Thursday, April 14, 2011

Bought 50 UZV at $25.15/Sold 50 of the TC PYS at 23.2/Sold 50 of the TP ARSVP at 25.8/Bought 1 Borden Chemical 8.375% Bond Maturing 4/15/2016

I watched a video clip of Senator Jon Kyl (R), where the good senator claimed on the floor of the Senate that abortion is "over 90% of what Planned Parenthood does".  No federal dollars are used to perform abortions. As noted earlier, the TBs were about ready to shut the government down over 363 million dollars in federal funding to family clinics, including those operated by Planned Parenthood. Kyl's statement was offered as part of his principled justification for opposing that funding. As it turns out, the actual figure is just 3%, rather than 90%, and Kyl claimed that his representation was not "intended to be a factual statement", though it appeared to be.  This caused Steven Colbert to make a series of "not intended to be factual statements" about Senator Kyle. CNN.com Blogs (e.g. John Kyl is one of Gaddafi's sexy Ukrainian female bodyguards, John Kyl cheated on Sandra Bullock, etc. "not intended to be a factual statement".)

I am not sure Colbert is being fair to Kyl, since it is well known that the sine qua non of True Believers is to routinely create non-factual information to support their beliefs. This is a link to Jon Kyl Tweets Not Intended to Be Factual Statements - The Colbert Report - 4/12/11 - Video Clip | Comedy Central

PolitiFact has another description of Kyl's claim, referring to it as a "false" statement.

In case there are any super models who regularly read this blog, and want to know more about the OG hopefully, he used to # play shortstop for the New York Yankees, regularly runs five miles a day in just twenty minutes and performs a warm up exercise each morning of 300 push-ups with each arm to keep his slim and muscular body in top physical condition for a man of his age-just 21 by the way, and has so much hair on the top of his head that he regularly donates some to those less fortunate.  Oh, forgot to mention, the OG won the Nobel Prize in Economics for his groundbreaking work titled "Efficient Markets Theory as BullShit: How True Believers and RBs Influence Irrational Pricing in Stock Prices"   ( # not intended to be factual statements)

1. SOLD 50 of the TP ASRVP at 25.8 on Tuesday (see Disclaimer):  This TP originates from a micro cap bank, AmeriServ Financial, that has a market cap of around 49 million at a $2.3 share price. I made a small profit on the shares and collected a couple of interest payments, which is all that I am trying to do with TPs now.  Bought:  50 ASRVP @ 25 (Nov 2010 Post). I noted in that post that the common stock was then hovering around $1.5. 

Apparently, this was in response to the last quarterly earnings report, where the bank earned 4 cents per share. SEC Filed Press Release  Any buyer of this type of security, at current price levels, has minimum upside potential on the shares and significant downside risk.  

2. Bought 1 Borden Chemicals 8.375% Senior Bond Maturing in 2016 at 96.85 on Tuesday (Junk Bond Ladder Strategy)(see Disclaimer): Borden Chemical is now part of a private company Momentive Specialty Chemicals, Inc. that is owned by Momentive Performance Materials, a holding company controlled by investment funds affiliated with Apollo. Momentive Performance Materials Holdings LLC (see also p. 3 of 2010 Annual Report) That history tells the casual reader that Momentive Specialty Chemicals is a highly leveraged company which is the case. The 2010 annual report does show that the company was profitable in 2010, earning 214 million dollars on revenues for the year of 4.818 billion.  2010 Annual Report for Momentive Specialty Chemicals The total net debt is shown as of 12/31/2010 at 3.48 billion.   On 1/31/2011, Momentive completed the sale of its Inks and Adhesive resin business for 120 million in cash plus certain adjustments. SEC Form 8-K This is a link to the  SEC Filed Press Release announcing 4th quarter earnings.

The liquidity and capital resource section of the Annual Report can be found at pp. 34-38. The note that I bought is referenced in the table at page 37. Please note that there is a substantial amount of senior secured debt.  The debt is also discussed starting at page 65 under "10. Debt and Lease Obligations". At page 67, there is a note about the 8.375% bond, which has a "sinking fund" requirement: "The 8.375% Debentures have a sinking fund requirement of $20 per year from 2007 to 2015. Previous buybacks of Debentures allows the Company to fulfill sinking fund requirements through 2013"

This bond is of course rated well within junk territory.  The current rating is Caa2 by Moody's and CCC+ by S & P according to FINRA.

Link to Momentive's SEC Filings: EDGAR 

My confirmation states that my current yield at my cost is 8.576% and the YTM is 8.968%.

3. Pared Trade: Sold 50 of the Trust Certificate PYS at $23.2 and Bought 50 UZV at 25.15 on Wednesday (see Disclaimer):  This is another low yielding long term bond.  I am not going to take significant positions in any long term bond yielding less than 7%. Any positions established will be traded for small profits, with the main purpose being the capture of one or more interest payments.  

PYS has a $25 par value and a 6.3% coupon.  The TC and the underlying senior bond from R. R. Donnelley mature on 4/15/2029. PYS just went ex interest for its semi-annual interest payment, and I will soon receive that payment on the 50 shares sold on Wednesday.  I clipped a small profit on the shares bought a few weeks ago  at 22.6. I did better in an earlier trade. Sold: 50 PYS @ 24 (11/18/2010 Post)  Add 50 PYS at 19.59 (June 11 2010). I also did a similar clip earlier in 2010:  Bought 50 PYS at 20.01 (3/27/2010 Post)  Sold 50 PYS at 20.76 (7/28/2010 Post). RB just asked whether the Nerd Machine LB was bragging about those picayune profits?

The underlying bond has a coupon at 6.625%: FINRA

In the place of PYS, I added another 50 shares of the senior exchange traded bond issued by United States Cellular, whose common stock trades under the symbol USM.  I have discussed this bond, with the symbol UZV, on multiple occasions and have traded it for small profits. Bought 100 UZV at $24.42 (2/17/2010 Post) Added to UZV at 25.12 Added to UZV at 25.01 Sold 100 UZV @ 25.67 (2/22/2011 Post)

Anyone buying long bonds now can not rationally expect anything more than small profits. The downside risk is in my opinion far more pronounced than any upside potential in the bond's price. At best, I hope to exit long bond positions acquired over the past year or so at break-even after capturing one or more interest payments.

This baby bond has a $25 par value, a 7.5% coupon and a maturity date on 6/15/2034.

Prospectus:  www.sec.gov  This bond is rated investment grade. According to QuantumOnline, it is rated Baa2 by Moody's and BBB- by S & P, comparable to the R. R. Donnelley bond that I sold, except I pick up a slightly higher current yield with UZV and interest payments are made quarterly.  PYS pays semi-annually.

I bought the UZV shares in the ROTH IRA with a day limit order. I was filled when the price sank to $25.12 intra-day.

Another reason for buying UZV is that I am about to lose my senior exchange bond, TDA, to a call.  TDA is a senior bond issued by Telephone and Data Systems (TDS), a company that controls United States Cellular through its 81% stock ownership. So, in effect, I am using some of the soon to be received TDA proceeds to buy more of UZV.

United States Cellular is the 6th largest wireless phone company in the U.S.

For comparison purposes, I did look at the yield for a U S Cellular bond maturing in December 2033 that trades in the bond market.  That bond has a 6.7% coupon. FINRA (symbol USM.GC/Cusip 911684AD0)

Exchange Traded Bonds:

If Headknocker does not blow a gasket, OG will discuss two more junk bonds purchased on Wednesday in the next post.  

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