If you want to buy January puts at a strike of $1, i.e. DOWN $7 from here, you have to pay at least $0.20. What does that tell you about confidence in the recent run up?
My point is that it seems inconceivable that a number of shorts would not have been covered since the last SI report. But I get your point with the bondholders. Fun, isn't it?
Today was an exceptionally slow day, but if you look back a year ago the average daily volume was around 7 or 8 million. The recent months have been huge as "coal panic" took hold. IMO the real bonus for longs is that any remaining shorts will find it more difficult to cover their positions. At a daily volume of 6 million shares (3 million buys, and 3 million sells), it would take almost five weeks to cover 100 million shorted shares - ASSUMING EVERY BUY WAS TO COVER! I am not saying there are still 100 million shares short, but whatever the number, those "piggish" remaining shorts have to be worried.
I cannot find a solvent issuer whose bonds are trading at a lower price than Arch Coal. At $0.10 on the dollar, they are trading at a much higher yield than Peabody, Sandridge and others who are widely considered as candidates for bankruptcy. The market cap (common shares) is only $30million - down 98% from the peak. Alpha Natural has a market cap of $7million - and it's already in bankruptcy!
Would one of you optimists out there please explain how the market could have things so wrong? How is it that the market has oversold the debt and shares to the point of leaving $100s of millions on the table? There are thousands of investors who could buy all the shares at 2x the current price. But nobody is stepping up.
If you say you are bullish,but can't answer this question sensibly, then IMO you have some unseen agenda.
I would have thought we'd get a PR this morning. A report on the exchange offer and Fridays deadline is due. Whatever is going on, it appears no resolution has been reached.
If you want to get a preview, go to the whalewisdom website and you can get to a table of 13/f filers for BTU which shows big buyers. Monday we should have all the numbers.
Example: Steadfast Capital Management - new position - 8.94mn shares, Maybe they bought a block from Balyasny.
balyasny asset management 13f
and click on whalewisdom (no kidding)
Go to 13f holdings summary / see all holdings
Did you ask why their bonds trade at under $10, and why the market cap is only $27million?
That report was put together by a group of Portuguese business students for a competition run by The Economist. They were sponsored by a US hedge fund known to be a major short-seller. The conclusion was that BTU would go bankrupt in a few years if it did not do something different. The paper was written before the successful debt exchange, and progress on cost-cutting.
Nice try, shortie.
Fitch makes it sound like a done deal.
Cut & Paste to browser:
Fitch: U.S. HY Default Rate Heading to 3% in August
C&P subject in your browser. ACI is expected to file unless refi gets done this weekend.
I have taken these positions with out-of-the-money options. ACI's predicament is dire - troubles doing a debt exchange, self-bonding for PRB in doubt, bonds priced for BK. BTU has problems, but survival seems more likely for longer. Sentiment is volatile and will influence coal stock price performance. I expect that in a couple of months either BTU will be $2+ or ACI will be well below $1. Anybody else like this idea?
I am using the site finra-markets dottie morningstar dottie com slasher BondCenter.
Trade data seems up-to-date.
I am seeing prices for ACI debt that are in the $6-7 range. This means they are being valued at about a single coupon payment, with no value beyond that. Can anybody confirm this price info? It seems incredible that there would be no future value for the debt, but if the bond market continues to believe so, it will be only a matter of time before the common goes to zero. Comments welcome