Oxford Lane Capital Baby Bonds
- Thread starter BMK
- Start date
Yes, I saw that. The author of the article even points out that the CDOs held by Oxford Lane are often thought of as very risky.
But he then lays out various reasons he thinks that these bonds have almost no chance of default.
Do you think there is serious risk?
I don't want to trade bonds.
I want to hold to maturity.
These look like a good yield without a lot of risk. The author of the article thinks they are underpriced.
I'm curious what other people think.
The article was written by
Preferred Stock Trader with 5.7K followers.
ie nameless and faceless.
It sounds fishy.
Based on the chart, it doesn't look bullish.
It seems more like the writer has lost $$$ investing in it.
No point in collecting dividends and the price keeps on getting
more and more and more underpriced.
Anyway, do your own analysis.
Good Luck!
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It isn't expected to go up dramatically. It's a bond, not a stock.
That may well be the case. But that's going to happen anytime you buy a bond and then interest rates go up. If you hold to maturity, you get the face value (assuming the issuer does not default).
The guy gets good reviews on SA, and has authored articles that have been selected as "Editor's Picks." That means something. I am new to SA, with a paid subscription, and I realize that almost anyone can publish an article on SA. But someone who has only published a few articles would not have 5.7K followers.
He’s decent on preferred stocks.
So the Fund profits from positions in high-risk tranches on CDO/CDLs. They mitigate risk via diversification, and limitations on leverage. These “baby bonds” are used to fund purchases, and the Funds also have a layer of preferred stock to further protect the lender/babybond buyer.
Where’s the big risk? Similar to the mortgage crisis, where defaults were rampant across the country, a wide-spread rash of defaults would bring them down.
With rates getting hiked, and efforts to curb inflation, an upcoming recession is a real threat. These high-risk commercial loans would be the first to go belly-up. This could sink one of these funds.
I rate them somewhere between low investment grade and junk.
Thanks for your input. I'm not afraid to look at junk bonds. I may be comfortable with them in a small portion of our long-term portfolio.
What do you think about the new 9% notes issued by OMF?
Maturity = Jan 29
CUSIP = 682695AA9
They are rated BB by S&P. They don't have a rating from Moody's. And most or all of OMF's bonds are rated by both agencies. At first I thought that might be a red flag, but then I realized maybe it's because they are too new, and Moody's just hasn't published a rating yet...