Tuesday, April 28, 2009

Hertz Bond Information in One Post

ADDED 6/7/2009: I currently have no interest in buying Hertz bonds. An investor interested in what bonds are currently traded may want to consult the data and historical trades at the free FINRA site: Search Results
My sole involvement is ownership of 50 shares of DKR purchased at $6.45, with a $25 par value, a Trust Certificate containing as its underlying bond a senior note from Hertz which matures in 2012 as discussed below.
The most recent discussion of DKR is contained in item # 5 from a 7/12/2009 post: Junk Bonds

Added 2/21/2010: I sold my remaining shares in DKR: / SOLD 50 DKR AT 23.76

Added 8/24/2010: DKR has been called at its $25 par value plus accrued interest by the owner of the call warrant. Structured Asset Trust Unit Repackagings (SATURNS) Series 2003-8 Trust Receipt of Notice of Intent to Exercise Warrants in Full | Business Wire

********Original Post:

When I write about a topic, the relevant discussion can appear in many posts. Sometimes, if there is some interest, I will try to bring the references together in a single post which is the purpose of this one. The following is a discussion limited to a single security that I own-DKR.

For the Hertz bond, I still own just 50 shares of the Trust Certificate DKR, which contains as its underlying security a senior bond from Hertz that matures on June 1, 2012. I sold my other 50 shares on a spike to over 14.SOLD 1/2 POSITION DKR/GE FUNK/ I DO NOT OWN ANY BANK TRUST PREFERRED issues/CURRENCY INTEREST RATE DIFFERENTIALS/FOREST CITY My purchase price for the remaining shares using FIFO accounting is $6.45. TRUST CERTIFICATE HERTZ BOND DKR HERTZ BONDS

Some other posts on this security include:

I always try to compare the price of the Trust Certificate with the pricing in the bond market of the underlying security. The only information that I have about pricing for the underlying bond in the TC comes from FINRA. This is a link to the underlying bond in the TC DKR.FINRA - Investor Information - Market Data - Bonds - Bond Detail The purpose of this exercise is to determine whether I would receive a better deal by buying the bond directly with an order in bond market, which I will do, or would it make sense to buy it indirectly by purchasing the trust certificate on a stock exchange. One thing to always note for me is the coupon of the underlying bond and the coupon for the TC. The coupon may be the same or different. The TC may have either a higher or lower coupon than the underlying bond. The Hertz bond has a coupon of 7.625% whereas the TC has a 7% coupon. So that is relevant to my decision. Both of course mature on the same day, June 1, 2012. DKR has always made LB nervous, and it brought out the caution police. DKR is viewed as extremely speculative. My potential return on my remaining shares is over 100% per year adding the coupon payment at my cost to the amortization of the spread between my $6.45 cost and the $25 par value. Capturing the spread generates most of the return for me and that can be accomplished only if Hertz survives to pay par value. I have reduced my risk by selling 1/2 of the position for a profit, and I believe without double checking that I have received one semi-annual interest payment on the full position. The next semi-annual ex-date is in May 2009. DKR Stock Quote - Saturns Hertz Corp Ser 2003- Stock Quote - DKR Quote - DKR Stock Price

This is a link to the prospectus:

I had an opportunity to buy the 50 shares sold at over 14 back at less than 6. LB, who was clearly in control in late February 2009, had a deer in the headlight look at the time, and nixed the purchase of more. Buy of 50 AEV in IRA/Hertz/Bernanke/
It subsequently almost doubled in price, and is now out of the purchase range.

Even though my position is small, I still monitor the earnings of Hertz, and try to assess its credit worthiness and likely survival until 2012.

The Hertz bonds are classified as junk, rated BB- by Fitch:Fitch Corporate

I treat junk rated bonds like I would handling a rattle snake-cautious is the operative word, so my exposure is never very large but I do not ignore them either.

I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. I have never worked for a financial institution and never will. In these posts, I am acting as an unpaid financial journalist and an occasional political commentator. I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine. Any discussion made by me of particular securities is not a recommendation to buy or to sell. Trade at your own risk. Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons. The sale may before or after the post. Before buying or selling any stock, even one recommended by a trusted financial advisor, please research it and make up your own mind which is what I always try to do. Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news. In this post, and all others by me, I am merely describing my reasons for purchasing or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale. The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile. By way of example, it is unlikely that I will ever need the funds contained in my retirement accounts. Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments. Information contained in my posts has been obtained from sources believed to be reliable but cannot be guaranteed. It is always important to follow the investment process. the investment process/links to further information on canadian energy or royalty trustsInvestment Process Part II: Bonds and Bond Like Investments NOT A RESEARCH SERVICE/Add of PWE Last Week These posts by me do not constitute investment advice, nor shall they be construed as a guarantee of future results, or as an offer of any transaction in securities. All content in these posts is provided for informational and entertainment purposes only, and it is a form of entertainment for me.

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