Friday, August 17, 2012

Ares Capital/Earnings: CVO, Apria/Sold 200 STLPRA at $10.5-ROTH IRA/Bought Back 50 BDGE at $19.65

I thought that the following story about the founder of Crocs was interesting particularly as it deals with his fantasy relationship with Taylor Swift.

Doug Kass is selling the market. He is concerned about a potential triple top and the stalling out of the transport [TRAN] average. He also states that it has very rarely paid to buy equities when the VIX is around 14. That would not be accurate statement for a Stable Vix Pattern. When the VIX movement falls below 15 coming out of an Unstable VIX Pattern, and the Stable Pattern forms thereafter, it has presaged powerful cyclical bull market rallies lasting several years, as shown by the Stable Vix Patterns starting in 1991 and 2004. His observation would be correct only for Unstable Vix Patterns, when a move below 15 would likely mark a stock market high. The VIX would soon shoot back up into the 20s or higher as the market declines.

TICC Capital priced its offering of 3M shares at $9.65.

In a note yesterday morning,Wells Fargo told investors that Ares Capital was unlikely to sell stock this week. ARES is a BDC, and those companies frequently have stock offerings that knock down the share price. It behooves management to have more assets so they can make more money in fees. While it is conceivable that such offerings may ultimately benefit the BDC's investors, assuming a successful deployment of the new cash which sometimes occurs, the only certain benefit is to the BDC's managers. After the closing bell yesterday, Ares Capital announced a public offering of 19 million shares plus up to an additional 2.85 million shares in the over-allotment option. I own 150 shares which have just recently moved into profit territory. This offering will knock the shares back down.  With BDCs, I just try to collect the generous dividends and then get out without losing money on the shares. I almost sold my shares yesterday, but I decided to collect one more dividend instead.

Husky Energy is ex dividend today for its 30 Canadian cent dividend per share. I own 200 shares (HSE:CA), and will be receiving the dividend in Canadian dollars after a 15% withholding tax deduction. The CAD is currently worth more than the USD. CAD/USD

The CEF Gabelli Dividend & Income Trust declared its 8 cent per share monthly distribution for the months of October, November and December. I own 230 shares and have never reinvested the dividend.


Romney is not capable of telling the truth and that will never change. He will say just about anything, including knowingly false statements, in order to win an election. His latest misrepresentation is that Obamacare "robbed" $700M from Medicare. PolitiFact He will be peddling a continuous loop of falsehoods.

While Ryan is not a pathological liar, more like a typical politician from either political tribe who slips into deceit in order to gain a political advantage less frequently than a Mitt Romney, he claimed that traditional Medicare is being turned into a "piggybank" to finance Obamacare. Reuters That is what Romney is claiming too.

And what makes the charge both humorous and repellant at the same time is that the republican budget plan authored by Ryan has cuts in an effort to bring down future costs according to PolitiFact. The cost savings in the Democrat plan comes mostly from insurance companies and health care providers. Beneficiaries are not being "robbed". There is a reduction in subsidies to private insurance companies who offer Medicare Advantage programs which have started to cost more than traditional Medicare (Medicare Advantage is a GOP idea whose politicians of course claimed that such plans would cost the government less).

So, Ryan is just another politician intent on misleading and deceiving the public to gain a political advantage, in spite of his cherubic face and demeanor. The general idea behind this particular fraud is to scare seniors who are receiving traditional medicare into believing their benefits are being cut and to distract voters from the GOP plan which dramatically alters Medicare by turning it into a voucher program for the purchase of private insurance. GOP's Plan To Bankrupt the Middle Class

The Democrats will make different misrepresentations about the GOP's medicare plan, as I pointed out in a recent post, and they have the same underlying purpose. (see discussion at; and my discussion in the introduction to  GOP's Trickle Down Economics and the Middle Class) This kind of dialog from both political tribes is just disgusting. The Democrats could nail the GOP politicians by simply telling precisely what the republicans have tried to do without making a single false claim designed to scare seniors who are currently receiving traditional medicare.  Even telling the truth would fall on a lot of deaf ears now, since a large number of Americans no longer believe anything being said and are too disgusted to even vote.

If misrepresentations by politicians were made in commercial transactions, they would form the basis for lawsuits based on negligent misrepresentation and/or fraud. (see : Whoppers of 2012, Early Edition)

1. Apria Healthcare (own 1 senior series "B 2014 secured bond)(Junk Bond Ladder Strategy): Apria reported another quarterly loss. For the second quarter, the company reported a net loss of $12.7 million or revenues of $607.7 million. The company claimed EBITDA of $50.2M. Press Release

I have not been pleased with a single earnings report since I bought this bond. Bought 1 Apria 12.375% Senior Secured Maturing on 11/1/2014 at 91.625 (November 2011)

I previously upgraded my risk rating after reviewing the 2011 annual report. Item # 3 Apria Healthcare My new risk rating for the Series "B" is 8+. After reviewing this latest report, I am increasing my risk rating to 9+. Part of that increase is justified by continued losses in conjunction with the sheer size of the higher priority debt.  

As of 6/30/12, long term debt stood at $1.017+ billion. The company had drawn $69M on its senior secured credit facility. Cash and cash equivalents were $24.239 million, down from $29.096M as of 12/31/11. The company paid $59.8M in interest during the second quarter. Free cash flow was a negative $48.2M. 

