Thursday, April 5, 2012

ADP Payrolls/Harland Clarke Investor Presentation/Reynolds Group Holdings Annual Report/Sold 1 Appleton Papers

LB is knee deep in correcting other people's mistakes at the moment. At least I know what I will be doing on Good Friday.  I did manage to free myself from that drudgery long enough to buy 300 shares of a bond CEF yesterday, but it will be next Monday before I will be able to discuss that trade. That transaction was in the ROTH IRA.

LB, the staff member responsible for correcting other people's mistakes, is not the staff member most likely to forgive and forget, to tolerate fools, and to understand an unwillingness  to take responsibility for creating the mistake in need of correction. In fact, it would be fair to say that the persons requiring the LB to spend a tedious and unnecessary 10+ extra hours on the 2011 tax return are most fortunate in their absence from HQ.  LB is after all a much respected ass kicker extraordinaire.

Of course, by reporting a problem to TurboTax and Fidelity, I do not expect any support or a correction in time for this year's tax return. Instead, if enough people complain, then maybe their errors will not be repeated next year.  I discuss this problem in yesterday's post:  Fidelity and TurboTax Problems-Form 8949/Unnecessary and Time Consuming Problems with TurboTax To my knowledge, this problem has only arisen with the download from Fidelity who will of course refuse to take any responsibility for the problem. If anyone experiences a problem with another broker, please let me know.

ADP reported yesterday that the private sector payrolls increased by 209,000 in March. The February number was revised up to 230,000 from 216,000. adpemploymentreportpdf

The ISM services index for March was reported at 56%, slightly below expectations. The new orders component fell to 58.8 from 61.2 in February. The employment component rose to 56.7 from 55.7.

Simon Johnson, a professor at M.I.T., is critical of both the Obama and Ryan budget proposals. Daily Ticker He is the author of the White House Burning: The Founding Fathers, Our National Debt, and Why It Matters to You published earlier this month.

Maureen Dowd has some caustic comments about the "Men in Black" in her last column.

Moody's downgraded General Electric's debt to Aa3 from Aa2 and lowered GE Capital to A1 from Aa2.

This is a link to Harland Clarke's presentation made at a recent investors' conference. SEC Filing At page 5 of that presentation, the company estimates 2012 adjusted revenues of $1.732 billion, adjusted EBITDA of $498 million and a 29% margin. I own 3 of the 2015 bonds.  I discussed the 4th quarter earnings report at Item # 1 HARLAND CLARKE.

As further evidence of a slowdown in China's growth, the Australian Bureau of Statistics reported that Australia's exports fell a seasonally adjusted 2% in February from January, with shipments of coal and coke falling 16%. International Trade in Goods and Services, Australia, Feb 2012

1. Reynolds Group (own 4 senior unsecured bonds): The Reynold's Group acquired Pactiv.  Pactiv was formerly know as Tenneco Packaging. I own too many Pactiv and Tenneco Packaging bonds and will likely sell one of my two longer term bonds before the end of this year to reduce my exposure to 3 bonds. For now, I intend to keep the two Pactiv bonds (FINRA) maturing in 2018. Added 1 Pactiv 6.4% Senior Note Maturing in 2018 at 77 I increased my risk rating on that bond to 7 from 5 back in June 2011: Tenneco Packaging and Pactiv Bond-Increasing Personal Risk Ratings 

The Reynolds Group recently made available its 2011 Annual Report:  reynoldsgroupholdings.pdf For 2011, the company lost 417 million on $11.789 billion in revenues. It claimed EBITDA of $1.897 billion for the year. (page 8) The amount of debt is just staggering to me. The liquidity and interest rate risks are discussed starting at page 66.  As noted at page 90, Reynolds did refinance Graham Packaging debt by issuing $1.25 principal amount of 9.87% bond due in 2019.

2. Sold 1 Appleton Papers Second Lien Note at 93.252 (Junk Bond Ladder Basket Strategy)(see Disclaimer): I bought this bond back in March 2011. Bought 1 Appleton Papers 2nd Lien Bond at 95.75 I came close to break-even on the bond and received slightly more than one year in interest. The coupon on this bond is 11.25%. I have not been pleased with the earnings reports from this company. I recently raised my risk rating to 8 fro 6+ after reviewing the 4th quarter report.  Item # 1 Appleton Papers I am becoming more hyper sensitive to the credit risks with my junk bonds given the spate of recent bankruptcies including Eastman Kodak, AMR, and General Maritime. I have 1 bond from two other issuers where I expect a bankruptcy filing before the end of this year, more likely much sooner. Appleton is not one of those companies, but I do perceive a greater risk now than when I originally bought this bond. So I am okay with getting out with a positive total return.

I would note that the pricing of my one AMR bond has improved some. 

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