i wrote you a long reply but for some reason more than 1/2 of it got cut off. ugh
i dumped those NIHD bonds in mid $75's & upper $68's and will not look back on that one. i actually floated ergen around months ago as to him wanting to possibly get in the mix down there.
but what is very interesting is that about 5 weeks or so ago, NIHD stock price had not really collapsed yet and the bonds were in the high $79's.....there was a big announcement from richard branson that in 3 years his goal is to have everyone in SA the ability to get a VM cell phone. everyone was all excited on the NIHD boards.
but i thought this is actually really bad for NIHD. since that announcement th stock price is down nearly 50% and the bonds cratered. most definitely though i could see ergen being interested in specifically their spectrum portfolio.
anyone who is savvy enough to create a new entity for the specific purpose of buying corp bonds in the open market at steep discounts is capable of allot when it comes to strategy.
maybe if NIHD bonds tank low enough, he might do the same here. but that is quite speculative at best. i have no stake or interest in NIHD at this moment, nor will I have any in the future.
figured that liqhtsquared debt was not new news but i have not been tracking BB because i know its just going to be a long wait at this point re: trust and what not.
but yeah i first went to the NIHD boards half a year ago when the nearest term bonds were trading just under $90. i saw this as a red flag because of where we were in the interest rate cycle at that point. the stock was trading at $8. people laughed at me.
then the bonds started going down and down....i had seen this before the hard way many times. and before you know it, the bonds are trading
well this will no surprise many on here and this might not be new news for some but i thought this was very interesting --how ergen was loading lightsquared debt all along on the down-low by creating a new entity for that sole specific purpose. details here from a news article posted yesterday:
Dish’s Ergen Defends LightSquared Debt Purchases as Smart
By Tiffany Kary - Dec 5, 2013 3:13 PM ET.
Billionaire Charles Ergen said his purchases of bankrupt LightSquared Inc.’s debt were smart, not illegal, and that a lawsuit challenging his $2.22 billion bid for the company should be thrown out.
In the suit in Manhattan federal court, Philip Falcone’s Harbinger Capital Partners said Ergen shouldn’t have been able to buy the debt because his two companies, Dish Network Corp. (DISH) and EchoStar Corp. (SATS), are direct competitors of LightSquared, a satellite broadband provider. Harbinger invested about $3 billion in LightSquared.
Ergen used a specially created entity to hide the purchases, buying a big enough stake to block any bankruptcy plan Dish didn’t approve of, Harbinger said. His purchases also meant that if his $2.22 billion bid for LightSquared succeeds, he will effectively be paying himself back for debt he bought at a discount. Ergen today said that he did nothing improper.
“It is smart, not illegal, when investing in the debt of a distressed or bankrupt company, to be cognizant of bankruptcy voting thresholds and strategic considerations,” he said in a court filing. “That’s how investors make money and protect their investments.”
actually blockbuster video did the same thing. they sold a $675M float of new debt and less than a year later, all the wheels fell off. in BK court it does not matter how something goes over, that is the whole point. with ATPG oil & gas, supposedly they had an infrastructure/pipeline of assets worth billions of dollars. surely their senior bonds would get 100% recovery. well in BK court turns out actua liquid vale of all those billions of dollars of assets was worth a heck of allot less money especially when factoring in multi billion dollars of debt. those bonds are not trading for literally pennies along with the blockbuster bonds.
this is not about who is right or wrong. 2014 is a make or break year for NIHD. they have to turn the corner here; get traction with retention and acquriing new subs. the cash burn and debt load will compound quite dramatically and not in a good way. obviously no one has a time machine, so its not a matter of right or wrong -- today is a matter of how much speculation or risk do you want to assume. i hope this company does turn the corner. but management coming up short this year on some critical milestones clearly spooked some folks.
one other theory no one has floated around; seems like since the revelation became public about virginmobile getting a strong foot-hold in this region, the bonds have really gain downward momentum. who knows what will happen; surely i do not, nor do you. good luck with your position.
cccbondguy - thanks & wish you the best in hanging in there. if i was putting new money to work and this was a fresh position, total different story. but having watched other bonds just keep plummeting into oblivion have to have a stop here somewhere. in hindsight as i mentioned wish i sold sooner; my stop was way to wide on this one. had i sold when my instinct was to get out at $80 i could have bought back in here now in the mid $65's. but hindsight is also 20/20 right? best of luck to you as well.................
in situations like this one specifically; the debt traders are always ahead of the curve. the equity pps will trail. i saw the exact same thing that is happening here occur with blockbuster video. the stock price was fine and one day out of nowhere the bonds tanked from the upper $88's down to the mid $65's. from there another big drop to low $52's and then just kept going down and down.
another huge down day for the bonds here. i am getting out of this position. lost a lot amount of money, but at least there is still some left at this point. right now no bidder in site. there is a monstrous seller out yet again with $5M block and he is flashing it. $1M blocks hiiting way under ask. this is a major red flag.
