Wednesday, November 9, 2011

Sold 100 WLFCP at 10.78/Bought 1 Apria 12.375% Senior Secured Maturing on 11/1/2014 at 91.625/Bought 1 Gray Television 10.5% Second Lien Bond Maturing 6/29/2015 at 95/Junk Bond Ladder Table

China's CPI moderated in October to a 5.5% increase compared to a year ago, down from the 6.1% increase in September. This was in line with forecasts. Producer prices, however, rose a less than expected 5%.

The head of China's overseas investment arm, Jin Liquan, called European workers "sloughful" and "indolent". Mail Online He said that the Europeans need to quit languishing on the beach and to work harder. For good measure, unless his meaning was not clear, he said that the Europeans should stop looking for outside sources to solve their debt problems and need to be less reliant on state handouts. This interview was given to Al Jazeera, and is available for viewing at their website. It is unusual to have those in authority express their views so openly.

European banks have started to unload sovereign debt issues from the PIIGS at a loss.  Bloomberg As buyers flee, who is going to refinance the debt as it matures?  This sovereign debt issue has the potential to be catastrophic.

I heard an interview with Alan Sinai yesterday who believes that Europe is already in a recession.

UBS initiated FirstMerit (FMER) with a buy rating with a $19 price target. FMER is owned as part of my regional bank stock basket strategy.  REGIONAL BANK BASKET STRATEGY GATEWAY POST

Herman Cain blasted the news media for carrying news stories about the numerous sexual harassment allegations made against him. That tactic is likely to work with the TBs who view any reliable information inconsistent with their opinions as biased and untrustworthy. To the extent TBs make an effort to acquire any information, the search will be limited to only information confirming their pre-existing opinions from a limited number of sources deemed reliable by them such as Fox and Rush Limbaugh. All other news sources, sometimes called the "mainstream" media, can be ignored altogether as untrustworthy, a process that is actually encouraged by the GOP.

Another woman, Karen Kraushar, wants to go public with her allegations of sexual harassment according to The Washington Post.

1. SOLD 100 WLFCP at 10.78 Last Thursday (see Disclaimer): This security has a $10 par value. Dividends are paid monthly, and I sold my shares on the ex dividend date.  I am circumspect about holding this security when the price exceeds its par value by 7% and have sold it when the premium exceeds that amount. Item # 4 Sold 100 of the 200 WLFCP at $11.42; Item # 2 Sold 100 WLFCP at $11.35. On those two trades, I realized a total gain of $202.09 this year, with $116.02 of that amount being a long term capital gain. (see snapshot Item # 2 in last linked post).  

The shares sold last Thursday were bought in late August 2011. Bought 100 WLFCP at $10.32 I will review the last earnings report from the issuer before buying the shares back. I will generally consider buying the shares back when the price falls below $10.35.  I would much prefer buying the shares back at a significant discount to par value but I have not had that opportunity for over a year now, not counting the momentary decline in August 2010 which I was not able to catch.  This security could have been bought for $6 during the Dark Period.  WLFCP Interactive Chart 

WLFCP closed at $10.66 yesterday.

2. Bought 1 Apria Healthcare 12.375% Senior Secured Bond Maturing 11/1/2014 at 91.625 Last Thursday (Junk Bond Ladder Strategy) (see Disclaimer): While this bond is a senior secured bond, it is junior to the other senior secured bond that I previously bought. (see Discussion at Item #2  Bought 1 Senior Secured 11.25% Apria Healthcare Maturing on 11/1/2014). Consequently, even though both bonds are "senior secured" bonds maturing on the same day, the "B" series with the 12.375% has a lower credit rating and a significantly higher yield than the "A" series. As I understand the priority issue, it would become material in the event of a bankruptcy. Judging from the pricing of the two bonds, investors are more comfortable with the higher priority bonds, and I now own one of each. 

2014 "A" Series 11.25% Coupon: FINRA
2014 "B" Series 12.375% Coupon: FINRA 

Prospectus for both bonds: Prospectus dated August 16, 2010 The detailed description of the two notes starts at 163, and a summary description about priority differences starts at page 179. 

2010 Annual Report: Form 10-K

Apria's website: Home

I gave the "A" series bond a 6- rating. I am assigning a 7 rating to the "B" series given the firm's high debt level and earnings history. 

Personal Risk Ratings For Junk Bonds

My confirmation states that the current yield at my cost is 13.389% and the YTM is 15.647%.

Last Friday, Apria filed its SEC FORM 10-Q for the third quarter. The company reported a loss of $4.687 million on revenues of $584.874 million, an 11.2% increase from the year ago quarter. As of 9/30/11, Apria had $57.927 million in cash, down from $109.137 million as of 12/31/2010, and debt is remaining relatively constant at $1.017 billion.  The company acquired Praxair's home healthcare business in March 2011 

3. Bought 1 Gray Television 10.5% Senior 2nd Lien Bond Maturing 6/29/2015 at 95 last Thursday (Junk Bond Ladder Strategy )(see Disclaimer): Grey operates 36 television stations in 30 markets, plus an additional 40 digital second channels. SEC Form 10-Q A location map of those 30 stations can be found at While others may disagree, I would not call any of those stations to be located in major markets. 

According to FINRA, this bond is rated Caa2 by Moody's and CCC by S & P. FINRA I do believe that the firm is over leveraged and those ratings are justified for that reason. 

Gray is publicly traded under the symbol GTN. I have considered buying a 100 shares below $2 as a Lottery Ticket but elected to go with the bond instead. Both the price to sales and price to book numbers are below 1. GTN Key Statistics 

Prospectus:  SEC Filing. Interest is paid on 5/1 and 11/1 so I only had to pay a couple of bucks in accrued interest to the seller. This debt is junior in priority to Gray's senior credit facility which explains why it is called a second lien bond, like a second mortgage.  For another company, I described the second lien bond as securing nothing but air. The Gray second lien would have some collateral after the senior lien holder is paid in my opinion.  The outstanding principal amount on the 2015 bond is $350 million. The senior credit facility has close to $460 million outstanding.    

Reuters profile page
Reuters key developments page

I suspect that 2012 will be a good year for television owners, particularly due to the 2012 election cycle which will of course include the Presidential race.

After buying this bond last Thursday, Gray reported third quarter results. SEC Press Release Net income was at $27,000, down from $3.719 million for the year ago quarter. Political advertising was down in the last quarter year-over-year. The consensus estimate was for a 5 cent per share loss.

My confirmation states that the current yield at my cost is 10.96% and the YTM is 11.961%.

4. Junk Bond Table (Junk Bond Ladder Strategy): This is the updated version of my junk bond ladder table through last Friday:

I am running way behind in summarizing my trades.  I did buy a stock CEF yesterday, but doubt that I will mention it before Friday or next Monday's post at the latest. I also used the rally yesterday to add to a double short stock ETF as a hedge. I find it difficult to justify the rally. 

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