Saj Karsan
Long only, deep value, contrarian

IBI Group: Cheap Debt That's Covered By Current Assets

Shares of IBI Group (OTCPK:IBIBF) have fallen off a cliff, and therefore may be substantially undervalued. Unfortunately, the company carries a decent amount of debt, which means even though the stock's potential upside is large, so is its potential downside!

IBI's debt, however, also trades at a large discount. As a result, investors in the debt are offered substantial upside without the same level of risk as that borne by equity holders. In particular, the company's 7% debentures (IBG.DB), due at the end of 2014, currently offer investors a yield to maturity of 30% in a company that is profitable if you ignore intangible asset write-downs. Interestingly, this debt is also currently covered by the company's net current...

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