i don't think shorts are adding but neither are longs or any new cash...and the street is still soggy with paper from the blow out and needs to discard before year-end (+ tax loss selling).....
artsbest - i think u got it right, simple as that. A lot of cats have gotten hung on the NG trade. KKR and folks took TXU private as a bet on NG and plewwy, its about to go bust big time....i think wilbur and prem are just willing and able to double down...if NG goes above $5 in '15, then this could be back to high single digits BUT alot depends on Marcellus and what its really worth.....
lets say a company has a net asset value of 10, generates 10% returns but takes 90% of the profits (call it egregious, LLC)....would u still say it should trade near NAV?
KFN is more diversified than just CLOs - they have o&g, cmbs, and soon maritime finance. CLOs are not far more risky - they have senior secured debt underneath them and, in the end, it is no different than buying the debt outright with leverage. Basic stuff. The fact that FSC takes 40% of net income in fees should be enough said.
Many CLOs have senior secured debt underlying them and are overcollaterlized. The only difference between a sub investment in a CLO vs a direct investment in the senior debt underlying it is that you parse the cash flows into something that gets a AAA, which insurance cos. and the like pay a premium for, and the sub tranches. So in effect, you "steal" some money from the guys that want AAA. Your statement that: "Investing in subordinate debt within CLOs is far more risky than investing in secured debt" is very misleading
wise man - does the likely bankruptcy of TXU with KFN holding 300+ mn concern you? Seems like she tanked on big volume the day after S&P report (thurs post close) ?
they are levered and long-rates are rising. Better off buying a small basket of liquid prefs and save the 1.6% manage fee.....
what is the logic of starting coverage when he's been on the CCs for as far as i can remember.....he did seem buddy, buddy with Mr Miller - at least until the last call
you really need too read the financials - here is a snippet: " As the majority of our assets and liabilities include floating interest rate provisions indexed to three-month London interbank offered rate...."
what's your argument again?
yield up, price down....is that what they taught at wharton? impressive
to bad they didn't teach u what the duration of a floating rate note is
Im less than impressed with FSC. They take close to 40% of net profits for themselves, have a div coverage ratio below one for as long as one can see - have issued shares to keep up the dividend and provided a ROE sub 9% - and these are the good years.
also book value should factor in the delta weighted value of the convert shares (~1-2mn) so book is closer to 9.75
Going forward, it doesn't look like even the $1 div they announced is sustainable. More like 80c assuming 90-95% payout. Next year divs of 140mn on 120mn in distributable cash flow....means more shares....or book value declines to 9.5ish
not sure other BDCs are similar but this is a cash machine for tannenbaum and the crew imho
it looks like they did an s-4 so u can buy some soon...issued at near 8% yield 9 year paper....puts the 10% distribution yield here in perspective I'd say