RE: LSC Bonds
Hi Jeffrey
We own $2.65MM of the LSC Communications 8.75% 2023 bonds. We paid $105.25 back in Jan 2017.
• Bonds trading up 10 points this morning on a takeover. Currently at 107.00.
• I think we sell. If the deal does not close we are back down at 97-98. If it closes there is probably 2-3 points of additional upside.
• We can take the proceeds and find a similar bond that does not have the binary risk to it.
Paul
Paul Barrett
Alpha Group Capital LLC
142 W 57th Street, 11th Floor, New York, NY 10019
again,. i need better info, . what was yield to maturity on purchase. . when do they pay? what bonds would you buy instead. , ? and its yield . . not enough to say we buy another.
Purchased Jan 2017 @ 105.25. Yield at the time was 7.60%.
• Bonds were trading at $97 before this announcement. They have spent the last year in a $97-$104 range. Sold off $4 in October.
At $97 that was a 9.52% YTW
• At $107 it is now a 6.69% YTW
- B rated issuer
• Being acquired by Quad Graphics. Another B rated issuer whose 2022 bonds are yielding 6.66% YTW
• If we sell at $107 we make $46K from price appreciation for a total return of $463K or 9% annualized.
- Deal expected to close in the summer of 2019.
Option 1: Do nothing. It is callable in a year at 106.56. So little price upside from here. Risk of the deal not closing and we trade back down to <100.
Option 2: Sell at 107. Roll proceeds into Consolidated Communications bonds.
Consolidated Communications 6.5% 2022
$ 93.00
- YTW 8.64%; 3.3yr duration.
• Broadband provider in the Northeast/Midwest. Stable business.
` 4.3x levered; $530MM of EBITDA in 2018.
` Only 40MM of term loans maturing before 2022. Bigger term loan maturing behind us in 2023.
- JPM idea.
Paul
Paul Barrett
Alpha Group Capital LLC
142 W 57th Street, 11th Floor, New York, NY 10019