US Markets are closed for President’s Day.

music selection:  “Lay Down Sally” — Eric Clapton

weigh-in:  213.0 (1.8) – Finally (finally!) back on track.

I haven’t been updating regularly on discounted bonds as limit orders clear the market.  Six positions have filled since the beginning of the year:

Cummulus Radio, 7.750 coupon, 01MAY2019 maturity, 33.150 entry price

Ensco, 8.500 coupon, 15JUN2019 maturity, 75.525 entry price

Freeport McMoran, 2.375 coupon, 15MAR2018 maturity, 72.000 entry price

Genworth Insurance, 7.700 coupon, 15JUN2020 maturity, 71.250 entry price

Square Two Financial, 11.625 coupon, 01APR2017 maturity, 44.000 entry price

Weatherford, 5.125 coupon, 15SEP2020 maturity, 75.954 entry price

 

In addition, some of my positions are deeply in red and are very likely to enter bankruptcy:

Peabody Coal, Energy XXI, Linn Energy, and Midstates Petroleum are all selling for less than a nickle on the dollar.  These were all purchased for less than 25 cents on the dollar.  Historically, bankruptcies return 40 cents on the dollar to bondholders.  I should be OK but it might take several months for the courts to sort things out.

Also, Linn Energy, Rexx Energy, and Cliff’s Natural Resources are all making tender offers for early exchange of their bonds for longer dated bonds.  This is one of the many emergency measures companies can take to kick the can down the road when fighting bankruptcy.  These maneuvers are “bad” for shareholders and “good” for bondholders.  That is part of what makes discounted bonds attractive investments.  With death at the door, companies will use every trick in the book to satisfy their bond obligations.

Devour your prey raptors!

Discounted Bonds

Never miss another opportunity to devour prey!

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2 thoughts on “Discounted Bonds

  • February 18, 2016 at 7:16 am
    Permalink

    Raptor,

    How do you purchase the discounted bonds? Do you use IB?

    Thx,

    Reply

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