Can't lose opportunity

[FCXoptions]

Thanks for all the input. After looking at the different options, instead of trying to finance the cost of the bond by shorting the underlying, I decided to just buy 20k worth of bonds. I have roughly $800 at risk and can use it as a learning experience to see how things play out. If the company survives, I will get a decent return. If they go under and the bond holders get 0, then it was an interesting lotto ticket.

I did something similar with EXXI a couple weeks ago. Bought $12k worth for a few cents on the dollar. Only risking a few hundred total. They have been buying up their debt like crazy, if I recall correctly they have bought up $1.7b worth for $200m approx. This seems like a reasonably good sign to me that they don't intend to file BK as they still have quite a bit of cash, and this alone has saved them $6/barrel in production costs, but who knows. One concerning thing I didn't discover until I had already bought was they have a large outstanding issue of second-lien bonds that they don't appear to be able to buy up on the open market. You have to be an institution to trade them, so I would assume in a bk they would prevent the rest of the bondholders from getting much.

Anyways, we will see! I've got $16k of debt @ par value across 3 companies and $9k of preferred shares and paid under $2k for all of it . All of them just about are 10-1 risk/reward or better so who knows.

Good luck!

 

[destriero]

I don't know anything about the company but if I thought there was a chance, that's how I would trade it.

Apollo (the PE firm) did it with LyondellBasel like 6 years ago. Put in 2Bn to buy the distressed debt. 2 years later it's worth 10Bn and they are sill earning billion dollar dividends.

I recall reading about the deal; why is APO's mcap only $3B? Is this another structure that's not public?

 

[Sig]

I recall reading about the deal; why is APO's mcap only $3B? Is this another structure that's not public?

I show $34.7B for the market cap? Anyway market cap is just the number of shares outstanding times the price per share. It's possible to have debt significantly in excess of market cap. A lot of PE shops actually work on that model, they buy a company, lever it up, take the cash out, then cut it loose.

 

[newwurldmn]

I recall reading about the deal; why is APO's mcap only $3B? Is this another structure that's not public?

I think APO is the management company. They earned 7Bn + billions in divs in one of their PE funds. I don't know if that was before or after fees. Even if it were before fees, can you imagine splitting 3Bn between the 10 guys who structured the transaction?

 

[newwurldmn]

I show $34.7B for the market cap? Anyway market cap is just the number of shares outstanding times the price per share. It's possible to have debt significantly in excess of market cap. A lot of PE shops actually work on that model, they buy a company, lever it up, take the cash out, then cut it loose.

LYB has 34bn market cap.

 

[destriero]

1

I think APO is the management company. They earned 7Bn + billions in divs in one of their PE funds. I don't know if that was before or after fees. Even if it were before fees, can you imagine splitting 3Bn between the 10 guys who structured the transaction?

Sick deal.

 

[frostengine]

The LINE bonds I bought are up about 2.5x what I paid for them, however when I went to close them today I get an error on Interactive Brokers, wont let me perform the trade. However, I see bid/asks changing and trades taking place. Any idea what it could be? Gives some non standard redemption error.

 

[Chuck Krug]

talk to customer service chat.
their efficiency has been greatly improved over the last years imho.

 

[FCXoptions]

The LINE bonds I bought are up about 2.5x what I paid for them, however when I went to close them today I get an error on Interactive Brokers, wont let me perform the trade. However, I see bid/asks changing and trades taking place. Any idea what it could be? Gives some non standard redemption error.

They probably have stopped trading with the accrued interest I think is why. You probably have to call to do the trade. BTU is in a similar position as LINE, and their bonds moved up a decent amount yesterday, but it says you have to agree to an interest rate before the transaction..