and all three floats are getting pounded. this is something bigger than just tax selling. if someone wanted to unload thses bonds they would not be doing so in this fashion. this is a run for the exits. i am just so annoyed i did not sell the moment it broke through $80. right now no bidder in sight not until $64. no bond with only 3 years to redemption is trading at this price handle with a 10% coupon.
based on what i have been involved with in the past, this kind of price action typically means a re-ogr is on deck or possibly worse. i wish you all the best and hope that things play out differently but i have to go based on what i see objectively here. stock price will soon be in $2's based on where the bonds are trading today.
unfortunately this is all 100% accurate. that is why the recovery rating on the actual bonds is a 5 ( a 6 would be the worst possible case scenario 10 cents on the dollar recovery) a 5 would be in the 20-30 cents range. this is very commonplace in the debt markets where you have one entity rated higher than a holdings entity or the actual debt load itself. some debt can be senior or junior or subordinate or secured or non-secured, etc. bottom line is, these NIHD bonds are not secured nor do they lien on any of the assets.
the reference to that seeking alpha article; that is an old one. and as we all know now, anything can happen in 3 years much less 3 months. when that article was written, these bonds were trading above par. too bad i did not sell. i wanted to on many occasions, but that 10% coupon kept me holding.
tax loss selling indeed. i think though out of all of the "junk" bond scenarios i have been witness to, this does have the most potential. my only apprehension is the cash burn and debt load. but in terms of product placement, their assets portfolio of spectrum, etc. its a very bullish case. just a matter of execution and getting some traction with respect to retention and acquiring new subs. at some point i will probably have to look at the equity side and some call options if they take the pps under $3
absolute relentless selling today. anyone showing up with a bid under $73 has been absolutely hammered in any size. $1M blocks getting hit at the bid price. right now there is a $5M block seller who is not even shy about showing his order.
initially it looked promising because there were some decent size bidders showing up but they were all below ask spread and unfortunately all were hit. this is not what you want to see.
so like i said this is deja vu for me. imho at this point there is no way someone could not anything unless they have a time machine portal into the future to see how 2014 pans out. clearly though some folks took to the exits well ahead of the recent call and now the selling is gaining momentum.
i was hoping with that announcement form viginmobile we could catch a break and possibly firm up a bit on price, but not based on today's price action.
thanks cccbonduy and everyone else for your comments. interesting revelation on virginmobile. i guess what is more frustrating for me is that, everytime the bonds sell off like this within a week some bad news comes out. there still has been some heavy selling in the 2016's. right now a block of over $2M face is for sale at mid $73's. its not hard to tank a bond price when a seller with a big postion wants out. i have seen it many occasions. but this has been relentless selling.
but again getting back to the conference call; it sounds like they are at a turning point. given the setbacks they had relating to the sprint shutdown which was out of their control, they seem to be doing the right things like selling off non-core assets, cutting costs, etc. it just has to be enough and they have to get some traction with respect to retention and acquiring new subs.
does anyone have any definitive DD with respect to their spectrum portfolio? i can not imagine that either DISH or virginmobile would be interested in their assets here.
i am a little behind the curve here. have you or was it ever determined by anyone here with their DD that the trust is an irrevocable type trust? because if it is of that nature, it would explain why this has been dragged out for so long. irrevocable trusts are a legal ironclad way to protect assets. the original founding walmart family members did this for decades and saved billions of dollars by having this type of structure in place.
to put it you another way; you could have hundreds of millions of dollars of assets an a irrevocable trust; could be anything, real estate, gold, cash, stocks, etc. and NONE of it would be subject to taxation. this is getting very interesting because clearly all along its pretty obvious the stores came with the package. DISH had nothing to lose. give it a shot and see what happens. they had the option all along to close the stores. if anything its an act of good faith to the court -- hey we tried -- this model is officially broken.
don't forget -- blockbuster had a huge chunk of cash when DISH got their portion of assets; so if you net out that cash vs. what DISH bought them for -- its next to peanuts. i don't see anymore headway until well into 2014. i am long a ton of their debt so looking forward to the next stage of developments.
we need to explain first to the stock folks; that bonds trade at $100 or par value of a $1000. NIHD has three separate debt floats. 1 redeems in 2016 and the other two 2019 & 2021.
the 2019's are asking $58-$59
the 2012's are asking $55-$56
the 2021's are asking $73
this means that the 2019's & 2021's are trading at 40%-%45 less than their actual par value.
i combed through that entire recent earnings call transcript and am amazed that the bonds are still getting clobbered. there is still allot to do. if this company can just turn the corner a little bit on this 3G transition things could really have a different outlook.
but the bonds are trading as if a re-org announcement was coming tomorrow. very perplexing.
so what about all of these assets and cash? the spectrum along with their cell tower holdings? well first we have to look at the debt side. they have nearly $6B in debt. what the bonds pricing is telling us is that at the end of the day when you quantify and add everything up on the asset/cash side, it comes to significantly less than $6B.
