Annual Review Of Additions To Our High Yield Global Bond Portfolios

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Includes: ACW, CDURQ, CLMT, CRZO, CWXZF, DGPIF, DLNG, ESV, FGP, FPLSF, FSUMF, HL, IAG, KEM, MMLP, OAS, PHII, PKD, RCII, RIG, TGA, TRRVF, USD, VNR
by: Randy Durig

Summary

28 US dollar debt instruments, with average yield indications of 10.69% at the time of addition.

7 foreign currency debt instruments, with average indications of 11.28% at the time of addition.

The bonds in at the time of purchase had an average outstanding maturity of just over 48 months (4 years) at an overall indicated average yield of about 10.81%.

Annual Recap

Year-In-Review: January 1, 2015 to December 31, 2015

Presented below is a summary of the 35 bond reviews and recommendations that we have given to our clients over the past twelve months, from January 1, 2015 through December 31, 2015. Shown below are the yield indications at the time when these securities were added to our FX1, FX2, and FX3 Fixed Income Portfolios. This does not reflect any gains or losses that might result from exchange rate currency changes, nor does it indicate or account for any fluctuations in bond valuations.

14 of these global corporate debt instruments were Yankee Bonds (foreign corporation debt denominated in US dollars), and 7 were bonds issued in other currencies (Canadian dollars and Swiss Francs.)

Each summary that follows lists the issuer, coupon rate, maturity, credit rating, the yields at the time of acquisition, the portfolio (FX1, FX2, or FX3) each was added to, as well as a brief update of the issuer. Many of the companies hold dominant positions within their respective countries. It is not uncommon, however, to find credit ratings that are constrained by a national sovereign credit rating.

  • 28 US dollar debt additions, with average indications of 10.69%*, were made to FX1.

  • 35 mixed currency debt additions, with average indications of 10.81%*, were made to FX2.

  • 7 foreign currency debt additions, with average indications of 11.28%*, were made to FX3.

The bonds in the portfolios had (at the time of purchase) an average outstanding maturity of just over 48 months (4 years) at an overall indicated average yield of about 10.81% at the time they were added to the FX1, FX2, and/or FX3 portfolios. The average time remaining until maturity for these bonds is currently about 41.2 months.

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*Yield indications at the time of recommendations for addition to individual portfolios are not presented as year to date performance averages. As a result of our institutional association, we may obtain better yield/price executions for our clients than is initially indicated in our reports.

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40% Camposol S.A.

Issuer: Camposol S.A.
Coupon: 9.875%
Ratings: Caa1/B-
Maturity: 02/02/2017
Pays: Semi-Annual
CUSIP: 19189AA0
Price: 75.0 (12/22/15)
Yield to Maturity: ~40.4%

Camposol has appointed Mr. Manuel Salazar as CEO to replace Mr. Samuel Dyer Coriat. The transition should be complete in the first half of 2016. More on Camposol S.A.

7.37% Ensco PLC (NYSE:ESV)

Issuer: Pride International (now Ensco PLC)
Coupon: 8.5%
Maturity: 06/15/2019
Rating: Baa2 / BBB+
Pays: Semi-annually
CUSIP: 74153QAG7
Price: 103.45 (11/30/15)
Yield to Maturity: ~7.372%

Ensco's financial position is excellent. As of September 30, 2015, the company had $1.1 billion in cash, a fully available $2.25 billion revolving credit facility and a $6.6 billion contracted revenue backlog. More on Ensco.

8.8% and 9.8% Oasis Petroleum (NYSE:OAS)

Issuer: Oasis Petroleum Corp.
Coupon: 7.25%
Maturity: 02/01/2019
Rating: B2/B+
CUSIP: 674215AC2
Pays: Semi-annually
Price: 95.65 (11/24/15)
Yield to Maturity: ~8.85%

Coupon: 6.875%
Maturity: 03/15/2022
Rating: B2/B+
CUSIP: 674215AG3
Pays: Semi-annually
Price: 86.35
Yield to Maturity: ~9.83%

In the third quarter of 2015 (ending September 30, 2015) Oasis exceeded production guidance range and increased average daily production to 50,546 barrels of oil equivalent per day ("Boepd"), a 10% increase over the third quarter of 2014. More on Oasis Petroleum.

