Distressed Debt Investing
- Thread starter FCXoptions
- Start date
I might start to sell these BTU bonds soon, just realized they are up over a double now. If they file, this will be my first BK experience with bonds as I am new to all of this. I need to do some more research into estimating recoveries and what not to see what would be the best way to play this. I will either lock in half and take my risk off the table and leave the rest to see how things play out or just let the whole thing ride as it is not a big position really.
Looks like both BTU and EXXI are bankrupt (or will be by tomorrow). How is the distressed debt trading going?
Yikes. Hadn't seen that news on EXXI. Oh well!
Still has been quite profitable. CHK has performed very well. It's nearing a triple and I've made a double on the preferreds. I've made enough at this point on my winners that I could get zero on the rest and come out positive so that's a plus.
BTU I pretty much knew they were going to file. Just a matter of time. Wasn't so sure on EXXI. But either way I think I should come out relatively fine because I bought them so cheap. We will see though.
Thanks for the post letting me know on EXXI. I hadn't seen the news.
Still has been quite profitable. CHK has performed very well. It's nearing a triple and I've made a double on the preferreds. I've made enough at this point on my winners that I could get zero on the rest and come out positive so that's a plus.
BTU I pretty much knew they were going to file. Just a matter of time. Wasn't so sure on EXXI. But either way I think I should come out relatively fine because I bought them so cheap. We will see though.
Thanks for the post letting me know on EXXI. I hadn't seen the news.
Ok another update.
I had $5k of BTU bonds that I bought for about 4 cents on the dollar. Sold $3k of them this morning for 10.5 and going to leave the remaining $2k on to see how bankruptcy plays out. So i've covered my costs + 50% gain and then will let the rest ride. With that being said, I need to see how much I paid in for accrued interest because that was a total loss due to the BK filing. I made sure to get the furthest away interest payment I could though so I would have the least amount possible at risk in the accrual, so it shouldn't be too much.
CHK I bought @ 22 and it is in the 50's currently. Can't decide if I want to lock it in or just let it ride. I think they survive, but we will see. Their preferred stock is doing quite well still for me also.
EXXI, not so great. The company is proposing to wipe everybody out except the second lien secured guys and give them 100% of the equity minus a piece for management performance. That bond issue is all institutionally owned, so not surprised to find that out. Sweet deal for management as well. I believe the court date is 5/16, so will find out more then. I'm hoping that there is some form of recovery for the unsecured's. If oil can stay up/keep rallying I feel like the BK court might alot something, but at the same time who knows. Might just wipe us all out and be done with it. Either way won't be a major hit if it doesn't work out, I had low expectations of it working out.
The proceedings on EXXI and BTU will be a learning experience. That is why I wanted to keep a small stake on BTU just to learn more on the whole process. EXXI I have little incentive to sell at the current price, so just going to let it ride.
I had $5k of BTU bonds that I bought for about 4 cents on the dollar. Sold $3k of them this morning for 10.5 and going to leave the remaining $2k on to see how bankruptcy plays out. So i've covered my costs + 50% gain and then will let the rest ride. With that being said, I need to see how much I paid in for accrued interest because that was a total loss due to the BK filing. I made sure to get the furthest away interest payment I could though so I would have the least amount possible at risk in the accrual, so it shouldn't be too much.
CHK I bought @ 22 and it is in the 50's currently. Can't decide if I want to lock it in or just let it ride. I think they survive, but we will see. Their preferred stock is doing quite well still for me also.
EXXI, not so great. The company is proposing to wipe everybody out except the second lien secured guys and give them 100% of the equity minus a piece for management performance. That bond issue is all institutionally owned, so not surprised to find that out. Sweet deal for management as well. I believe the court date is 5/16, so will find out more then. I'm hoping that there is some form of recovery for the unsecured's. If oil can stay up/keep rallying I feel like the BK court might alot something, but at the same time who knows. Might just wipe us all out and be done with it. Either way won't be a major hit if it doesn't work out, I had low expectations of it working out.
The proceedings on EXXI and BTU will be a learning experience. That is why I wanted to keep a small stake on BTU just to learn more on the whole process. EXXI I have little incentive to sell at the current price, so just going to let it ride.
This sounds more like distressed debt gambling
Well, take it for what it is. FCX, US Steel, CHK I would consider my plays there more distressed investing. But sure you can call buying debt of companies in very difficult times that you think either might survive or you might get enough of a recovery to make your money back plus more gambling, because who knows. Letting the little remaining piece of BTU ride I guess could be considered gambling also because I am seeing how BK plays out, but honestly I just want to learn more on the whole process. I have covered my entire cost plus some, so I am not worried about it. I think the recovery will be somewhere in line with where the bonds are trading, but who knows.
EXXI, there isn't much of a market to sell into, so no reason to close it out. I bought it and intended to treat it like a call option on crude oil that instead pays me interest and doesn't expire. It was a cheap way to place a large bet on oil coming back. Clearly it didn't work out, but risking $500 for a potential $12,000 gain or more...I consider that a decent bet because I would have been willing to estimate the odds of them surviving as better than 4% at the time I entered the position.
Plus I think you indicated earlier these are all relatively small positions vs your overall portfolio and most of us allot a small portion of our portfolio to speculative plays. I think it's a cool way to learn about distressed debt and am enjoying your updates.
Yep that's correct. I've limited my risk to a pretty small portion on the more speculative plays. FCX I put a bit more into but I considered that a very solid play and more of just a normal distressed play.
The rest I've kept to a very small percentage. I've made enough on the other plays that everything remaining could be a total loss and I'd still come out positive on bonds overall so I'm happy!
EXXI BK court proceedings are this month...let the excitement begin!
Hopefully unsecured's will get a little piece of the pie, I think the deal as proposed is really screwing everybody but the institutional holders on the one secured issue. But with it being all institutions, they might just have the resources to get what they want. We will see. Collectively have $32k in face value of the EXXI bonds across 2 accounts but only paid 4 cents for them approx so don't have much tied up at all.
Hopefully unsecured's will get a little piece of the pie, I think the deal as proposed is really screwing everybody but the institutional holders on the one secured issue. But with it being all institutions, they might just have the resources to get what they want. We will see. Collectively have $32k in face value of the EXXI bonds across 2 accounts but only paid 4 cents for them approx so don't have much tied up at all.