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Update Discounted Bonds (SVNT)

I have an update on Seventy Seven Energy (SVNT)

music selection:  “The Freshmen” — The Verve Pipe

On 15NOV2015, I purchase two Seventy Seven Energy bonds at 36.55 cents on the dollar.  The company later filed bankruptcy.  Upon exiting bankruptcy, I received 65 shares of the newly constituted and debt free SVNT.  Today, a deal was announced with Patterson UTI (PTEN) that sent shares soaring 67%.  My position is now worth 2,860 (original basis was 731).  After accounting for coupon payments and commissions, the annualized yield (over 371 days) is now 289.31%.   I got lucky in that limit orders to sell for much less never filled as liquidity of this over the counter stock has been very low.  Today, I received a gift from Mr. Market.

I will be closing my limit order to sell SVNT and await an exchange for 1.7725 shares each of PTEN.  Liquidity of that issue is a lot higher and I should have no problem executing a sale thereafter.

Devour your prey raptors!

{ 2 comments… add one }
  • Chris B December 15, 2016, 3:06 pm

    Congrats! I bet it felt horrible the whole time while you were almost tripling your money, lol.

    I have a hard time coming up with an expected downside of my high-yield bonds, to balance against the easy-to-calculate upside. If my companies declare bankruptcy, how much does the average bondholder get back? I suppose the bond’s price expresses the market’s expectations, anyway, but I’m curious if anyone has statistical sources to answer this question.

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