Monday, September 19, 2011

Travelport/AGY Holding/Added 50 ERC at 14.75-Roth IRA/Sold 100 AEB at $18.2635 ROTH IRA-Average Total Cost $6.05/

CYS, a Mortgage REIT, goes ex dividend on 9/19/11: Forbes I own just 50 shares held in the ROTH IRA. The Real Cost of The Federal Reserve's Jihad against the Saver Class/AA/Bought 50 CYS at 12.97

The Greece problem is back on the front burner, as the Greek government was told that it had to do more to receive the next installment of its bailout funds. WSJ  Reuters

The 31 year old Master of Disaster, who allegedly cost UBS $2.3 billion, is photographed in a perpetual smiling state, as if the youngster had just won the lottery. Reuters This article shows him smiling in handcuffs and has pictures of his £1,000 a week apartment in London.  Mail Online

I mentioned last Friday the downward spiral in AGY Holding's 2014 bond. AGY HOLDING 2014 BOND PLUNGE IN PRICE  The snapshot in that post shows a decline from 87.250 to 25.5 last Friday, a one day loss of 70.77%.  For 1 bond, that decline equals  $617.5. On Saturday, the third party service for my broker priced that bond at 52, representing a 103.92% increased from the prior day's price:

I have not seen anything to account for this gyration. Whenever I see an anomaly, I will follow a routine procedure in an effort to discover whether there is any publicly disclosed reason for the anomalous price action. Where the firm's stock is publicly traded, this routine would involve checking Yahoo Finance, Marketwatch or other news services for any news item. I will then perform several google searches, using relevant terms. For example, for the AGY Bond, I would enter a search for the exact phrase "AGY Holding", limiting the time period of the search to one day, then one week. I would also use a few generic search phrases such as "AGY Holding downgrade", looking for a downgrade to explain the recent action. I did not find any information with those searches that would explain the plunge in price. I will also routinely check the SEC's website. While AGY Holding is a private company, it does have a publicly traded bond registered with the SEC and files reports with the SEC.  There has been no filings since AGY filed its Form 10-Q for the Q/E 6/2011 (EDGAR Search Results), yet another disappointing report, as I previously mentioned.  That report was filed almost a month ago on 8/15/11. The results were announced in a Press Release dated 8/12/2011:  SEC Filed Press Release

1. Added 50 ERC at $14.75 in Roth IRA last Thursday (see Disclaimer): My last transaction was to sell 100 shares of ERC at at $15.49.  That sale was in a taxable account. The add last Thursday was in the ROTH IRA. This last purchase brings me up to 500 shares, with 150 held in the ROTH IRA. I recently initiated a position in the ROTH.    Bought 100 of the Bond CEF ERC at 15.13 (3/3/11 Post). Form 10-Q

ERC closed last Thursday with a net asset value per share of $16.16. Based on a closing price of $14.71 that day, the discount to net asset value was then -8.97.                     

This is a link to the last SEC filed shareholder report:  Wells Fargo Advantage Multi-Sector Income Fund

The fund is currently rated 4 stars by Morningstar.  The fund uses leverage.

The current monthly dividend is 10 cents per share:   Wells Fargo Advantage Multi-Sector Income Fund - Wells Fargo Advantage Funds At a total cost of $14.75, the yield would be around 8.13%.

This is a link to the fund's fact sheet:  FactSheet_CEF_MultiSectorIncome.pdf The credit quality of the holdings can be found at page 1 to the bottom right. 

Last Friday, ERC closed at $14.74, with a net value per share of $16.16, creating at that time a discount to NAV of -8.79%.

Link to page at CEFA.

2. Travelport: I received an alert that my two senior Travelport bonds were downgraded by S & P to CCC- and the 2016  senior subordinated bond was lowered to CC. Reuters The immediate problem involves a $693 million PIK note that comes due in March 2012 at the holding company level. If a credible refinancing plan is not produced in three months, S & P "will likely" lower the rating again. This seems more negative than the comments made by Moody's when it downgraded the debt in mid-August. Moody'sTravelport (8/22/11 Post)

It is my understanding that the PIK notes are not obligations of Travelport but are instead obligations of the company that owns Travelport. A failure to resolve this issue could trigger a change in control provision that would require Travelport to buy back its debt, which would be difficult to say the least. The issue is not primarily the ability to make interest payments at the current time.

Another issue pointed out by the rating services is the tightening leverage ratios in the secured credit facility. (see pages 36-38 of Travelports' recently filed Form 10-Q discussing these issues). 

A reader inquired about Travelport bonds last Friday, inquiring whether I intended to average down on my position. The short answer to that question is no.  

In my risk rating, I previously had the unsecured senior bonds at 9 and the 2016 senior subordinated at 10: Personal Risk Ratings For Junk Bonds In my system, 10+ would be the rating assigned to the highest risk of a default, and I am raising the senior subordinated bond to 10+ from 10. I am raising the senior unsecured bonds to 10- from 9. Both increases are due to the failure so far to resolve the PIK maturity issue. 

3. Sold 100 AEB at $18.2635 Last Friday in ROTH IRA (see disclaimer):  There are several reasons for selling this security, and most of them involve the sovereign debt issues in Europe.  I am concerned that those problems may be spinning out of control. Given the huge percentage gain in the AEB shares, I decided to harvest the profit for the shares held in the ROTH IRA, and to keep the shares held in a taxable account which have a similar cost basis. I do not have to pay taxes on the profit realized in the ROTH IRA which is another consideration.  

100 Shares of AEB ROTH IRA Total Cost Per Share $6.05

The realized gain was $1,213.76:

100 Shares of AEB Realized Gain $1,213.76 on $605.55 Investment Plus Quarterly Dividends

At some point, I may buy a fixed coupon AEGON Hybrid in a taxable account.  Aegon Hybrids: Gateway Post

AEB closed last Friday at $18.49.

I no longer have any European hybrids in my retirement accounts, and have no intention of buying any in those accounts after my recent sales of INZ, AEH and AEB.  European Banks and IAS 39/VIX/Sold 50 of the ING Hybrid INZ at 21.21 Bought at a Total Cost of $7.82-Last ING Hybrid Owned;  Sold Aegon Hybrid AEH at $23.09 Bought at $4.63

I will discuss the remaining trades from last Friday in the next post. 

No comments:

Post a Comment