14% Kemet Corporation (NYSE:KEM)

Issuer: KEMET Corporation
Coupon: 10.5%
Ratings: Caa1/B-
Maturity: 5/01/2018
CUSIP: 488360AF5
Pays: Semi-annually
Price: 92.875 (11/12/15)
Yield to Maturity: ~14%

For the six months ended September 30, 2015, Kemet posted operating income of $15.23 million versus $12.16 million for the same period in 2014, an increase of 25%. More on Kemet.

8% Calumet Specialty Products (NASDAQ:CLMT)

Issuer: Calumet Specialty Products Partners
Coupon: 7.625%
Maturity: 01/15/2022
Rating: B2/B+
CUSIP: 131477AL5
Pays: Semi-annually
Price: 97.9 (11/6/15)
Yield to Maturity: ~8.059%

Calumet reported adjusted EBITDA of $131.7 million for the third quarter 2015, versus $110.7 million for the prior year period. More on Calumet Specialty Products.

10.25% Dynagas (NYSE:DLNG)

Issuer: Dynagas LNG Partners LP
Coupon: 6.25%
Maturity: 10/30/2019
Ratings: -/-
CUSIP: 26780TAA5
Pays: Quarterly
Price: 87.0 (11/4/15)
Yield to Maturity: ~10.25%

Dynagas recently announced Q# 2015 results, with Net income for the three and nine months ended September 30, 2015 of $16.0 million and $45.2 million, respectively, an increase of 14.6% and 28.3%, respectively, over the same periods in 2014; More on Dynagas.

12.5% Transener

Issuer: Compania de Transporte Energia (Transener)
Coupon: 9.75%
Maturity: 8/2/2021
Ratings: CCC-
Pays: Semi-anually
CUSIP: P3058XAK1
Price: 88.5 (10/29/15)
Yield to Maturity: ~12.5%

For the nine months ending September 30, 2015, Transener had consolidated net revenue of ARS 1.292,1 million, 32% higher than ARS 979,1 million for the same period in 2014. More on Transener.

CanWel Building Materials (OTC:CWXZF) in CAD

Stock Tickers: CWX.TO (TSX) | CWXZF (OTCBB)
Price: 5.25 (11/3/15) | 3.98 (11/3/15)

Debenture Ticker: CWX.DB (TSX)
Coupon: 5.85%
Maturity: 4/30/2017
Ratings: NA
CUSIP: 13874XAA1
Conversion price: 12.8 (bondholder's option prior to maturity)
Pays: Semi-annually
Price: 95.8 (10/8/15)
Yield to Maturity: ~8.8%

For the three-month period ended September 30, revenues increased by 9.0 percent to $247.4 million when compared to $227.0 million in the same period in 2014. The increase in revenues was primarily due to the impact of the acquisition of California Cascade Industries which was completed during the quarter. More on CanWel Building Materials.

8.5% Carrizo Oil and Gas (NASDAQ:CRZO)

Issuer: Carrizo Oil & Gas, Inc.
Coupon: 7.5%
Maturity: 9/15/2020
Rating: B2/B
Pays: Semi-annually
CUSIP: 144577AF0
Price: 96.0 (10/7/15)
Yield to Maturity: ~8.5%

Carrizo Oil and Gas recorded record production in Q3 2015 of 23,573 bbls/day, 18% above Q3 2014. More on Carrizo Oil and Gas.

12.5% Edenor

Issuer: Empresa Distribuidora y Comercializadora Norte S.A. (EDENOR)
Coupon: 9.75%
Maturity: 10/25/2022
Rating: B2/B
CUSIP: P3710FAJ3
Pays: Semi-annually
Price: 87.5 (9/29/15)
Yield to Maturity: ~12.5%

Edenor posted Q3 2015 adjusted EBITDA of ARS 634.9 million as compared to a Q3 2014 adjusted EBITDA loss of ARS 388.7. More on Edenor.