Apria has two series of secured notes. The "A" series has $700M outstanding and is more senior in priority to the "B series which has $317.5M outstanding. I have previously sold out of the "A" series. (see note 5 From 10-Q)

Sold 1 Apria 11.25% Senior Secured Bond at $104

2. Cenveo (own 1 second lien 2018 bondJunk Bond Ladder Strategy): Cenveo reported GAAP net income for the second quarter of $.1 million or less than 1 cent per share on $439.5M in sales. The non-GAAP income number was $8.4M or 13 cents per share.  The Non-GAAP number excludes a number of items, including integration, acquisition and other charges, loss on extinguishment of debt, stock based compensation, impairment charges, etc. Second Quarter 2012 Earnings Release Adjusted EBITDA for the second quarter was $53.1M, virtually unchanged from the year ago quarter.

The company has been repurchasing the 2013 senior subordinated note, retiring $50M of those notes during the second quarter. "At present", there are $98.5M outstanding of those 2013 notes, and the company "fully intends" to retire the remainder by the end of 2013. That note is the nearest maturity. I did realize a profit trading that bond: Sold 2 Cenveo 7.875% Senior Sub Bonds Maturing in 2013 at 95 (March 2012).

As of 6/30/12, the company had cash of $14.067M and long term debt of $1.210+B. CVO-2012.6.30-10Q. The debt is discussed in note 7 at page 12. As with most other second lien notes, the first lien in this case is the secured bank credit facilities. The amount of those more senior secured borrowings stood at $406.857M as of 6/30/12. Then there would be the second lien note, which I own, that has a $400M principal balance. The remainder would be a 2017 senior unsecured note ($86.2M) and the unsecured 2013 senior subordinated note referenced above.

For the most part, the common has been trading under $2 per share recently: CVO Historical Prices The common shares are in my LT monitor list. Price to sales is .07, and the forward estimated P/E is 3.92. CVO Key Statistics

Bought 1 Cenveo 2nd Lien 8.87% Bond at 92.499 (May 2012).

3. Sold 200 STLPRA at $10.5 Last Tuesday -ROTH IRA (see Disclaimer): This TP can be called by Sterling Bank at anytime now. The redemption price would be the $10 par value plus accrued interest. It was borderline for me to keep the TP with that consideration in mind.

I previously noted that this TP could still be treated as Tier 1 equity capital under Dodd-Frank. That is still correct, and it was one reason for keeping it. Maybe STL would not redeem it for that reason. However, after reviewing some material relating to the Federal Reserve's  new capital rules, it appears that this TP will have to be phased out as TIER 1 equity over a ten year period, staring in 2013, as explained more fully in Item #1 SUSQ Redemption of TPs. That consideration makes it more likely in my opinion that STL will redeem this relatively high cost 8.375% coupon TP.

By selling it now, I was able to harvest a profit on the shares. My goal was simply to collect several interest payments in the ROTH IRA without losing money on the shares, and I accomplished that modest objective:

2012 Roth IRA 200 STLPRA +$58.03
Sterling Bancorp Trust I 8.375% Cum. Trust Pfd. Secs. closed at $10.59 on volume of just 300 shares.

4. Bought Back 50 BDGE at $19.65 Last Tuesday (Regional Bank Basket Strategy)(see Disclaimer): I recently sold 50 BDGE shares at $23.5. Sold 50 BDGE at $23.5 (7/3/12 Post). In a fairly typical trading pattern for securities likely to be held over a long period, I bought back those shares at $19.65 last Tuesday. I am reinvesting the dividend.  The shares are held in a Fidelity account and that broker secures a 5% discount on reinvested shares through its participation in the Depository Trust Company Discount Plan. Other brokers do not participate in that plan, and will not secure the reinvestment discount. Instead, they buy shares in the open market on the dividend payment date. Item # 1 Continuation of Discussions Re: Broker Price Differences For Reinvested Dividends

I discussed the last earnings report at Item # 5 BDGE

Bridge Bancorp, Inc. Reports Second Quarter 2012 Results

Net income for the second quarter increased to $3.063M from $2.476M  in the 2011 second quarter. The E.P.S. number was lower at 36 cents, compared to 38 cents, due to more shares outstanding. BDGE sold 1.377M shares at $17.5 last December to institutional investors. SEC Filed Press Release In May 2011, the company issue 273,479 shares to buy Hamptons State Bank.

Needless to say, Bridge is a small bank. It operates 21 branches in Suffolk County and eastern Long Island, NY.

This is a link to a map of its locations: Bridgehampton National Bank

The capital ratios are good:

Capital Ratios as of 6/30/12
The preceding snapshot includes the capital ratios for both the holding company Bridge Bancorp and the operating bank Bridgehamton National Bank. ‎ SEC Form 10-Q for the Q/E 6/30/12 at page 52

I just received shares purchased with the last quarterly cash dividend of 23 cents per share. Bridge Bancorp, Inc. Announces Second Quarter 2012 Dividend

At that rate, the dividend yield at a total cost of $19.63 would be about 4.67%.

This brings me back to 150 shares bought in the open market plus shares acquired with the dividend.

BDGE is a thinly traded stock, with large bid/ask spreads being normal.

Bridge Bancorp closed at $19.95 yesterday on volume of 4,909 shares. 

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