1. Roubini Sees Yellow Weeds Not Green Shoots: Once a professor gains notoriety by predicting the future more or less correctly, it becomes obligatory almost to continue opining about the future, such is the case with Nouriel Roubini. It has become just impossible to avoid him, sort of like a Paris Hilton or Britney Spears for Stock Jocks. His most latest pronouncement is that there are no green shoots, just yellow weeds. Roubini He sees the recession lasting another 6 to 9 months with an anemic recovery, following by a "big risk" of another recession soon thereafter. CNBC.com
2. Sold 100 SBGI: I sold the 100 shares of Sinclair Broadcasting at $2 that I bought in my regular IRA at $1. AT & T and Goodrich Bonds/ Life Insurance Companies/S L Green Realty/Metal Prices/Buy of SBGI & SOLD KSA That may not sound like much but it is a 100% gain before commissions in less than 3 months. I am raising some cash in that account to buy a CPI floater when and if the price comes back down. I may also have to sell the 50 shares of KEY that I just bought in that account. I am keeping 150 shares of SBGI that I own in other accounts, at least for now.
3. ZBPRA: I received a notice today from my brokerage firm that Zions Bancorporation was conducting a Dutch Tender Offer for 4 million shares of ZBPRA at between $10 to $11.50. I purchased this security on 5/7/09 at $7.8 and it has already gone ex dividend for this quarter's dividend payment. Bought 100 ZBPRA at $7.8/Corrections Corporation Earnings I intend to keep my shares since this floater was purchased at a favorable price and adds diversity to my portfolio of equity preferred floating rate stocks. I also view this offer to be way too low. Zions is selling some common stock to fund this purchase. Y Fin This one pays the greater of 4% or .52% above 3 month LIBOR. At my cost, the guarantee results in a 12.82% yield.
4. Forest City: I recently sold my 50 shares in the senior exchange trade bond issued by Forest City (FCY) and used the profits to buy 50 shares of its common stock (FCE-A). This large real estate firm reported results for the Q/E 4/09. Y Fin The company entered this recession highly leveraged, and recently diluted existing shareholders by selling 52.3 million shares in May at $6.60, a price prevalent in 1996. This impressed me as one of those companies that was not paying much, if any, attention to what was happening in 2007 and did not take necessary actions to sell some property and to reduce debt when the warning signs were clear about a pending credit crunch and imminent recession. Possibly, as frequently happens, the entire focus was on the here and now, the nuts and bolts of the day to day business operations, while the big picture issues were just out of sight, out of mind until it was just too late to choose among desirable alternatives.
As a consequence of the failure to take proactive measures at an opportune time, the company had to recently sell 52.3 million shares to raise a little over 300 million dollars which funds were used to pay down borrowings under its 750 million dollar revolving credit facility, and it is still struggling in my opinion. I did not see anything in the release about extending this facility which matures in March 2010 (see page 20: FORM 10-Q) The stock dilution was completed after the close of the quarter, and the proceeds were used to pay down this recourse debt which at least reduces some the likelihood of a default at the corporate level.
The company further stated that it has addressed 408 million of its pro-rated share of the 917.8 million pro-rated share of debt due in fiscal year 2009. The recently filed 10-Q shows 800.295 million in senior debt and 46.635 in subordinated debt (page 21FORM 10-Q)
The mortgage debt is listed at page 54 and the non recourse mortgage debt was 6.095 billion on operating properties, 2.078 billion on development projects and some on land. The total was 7.401655 billion dollars.
I see nothing in the report that alleviates my concern about this debt level. A lot depends on how long the current recession lasts. The stock traded down 31 cents today after the earnings release to $6.79 on below average volume. I would expect the institutional investors want to know more about how management plans to deal with the debt maturing in 2009 and 2010, as well as any progress on extending the maturity date on the revolving credit line. I view my purchase of just 50 shares using the profits realized on FCY to be a lottery ticket.
Forest suffered a net loss of 30 cents during the quarter and had EBDT of 39 cents a share.
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