8.43% Martin Midstream Partners (NASDAQ:MMLP)

Issuer: Martin Midstream Partners L.P.
Coupon: 7.25%
Maturity: 2/15/2021
Rating: B3/B-
CUSIP: 573334AD1
Pays: Semi-annually
Price: 94.5 (9/21/15)
Yield to Maturity: ~8.54%

For Q3 2015, Martin Midstream reported adjusted EBITDA of $41.4 million representing an increase of 20% compared to the third quarter of 2014. More on Martin Midstream Partners.

8% Ferrellgas (NYSE:FGP)

Issuer: FerrellGas Partners LP
Coupon: 8.625%
Maturity: 6/15/2020
Rating: B3/B-
CUSIP: 315295AE5
Pays: Semi-annually
Price: 101.5 (9/19/15)
Yield to Worst Call: ~8.0% (@100 on 6/15/2018)
Yield to Maturity: ~8.23%

Ferrellgas announced adjusted EBITDA of $48.9 million for the first quarter of fiscal 2016 ended October 31, 2015, up 42% from $34.4 million in the same quarter of last year, due to strong results from the Bridger acuisition, which the partnership completed in June 2015. More on Ferrellgas.

12.25% Kirkland Lake Gold (OTC:KGLIF) in CAD

Issuer: Kirkland Lake Gold

Ticker: KGI (TSX) / KGILF (OTCBB)

Price: $5.19 CAD

Conversion Option Price: $13.740 CAD
Coupon: 7.50%

Maturity: 12/31/2017

Ratings: NA

Pays: Semi-annually

CUSIP: 49740PAC0

Price: 87.50 (9/11/15)

Yield to Maturity: ~12.3%

In November 2015, Kirkland Lake Gold acquired all of the outstanding shares of St. Andrew Goldfields. The new, combined company is expected to produce 260,000 to 310,000 ounces of gold in 2016 with attractive cash costs between US $600-$690 / ounce gold. More on Kirkland Lake Gold.

7% Accuride (ACW)

Issuer: Accuride Corporation, Inc.
Coupon: 9.50%
Maturity: 8/01/2018
Rating: B3/B-
CUSIP: 00439TAE7
Pays: Semi-annually
Price: 102 (9/11/15)
Yield to Worst Call: ~7.09% (@par on 8/01/2016)
Yield to Maturity: ~8.69%

For the nine months ended September 30, 2015, Accuride posted net income of $7.6 million as compared to $2.8 million for the same time period in 2014, an increase of 171%. More on Accuride.

7.67% NPC International

Issuer: NPC International, Inc.
Coupon: 10.50%
Maturity: 1/15/2020
Rating: Caa1/CCC
CUSIP: 62941YAB3
Pays: Semi-annually
Price: 106.0 (8/31/15)
Yield to Worst Call: ~7.67% (@102.62 on 1/15/2017)
Yield to Maturity: ~8.81

For the nine months ending September 29, 2015, NPC International posted adjusted EBITDA of $83.7 million, an increase of $10.2 million or 14%. More on NPC International.

7.62% Rent-A-Center (RCII)

Issuer: Rent-A-Center, Inc.
Coupon: 4.75%
Maturity: 5/1/2021
Rating: B1/B+
CUSIP: 76009NAK6
Pays: Semi-annually
Price: 87.0 (8/25/15)
Yield to Maturity: ~7.62%

For Q3 2015, Rent-A-Center's operating profit increased by 12% over Q3 2014, growing to $52 million from $47 million. More on Rent-A-Center.

7.83% PHI Inc. (PHII)

Issuer: PHI, Inc.
Coupon: 5.25%
Maturity: 3/15/2019
Rating: B2/BB-
CUSIP: 69336TAH9
Pays: Semi-annually
Price: 91.5 (7-30-15)
Yield to Maturity: ~8%

In light of the continued low oil price environment, PHI has shifted some of its helicopters from its Oil and Gas segment to its Air Medical segment, which nearly doubled its revenues between 2009 - 2014. More on PHI Inc.