i really would like to have a constructive dialogue. there are no agendas here. BELIEVE ME IF THE COMMON STOCK HOLDERS are safe, then the bond holders do not lose any money. and that is what this is all about. we are all investors whether equity or debt. its just a little different strategy.
i have been through this sort of investment time and time again. and i can tell you unequivocally -- NO ONE is going to buy this company in the present circumstance. there is too much debt. they would either buy in a prepack or reorg or worst yet wait for a ch11 filing in the future; swoop in and by the assets for pennies on the dollar. DISH does this very astutely and has picked up a ton of spectrum and other tangible assets on the cheap. very cheap.
the only way this is going to turn around is if this company does what they say they are going to do. have to control execution, retentions, debt service, etc.
would say from real world experience that form a financial reporting perspective that this classification is pretty straight forward with broker dealers and how they report it on the annual 1099 report? thanks.
thank you for all of your diligent posts and DD. just an FYI & you probably saw my earlier post. the B shares are now trading on the pinks. have been for 3 days now under GSTXP. you can buy them right now. they have been trading between $24.40 $25.30. last trade today is $25
the record date is the 15th of every month, but the reality is you probably need to have the position before the ex-dividend date, which i think might be 2 days earlier. after that point if you sell even before the 30th of the month, you still get your divi.
if you bought $5000 worth of the A shares right now @ $22, you would pick up 227 shares and be paid a monthly dividend of $40.78. to calculate that you simply take 227 shares X face value of $25 X interest rate of 8.625% / 12 (months). this equates on an annual basis to divis of total $490
gatr55 - exactly that is what i am getting at. its not like there is a convertible option embedded with the A shares. but the news has been disseminated now for days. maybe people do not realize the B shares are actually trading and where they are trading.
would you mind elaborating for me again what you meant by your observation that you would be disappointed in GST management if the B shares were trading at a premium? do you simply mean than that they were not priced right because they should have gotten a lower interest rate since if the B shares were trading over face value the effective yield would be lower?
i am a bit perplexed at the A shares. going to just have to wait and see. the true test will be when the B shares move over to the AMEX. it could happen as early as this tuesday. but technically speaking certain preferred ipos have traded as much as 30 days on the pinks before moving.
gatr55 - you are correct. the B shares have been trading now for three days on the pinks between a range of $24.40 - $25.30. last trade today = $25. i think i am not quite understanding your DD/math. can you amplify again please on why the B shares should trade where they are. there is a yield difference of nearly 100 basis points between A shares & B shares IF you do not account for the A shares discount to face value of $25 and being unable to predict when and if they will be redeemed. or maybe its just that simple -- that the A shares are so discounted now to $22's that it is on equal footing vs. the B shares trading right around face value at no discount nor a premium. thanks.
thanks ash. appreciate your input. i will probably look at adding some more debt here. let me just let everyone know in case you did not. these 2016 NIHD bonds have a whopping 10% coupon. right now they are trading at 77 cents on the dollar so best case scenario if you things work out or if they can just hold on, you are talking about an annual yield here in the 15-17% range. not bad. guys that are loading the stock might also want to consider the bonds as an alternative. if the stock price gets low enough, i might consider adding calls myself on the stock.
i can not believe how stupid i am that i did not think of buying puts ahead of this call. stock holders could have done the same. if you read my previous threads -- i am a bond holder and was very concerned because the bond prices of the 2016 NIHD debt was tanking. there were huge $1M blocks getting dumped at will on the ask price.
let me emphasize i have no agenda here whatsoever. the reality is, if you stock holders are safe, then i as a debt holder am golden and basically on auto pilot. but now this is a different reality all together.
the 2016 NIHD bonds cratered overnight and are now selling at $76's. there were still some $1M blocks hitting the bid price today. i have been through this time and time again. i think though NIHD is the most hopeful case out of some of past holdings. they have a spectrum portfolio, tangible assets, etc. but the fact that these bonds are only 3 years til redemption and basically giving the company a 75% chance is not good.
i can tell you this from experience; all this buyout chatter etc --- someone coming in and rescuing us and paying a 3 or 4X multiple against the current stock price almost never happens. "its gotta happen its gotta happen" i have been on many sinking ships and the only time i got bailed out was with Ameren Energy. Dynegy came in out of nowhere and bought their assets. when something has gotta happen, it typically does not.
the new paradigm is this - when a competitor wants assets of company Y -- and if company Y is in big trouble i.e. buring cash, lots of debt. they are not going to buy company Y. they are wait for company Y to fall into an abyss and then swoop in and buy the assets at pennies on the dollar. this is the reality. i did have one big hope here in NIHD spectrum portfolio that DISH could possibly be interested in that. DISH is on a buying spree right now bidding up and buy spectrum like its going out of style.
has anyone listened to the conference call?? any input? i have to read transcript.