Thursday, August 18, 2011

Junk Bond Ladder Table/EK/Bought 1 Nextel 7.375% Senior Bond Maturing on 8/1/2015 at 98.25/FINRA Links to Bonds in Junk Bond Ladder Strategy

The Fed reported that industrial production rose .9% in July. Manufacturing output rose .6% Industrial Production and Capacity Utilization

The Producer Price Index rose .2% in July, and .4% excluding food and energy. Producer Price Index News Release 

The bonds and common stock of Eastman Kodak (EK)(own 2013 bond) received a lift yesterday after Bloomberg summarized a report from MDB Capital Group estimating that EK's digital patent portfolio may be worth $3 billion. Lazard is now shopping those patents. WSJ I am just betting a few bucks short of two grand that EK will survive long enough to pay off the principal amount of my two senior bonds maturing on 11/15/2013.  FINRA Until yesterday, I was starting to feel lonely in that hope.

Governor Perry, the personification of a True Believer, and possibly our next President, said earlier this week that the U.S. deserves a President that loves America (ABC News), meaning that the current occupant does not, and of course may not even be an American. As we all know, Obama was born in Kenya, raised in a secret Muslim terrorist cell with designs on undermining the U.S., you know, one of those "terror babies". Perry also referred to Obama as the greatest threat to the country, another TB crowd pleasing line. I tried to say that line myself but could not keep a straight face. So, sadly, I will never be able to run for office as a republican.

Now, believe me when I say this, I have no doubt that Perry loves America, even though he considered taking Texas out of these United States to become a sovereign nation, anointing himself as King Perry I. Rick Perry On Secession  - YouTube  We understand his sentiments here at HQ. After all, our Great Leader, Headknocker, wants to succeed from all forms of government, and to turn HQ into an Americanized version of Lichtenstein. RB does not want to succeed but add more territory to the U.S.  RB's plan to acquire Canada, all of it, and rename it Greater Tennessee, is still moving forward, though more slowly given the Fed's Jihad against the Savers and the difficulties of having to navigate the treacherous waters created by the Masters of Disaster on Wall Street. Canadian Dollar (CAD) Strategy But navigating treacherous waters infested with sharks and barracudas is more fun than sailing in perfect weather with a nice cool breeze at your back, isn't it?

1. Bought 1 Nextel 7.375% Senior Bond Maturing on 8/1/2015 at 98.25 Last Tuesday (Junk Bond Ladder Strategy) (see Disclaimer): In August 2005, Nextel was acquired by Sprint (S). This 2015 Nextel bond is now listed at  FINRA with the Sprint bonds.  According to FINRA, this bond is currently rated Ba3 by Moody's and BB- by S & P. While those are junk bond ratings, they are higher than most of the bonds bought in my junk bond ladder strategy.

This is a link to the prospectus:  SEC

Interest is payable on 2/1 and 8/1.

This is a link to Sprint Nextel's profile page at Reuters.    

This is a link to Sprint's Q2 2011 10-Q.  Sprint's debt, which is of course high, is discussed in note 7 to its 2010 Annual Report at pp. F-17 to F-19. As of 6/30/11, the company had $3.956 billion in cash and $16.278 billion in long term debt.  Net operating revenues for the June quarter were $8.311 billion. The company had a net loss of 847 million. (depreciation $1.121 billion) Net cash provided by operating activities was $1.944 billion.

My confirmation states the current yield at my cost is 7.445% and the YTM is 7.656%.

I am assigning a 4+ rating to this bond Personal Risk Ratings For Junk Bonds

I have previously bought and sold several trust certificates containing a Sprint Capital bond maturing in 2028. I no longer have a position in a TC with that bond as its underlying security. Trust Certificate DHM Redeemed at $25 par value plus accrued interest by owner of the Call Warrant (June 2011); Bought 50 of the TC DHM at 21.35 (March 2010); Bought 50 DHM at 22.84 (August 2010); Sold 100 DHM at 24.4 (September 2010); Bought: 50 DHM @ 24.51 (December 2010)// Bought 50 GJD at 17.49 (March 2010); Bought 50 GJD at 17.8-Roth IRA (March 2010); Added 50 GJD at 17.95 (April 2010);  Sold 50 of the 150 GJD at 18.59 (May 2010); Sold 100 GJD at 20.2 (August 2010). Another TC, DKI, containing a Sprint Capital bond was also owned at the time of its redemption by the call warrant owner. More on Call Warrants and TCs

On many days, the 2028 bond can be purchased in the bond market in small lots: FINRA. The 2015 bond that I bought has most of the yield of that longer dated maturity and consequently I preferred buying it given its shorter maturity. There are still several TCs available that contain the 2028 bond, including GJD mentioned above,  PYG, and JZK. The 2028 bond is rated junk at B1 by Moody's.  This is a link to an explanation of Moody's  and Standard & Poor's ratings.

