I sold the Unit bonds.
music selection: “Lay Down Sally” — Eric Clapton
I purchased CUSIP 909218AB5, the Unit 6.625 coupon bond with 15MAY2021 maturity on 25SEP2019 for 77.5 cents on the dollar. I paid 9 dollars in commissions on 9 bonds and 218.63 in accrued interest for total cash out of pocket of 7,202.63. The company needs to refinance and may be having trouble doing that. It made a tender offer that was reasonably attractive but has since twice extended the deadline. This indicates that there may be few takers and the company may be planning a reorganization bankruptcy that could threaten my principal
I decided to revoke my acceptance of the tender offer and sell my bonds for what I could get on the market. I sold yesterday 16JAN2020 for 54.26 cents on the dollar. I paid 9.75 in commissions and collected on coupon during holding plus my accrued interest for a total of 407.48 in interest income. That is total proceeds during the holding period of 5,281.13, resulting in a 1,921.50 loss or 26.68%.
It hurts to take a loss on a bond since I have limited diversification in bonds and it is so hard to find attractive distressed bonds with the high yield to Treasury spread being near historic lows. It is just a difficult market for high yield bond investors right now. The market will turn, the Treasury spread will widen, and bonds will be a far better place to be invested than equities for a few years. But that time is not now. I hope to continue making market neutral options trades to raise cash for deployment into bonds when the credit cycle finally turns.
Devour your prey raptors!