There is a change in status on two of my discounted bonds. The 6.000 Peabody Coal bonds and the 6.500 Linn Energy bonds are now both trading “flat.” When bonds go into technical default, they trade without the accrued interest being paid, referred to as trading ‘clean’ or ‘flat’. There is a very strong chance both Peabody and Linn will file for Chapter 11 soon.
I paid 20-1/2 cents on the dollar for Peabody and 23 cents on the dollar for Linn. I’ll need at least that much from the bankruptcy courts to avoid taking a loss on these two. Historically, the average recovery for bond holders during bankruptcy is about 40 cents on the dollar. There is no guarantee in either case however.
Devour your prey raptors!