Michael C. Buchanan, Head of Credit at Western Asset Management Company, Interviews with The Wall Street Transcript: A Positive Outlook for High-Yield Investing
67 WALL STREET, New York - May 14, 2013 - The Wall Street Transcript has just published its High-Yield Equity Securities Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Increasing Demand for Midstream Assets - U.S. Energy Infrastructure Build Out - Oil and Gas Transportation Infrastructure Demand - Master Limited Partnerships Distribution Growth - Low Treasury Yields and MLP Dividends -
Companies include: Sprint (S), Dish (DISH) and many more.
In the following excerpt from the High-Yield Equity Securities Report, an expert portfolio manager discusses his top securities picks and his portfolio-construction strategy:
TWST: Would you provide examples of top investment picks, whether they are current top holdings or ones you've been adding recently?
Mr. Buchanan: Yes, I'll give you both. One that we really like right now is - and this highlights the looking for an example of a credit that is not as widely followed, not a large-cap name, but one where we clearly think there is opportunity - is a company called Lantheus Medical Imaging. First of all, I mentioned before, you have a market that's yielding on average about 5.5% to 6%, again depending on whose index you want to look at. We look at this company and it's rated Caa2 by Moody's, B by S&P, it has a 9.75% coupon with a 2017 maturity, callable next year in May. I'm just giving you the quantitative characteristics of the bond before we dig into the company. But what I think is really interesting here is you look at where it's trading right now. So one, the coupon is below par. Yield is about 10%, in fact just over 10%. The company is a producer and a manufacturer of dyes that are used for medical imaging, hence that name Lantheus Medical Imaging.
Because these dyes are isotopes, or essentially radioactive, there are very, very high barriers to entry for competitors to get into this business. You can think of all the reasons why, whether it's doing something with the waste that comes from those dyes, there is the shipping that comes as a result, the sourcing of raw materials. But what's interesting here is you've got a brand new CEO with, we think, a very strong management team below him. Last year they did burn cash, although this year we think they're going to generate a little bit of cash, slightly cash flow positive. But what we see in 2014 is some pretty major deleveraging, and I think a lot of people in the market have missed this one. It is a really good fundamental story. I think a year or two from now you're going to see a company that looks a lot different than they do today, just in terms of their overall credit metrics, whether it's free cash flow generation, whether it's overall leverage. We just think it's mispriced in the market, and at 10%, it's one that we feel very passionate about.
One that's a little more topical now is Sprint. I gave you an example of one that we own that is a company not as widely followed. Sprint is obviously the opposite of that; it's a large-cap issuer within the high-yield market. Clearly, we don't altogether avoid large-cap issues, and oftentimes we do find value. I think Sprint is an opportunity given...
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