8.99% Hecla Mining (HL)

Issuer: Hecla Mining Company
Coupon: 6.875%
Maturity: 5/01/2021
Rating: B3/B
CUSIP: 422704AD8
Pays: Semi-annually
Price: 88.5 (7-21-15)
Yield to Maturity: ~9.5%

Hecla's fourth operating mine, San Sebastian in Mexico, is expected to provide more than 8 million silver equivalent ounces and cash flow over the next two years. Stripping on one of the mines major veins began in September 2015, with the mine expected to begin producing ore by Q1 2016. More on Hecla Mining.

9.18% Parker Drilling (PKD)

Issuer: Parker Drilling Co
Coupon: 7.50%
Maturity: 08/01/2020
Ratings: B1 / B+
CUSIP: 701081AY7
Pays: Semiannually
Price: 93.25 (6/18/15)
Yield to Maturity: ~9.18%

In spite of the continuing pressure of low oil prices, Parker Drilling reported an increase in its Q3 2015 adjusted EBITDA from the preceding quarter, coming in at $35.4 million in Q3 as compared to Q2 adjusted EBITDA of $32.8 million. More on Parker Drilling.

8.875% Transener

Issuer: Compania de Transporte Energia (Transener)
Coupon: 8.875%
Maturity: has already returned ½ the principle, sinks an additional ¼ on 12/15/15, and the final ¼ on 12/15/16. Average life 6/11/2016. Callable at par after 12/15/14.
Ratings: CCC-
CUSIP: P3058XAJ4
Pays: Semi-annually
Price: 100.0 (6/17/15)
Yield to Average Life: ~8.75%

For the nine months ending September 30, 2015, Transener had consolidated net revenue of ARS 1.292,1 million, 32% higher than ARS 979,1 million for the same period in 2014. More on Transener.

13.25% Rolta

Issuer: Rolta LLC
Coupon: 10.75%
Maturity:5/16/2018
Ratings: BB-
CUSIP: U77587AA8
Pays: Semi-annually
Price: 93.75 (6/11/15)
Yield to Maturity: ~13.375%

In Q2 2015, Rolta announced an enterprise implementation of its "Rolta OneView" software for Statoil, the international energy company headquartered in Norway. More on Rolta.

9% TerraVest Capital (TRRVF) in CAD

Issuer: Terravest Capital, Inc
Ticker: TVK (TSX Exchange) / TRRVF (OTC Market)
Stock Price: $ 6.28 (NYSEARCA:CAD) / $ 5.30 (NYSEARCA:USD)
Bond Coupon: 7.00%
Conversion Option Price: $8.25 CAD
Maturity: 6/30/2020
Ratings: NA
CUSIP: 88104JAA6
Pays: Semi-annually
Price: 92.0 (5/29/15)
Yield to Maturity: ~9.0%

For the fiscal year ended September 30, 2015, TerraVest Capital announced a 48% increase in revenues, a 53% increase in adjusted EBITDA, and a whopping 486% increase in free cash flow over its 2014 fiscal year. More on TerraVest Capital.

8.25% Dynagas

Issuer: Dynagas LNG Partners LP
Coupon: 6.25%
Maturity: 10/30/2019
Ratings: -/-
CUSIP: 26780TAA5
Pays: Quarterly
Price: 92.625 (5/15/15)
Yield to Maturity: ~8.25%

Dynagas recently announced Q3 2015 results, with Net income for the three and nine months ended September 30, 2015 of $16.0 million and $45.2 million, respectively, an increase of 14.6% and 28.3%, respectively, over the same periods in 2014; More on Dynagas.

8.6% Grupo Papalero Scribe (CDURQ)

Issuer: Grupo Papelero Scribe S.A. de C.V.
Coupon: 8.875%
Maturity: 4/7/2020
CUSIP: P49768AA5
Ratings: B1/B+
Pays: Semi-annually
Price: 101.125 (5/15/15)
Yield to Maturity: ~8.6%

Bio Pappell, Grupo Papalero Scribe's parent company, increased EBITDA by 51% in Q3 2013 over the same time period in 2014. More on Grupo Papalero Scribe.

18% Data Group (DGPIF) in CAD

Issuer: Data Group Inc.

