I received shares from a bankruptcy agreement.

music selection:  “Drop Dead Legs” — Van Halen

Seventy Seven Energy went through a prepackaged bankruptcy about a month back.  My bonds are worthless (the debt was repudiated) and I received 65 shares of equity in lieu.  I’ve been holding off on reporting this because the shares were not trading until today so there was not a good way to estimate what the financial result would be.  Shares are currently trading for about 15 dollars.

On 8DEC2015, I paid 36.55 cents on the dollar for two bonds.  I paid 2 dollars in commissions, and 9.57 in accrued interest.  During the holding period, I collected 66.24 in coupon payments.  The trade has been in force for 254 days.  Assuming I sell tomorrow for 15 (and I hope to), the annualized yield will be 44.76%.

Value is what you get but price is what you pay.  You can often times get a very favorable price on discounted bonds because the original holders are forced hands.  In this case, even though I was “wrong” about the solvency of the company, I did very well.  That is the power of buying low.

Devour your prey raptors!

Update Discounted Bonds

Never miss another opportunity to devour prey!

4 thoughts on “Update Discounted Bonds

  • August 19, 2016 at 3:39 pm
    Permalink

    What was the process like? Did you have to file any claims, fill out any forms, or otherwise put any effort into the bankruptcy proceeding? How did your broker handle the transaction?

    Reply
    • August 19, 2016 at 4:55 pm
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      The process was effortless. I had shares with a weird symbol that wasn’t tradeable for a week or so until SVNT go listed. No forms. The bankruptcy lawyers handle all the paperwork. IB even assigned me the basis in the shares.

      Reply
  • August 22, 2016 at 5:56 pm
    Permalink

    Raptor,

    For what did you end up selling your shares?

    Darren

    Reply
    • August 22, 2016 at 8:05 pm
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      They didn’t clear. I have a GTC order open at 15.50. Liquidity is very low and I may have to wait a few weeks.

      Reply

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