Quote from Jerkstore:
I would suggest that your logical and creative reasoning is probably more important your recommendation.
I am not a bond expert, nor a company valuation expert. However, BP 1 year paper just went to 10.5% yield with 6 year BP paper at 6%. Pimco very publicly bought the 10.5% yield, calling this an obvious bet--on a company that has a 40% chance of bankruptcy according to its CDS market.
I am more a statistics guy than a company analyst. If I were in your shoes, I'd look at the options (vol and skew and especially the teeny puts) and the CDS market to see if the world expects NFLX to collapse. If you are a math whiz you could calculate the implied future stock distributions from the options, and a % chance of a bankruptcy from the CDS market and the options. Even if you don't have the modeling skills to calculate market implied %, you should be able to get valuable qualitative data from the comparative implied vols of the 2 delta puts, as well as from the comparative prices of the CDS strip out in time.
If the bond yield is high, and CDS/options prices are low, you could suggest hedging your bond exposure by buying puts or CDS, to lock in a lower risk, yet still high yield return. Another potential would be to suggest buying the convertible bond instead of the regular bond--not sure where you'd find the yields and terms on the converts though.
