Sold Revlon, bought PBF logistics.

music selection:  “Jive Talkin'” — Bee Gees

Several positions expire tomorrow.  All are in a good place except a bear put spread on Colgate Palmolive (CL).  I’ll likely take a loss in the range of 6-7% on the trade tomorrow.

I bought the Revlon 5.75 coupon bond with the 15FEB2021 expiry on 05JUL2018 for pricing between 75.5000 and 77.0000.  I paid 6,900 plus 18 dollars in commissions and 217.06 in accrued interest for 9 bonds.  The bond fell dramatically with the company approaching bankruptcy during COVID-19.  They were able to engineer a debt swap agreement that was accepted by institutional investors and the bond returned to near par.  I sold today for 99.7500, paying 20.50 in commissions and fees and receiving 140.88 in accrued interest.  I likewise received 143.75 in coupon payments per bond during the holding period.

The holding period was 858 days which makes the annualized return 18.21%.  The total cash return is 10,189.13.  I don’t expect an opportunity to flip this bond again as it is nearing maturity and a mortal lock to pay at par.

I bought the bond of a refinery MLP today as well.  I picked up the PBF Energy 6.8750 coupon bond with 15MAY2023 maturity for 91 cents on the dollar.  I paid 8 dollars in commissions and fees and 12.22 in accrued interest.  This is a bond I consider “money good” as it has interest coverage over 4 times.  Its revenue took a hit during COVID but actually continued to grow a few hundred basis points year over year.  They are largely immune to commodity pricing and the general partner has a clause whereby they must guarantee the bond if the partner cant pay.  Curiously, the bond tracks the price of oil and not the fundamentals of refining.  I expect to flip this at par or better if oil goes above 52/bbl.  The yield to maturity, should I hold to maturity is a little over 11.08%.  I consider that fair compensation for the risk taken and in fact better than most equity returns, for less risk as I’m supra in the capital structure to share holders.

Devour your prey raptors!

 

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Update distressed bonds

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One thought on “Update distressed bonds

  • November 20, 2020 at 3:22 pm
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    Have you analyzed whether over the long term you’ve done better with bonds or options?

    Reply

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