing about this company is yes they do have a ton of debt but they also have insane revenue numbers as well. so servicing the bonds is not going to be an issue.
the big two events will be what happens in 2016 with the bank debt and what happens with the 2017 sub debt?
don_t_panick - any updates or thoughts now on the 2017 bonds? they were trading as high as 75 handle only a few months ago. now offering at 40 handle.
found that bloomberg article with the hedge fund manager. they are talking about these 2017 bonds at 40 handle!
Dex Media Inc. (DXM)’s bonds will more than double in value to trade at par and its shares will jump to as much as 10 times current levels, according to Kyle Bass, whose Dallas-based hedge-fund firm Hayman Advisors LP made $500 million in 2007 betting against U.S. subprime mortgages.
Dex Media is a small company and a “cheap option,” Bass said today at the Ira Sohn conference in New York. Hayman owns 9.9 percent of the equity, he said.
Shares of the Dallas-Fort Worth Airport, Texas-based company surged 17.9 percent to $16.17 as of 1:41 p.m. in New York after his comments, pushing its market capitalization to $275.6 million. The company’s $219.7 million of 14 percent subordinated bonds due in January 2017 last traded March 12 at 44 cents on the dollar to yield 41.8 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Dex Media is the combined entity of phone-book publishers Dex One Corp. and SuperMedia Inc., set to merge through implementation of their companion bankruptcy reorganizations approved April 29. Lenders will be paid in full with new debt, unsecured creditors will be fully paid so long as they continue providing credit and shareholders of the two companies will share ownership of the merged business.
Hayman held 5.9 percent of the equity at the end of last year, the second-largest share of firms that report their holdings, according to data compiled Bloomberg. Franklin Resources Inc. (BEN) held 31.6 percent as of April 12.
Dex Media will have as much as $175 million in projected annual cost savings and will be able to use $1 billion in net operating losses to offset future income taxes.
greetings - anyone out there trading debt knows that it is slim pickin's out there right now with respect to high yield. over a year ago i had been tracking the DXM story/merger. i was surprised to see the 2017 bonds still trading at 40 cents on the dollar.
the equity side looks pretty strong with the stock trading where it is. there was a hedge fund manager with a very large position on the stock side, think something like 8% who was very very bullish on the 2017 bonds once the BK/reorg took place. or perhaps he meant the 1st lien bank bonds that are not publicly traded. i will have to go back and look at that again.
anyone with any thoughts or insights as to the fate of these bonds, please chime in. they redeem in only nearly 2 years exactly. the ROR would be enormous at 77% per year. are these bonds trading flat or paying interest? is the reorg completely over now? any input greatly appreciated. thanks.
this board has some astute and great posters. please don't take umbrage to my inquiry as i surmise from the 52 week pps range some of you are not happy with the what looks like $2.14 proposed buyout. its showing up right now as the #1 arb opp on m&a platforms due to the wide spread between current pps vs. proposed take out price.
any thoughts or revelations. i can imagine some of you wanted much more per pps. do you think this deal will actually close or get allot pushback from holders? thanks in advance.
any thoughts or input as to the probability percentage this deal gets done? still a decent amount of coin on the table here to be had vs. take out price. any guesses as to when this closes? thanks.
no in reality the fact that these bonds are trading at an 18% yield is not all that terrible. they have an RR of 6 so the fact that they are trading at a 27% discount is actually pretty good.
an RR of 6 means in a binary type event worst case scenario you don't get much investment capital back. so these types of bonds that are unsecured or non-lien typically will get crushed if things are really that bad. price action across the board in this sector is as such.
any bond in this space especially micro cap is taking lumps and bonds are trading same pps/yield spreads. don't get caught up in the price action of the preferreds.
this merely reflects the proper capital structure. preferreds can not yield more than bonds hence reason they are coming down. it was a great arb opportunity missed by most. i am sure some pros mades some coin here.
this is one the greatest arbs i have witnessed in along time. the preferreds were grossly over priced. the price action you are seeing the last two days is mainly due to capital structure. back in early december when GE was on kramer's show and they were chatting up the C shares; pps was trading at face value.
meanwhile the 2020 corp bonds were trading at a whopping 20% discount to par. and there is only a difference of 75 basis points between the two on their prospective interest rates.
so the bonds had a huge yield compared to where the C & D & E shares were trading. in theory preferreds always trade at a higher yield then bonds do, again because of capital structure i.e. bonds preferreds.
so now with the bonds trading at 18% yield, the preferreds are trading where they should be relative to that number. the good news is that today the bonds held firm and barely down ticked one point. so hopefully with tomorrow morning's conference call this price action can reverse a little bit.
the disparity in large part is due to the fact that there is a whopping 250 basis points difference between the C shares vs the D shares with respect to the coupon interest rate. the D shares will always trade at a much more dramatic spread on pps vs. C. but if you actually take the annual divi and divide by the pps you will find that the annualized yield is always pretty close to one another either at par or within 100 basis points.