2. FIRRA Links to Bonds in Junk Bond Ladder Strategy: Uncle Ben has turned me into an unwilling junk bond trader. Links to my discussions of these bonds can be found at Junk Bond Ladder Strategy. The purpose here is merely to put the links to the FINRA information in one post.  (I will be adding links to the foregoing as new bonds are acquired)

Albertsons 2026: FINRA
Albertsons 2027: FINRA
Albertsons 2030: FINRA              (now Supervalu)
AMR 2016: FINRA  Filed For Bankruptcy 11/29/11
Appleton Papers 2015: FINRA
ArvinMeritor 2015:  FINRA (now Meritor)
Ashland 2029:  FINRA      (originally Hercules)
Belo 2027: FINRA
Boise Cascade 2016:  FINRA       (now Office Max)
Borden Chemical 2016:   FINRA  (now Momentive Specialty Chemicals)
Boyd Gaming 2018: FINRA 
Brunswick 2023: FINRA
Cascades 2017: FINRA
Cenveo 2nd Lien 2018: FINRA 
Cincinnati Bell 2018: FINRA
Colt Defense 2017: FINRA
Columbia HCA 2023: FINRA 
Columbia HCA 2025: FINRA
CoreLogic 2028:  FINRA      (originally First American)(also own PJS)
Cricket Communications 2020: FINRA
Donnelley 2017: FINRA
Donnelley 2021:  FINRA
Eastman Kodak 2013: FINRA (Filed for Bankruptcy)
Edison Mission 2016: FINRA Information
Exide Technologies 2018: FINRA
First Data 2016: FINRA (senior sub)
Forest City Enterprises 2015: FINRA 
Gray Television: FINRA 
Harland Clarke 2015: FINRA
Knight Ridder 2017: FINRA
Macys 2030:  FINRA           (originally May Department)
MetroPCS 2018: FINRA 
Mueller Water 2017: FINRA 
Pactiv 2018: FINRA   (now part of Reynolds Group Holdings)
Penn Virginia Resource Partners LP 2018:  FINRA
Quicksilver Resources 2015: FINRA
Quicksilver Resources 2019: FINRA
RadioShack 2019: FINRA
Select Medical 2015: FINRA
Tenneco Packaging 2025: FINRA (now part of Reynolds Group Holdings, formerly known as Pactiv)
Tenneco Packaging 2027: FINRA  ( " )
Terex 2017: FINRA
Texas Industries 2020: FINRA
Travelport 2014: FINRA
Travelport 2016: FINRA
Travelport 2016:   FINRA            (Senior Sub)
U.S. Steel 2022: FINRA

Other bonds bought and sold as part of this strategy:

Albertsons 2029:   FINRA
Alon Refining 2014: FINRA
Apria Healthcare "A" Series 2014: FINRA
Apria Healthcare "B" Series 2014: FINRA
ArvinMeritor 2018: FINRA (now Meritor)
Boyd Gaming 2016 (senior sub): FINRA
Cenveo 2013: FINRA
Cincinnati Bell 2020: FINRA
Commercial Metals 2017: FINRA
Cooper Tire 2027: FINRA
Dean Foods 2016: FINRA
Dean Foods 2017: FINRA
Dillards 2027: FINRA
Donnelley 2029: FINRA
Edison Mission 2017: FINRA
General Maritime: FINRA FILED FOR BANKRUPTCY 11/17/11
Goodyear Tire 2020: FINRA
Hawker 2015: FINRA
J.C. Penny 2017: FINRA
J.C. Penny 2020: FINRA
MeadWestvaco 2032: FINRA
Norcraft 2015:  FINRA
Quicksilver Resources 2016: FINRA
Reddy Ice 2015: FINRA (Filed for Bankruptcy)-Received 43 Shares of common stock
Regions 2018: FINRA
Sears Holdings 2018: FINRA
Solo Cup 2014: FINRA
Sprint 2015: FINRA            (originally Nextel)
SuperValu 2014: FINRA
SuperValu 2016:   FINRA
Synovus 2013: FINRA
Synovus 2017: FINRA
United Rentals 2020: FINRA
United Refining 2018:  FINRA
Vulcan 2018: FINRA
Vulcan 2021: FINRA
Wendys 2025: FINRA
Windstream 2019: FINRA
Windstream 2020: FINRA

Bought Back after Selling: Albertsons 2026; Mueller 2017; Bought and Sold Twice: USG 2016

Other Bonds Bought and Redeemed by Issuer:
Edgen Murray 2015: FINRA
MBNA Capital Series A 2026:  FINRA (BAC Obligation)
United Refining 2012
Warner Music 2014

3. Junk Bond Ladder Table: This is how my junk bond ladder looks as of 8/17/11. I am expecting that the Warner Music bond, which is still included in this table, will be redeemed tomorrow:

As stated earlier, I expect to suffer at least two, and possibly as many as five defaults. My best case scenario will be to break-even on the bonds, realizing some gains through redemptions and sales while realizing losses mostly from defaults. A break-even on the bonds would net me the interest rate spread between these bonds and a seven year treasury, currently around 1.74%: Daily Treasury Yield Curve Rates According to the table, the average maturity of my junk bond portfolio is 7.09 years and the average yield to worst is 11.43%.

I also expect to realize some gains and have already done so. I am tracking realized gains/losses from bond redemption and sales at Item 5 Realized Gains Junk Bond Ladder Strategy. The total now stands at +558.49 plus another $67.03 from realized market discounts, mostly from bond sales. I expect that many of these companies will survive to pay off par value which will result in gains since these bonds are being bought at discounts to par value.  As long as that number stays in the green on a total net basis, I will be pleased with the result given the interest rate spread to safer bonds.    

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