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!