Ticker: DGI (TSX Exchange)

Stock Price: 0.76 (CAD)

Bond Coupon: 6.00%

Conversion Option Price: $12.20 CAD

Ratings: NA

Maturity: 6/30/2017

Pays: Semi-annually

CUSIP: 23768VAA3

Price: 78.85 (4/6/15)

Yield to Maturity: ~18%

In December 2015, DataGroup redeemed approximately 75% of these 6%, 2017 debentures, and converted these to common shares in the company. The remaining 25% of the debentures will continue to accrue and pay interest and will be redeemed at maturity. More on DataGroup.

10.1% Lantheus Medical Imaging

Issuer: Lantheus Medical Imaging, Inc
Coupon: 9.75%
Maturity: 5/15/2017
CUSIP: 516545AC4
Ratings: Caa1/B-
Pays: Semi-annually
Price: 99.5 (4/13/15)
Yield to Maturity: ~10.1%

In July 2015, Lantheus completed its initial public offering. From the proceeds of this offering, the company fully repaid these 2017 notes. More on Lantheus Medical Imaging.

9.15% Vanguard Natural Resources (VNR)

Issuer: Vanguard Natural Resources, LLC
Coupon: 7.875%
Ratings: B3/B
Maturity: 04/01/2020
CUSIP: 92205CAA1
Pays: Semi-annually
Price: 95.0 (4/8/15)
Yield to Maturity: ~9.15%

In October 2015, Vanguard completed the Eagle Rock Energy Partners and LRR Energy mergers, which will increase daily production by 33%. More on Vanguard Natural Resources.

7.8% Russian Railways - in Swiss franc

Issuer: Russian Railways
Coupon: 2.177%
Ratings: Ba1/BB+
Maturity: 2/26/2018
CUSIP: G77518AB7
Pays: Annual
Price: 85.75 (3/18/15)
Yield to Maturity: ~7.8%

For the first six months of 2015, Russian Railways increased its revenues 11.4% over the same period in 2014. More on Russian Railways.

8.1% Japfa Comfeed

Issuer: PT Japfa Comfeed Indonesia

Coupon: 6.0%

Ratings: BB-/-/BB-

Maturity: 05/02/2018

Pays: Semi-annually

CUSIP: N21177AA3

Price: 94.25 (3/9/2015)

Yield to Maturity: ~8.11%

In September 2015, Japfa Comfeed began shipping 100,000 parent stocks of broiler hatching eggs to Myanmar, the first export of chicken hatching eggs abroad since the 2004 avian flu outbreak in Indonesia. In addition, the company increased gross profits by 52.8% over Q3 2014. More on Japfa Comfeed.

TransGlobe Energy (TGA) in CAD

Issuer: Transglobe Energy Corporation

Ticker: TGL (TSX Exchange) / TGA (NASDAQ)

Stock Price: 3.77 (CAD) / 3.02

Bond Coupon: 6.00%

Conversion Option Price: $15.10 CAD

Ratings: NA

Maturity: 3/31/2017

Pays: Semi-annually
CUSIP: 893662AB2

Price: 86.0 (3/3/2015)

Yield to Maturity: ~14.06%

During the third quarter 2015, TransGlobe continued to collect on its receivable balance from the Egyptian government, collecting $42.6 million. The company's balance sheet also remains strong. As of September 30, 2015, the company had $126.9 million in cash and outstanding debt of $65.7 million. More on TransGlobe Energy.

7.25% and 8.82% TransOcean (RIG)

Issuer: Transocean Ltd.

Coupon: 7.375%
Maturity: 4/18/2018
Ratings: Baa3/ BBB-
Pays: Semi-annually
CUSIP: 893830AK5
Price: 100.3 (3/3/2015)
Yield to Maturity: ~7.25%

Coupon: 6.5%
Maturity: 11/15/2020
Ratings: Baa3/ BBB-
Pays: Semi-annually
CUSIP: 893830AY5
Price: 89.75 (2/27/2015)
Yield to Maturity: ~8.82%

For the nine months ending September 30, 2015, TransOcean had operating income of $630 million as compared to a loss of $731 million for the same period in 2014. More on TransOcean.

11.25% IAM Gold (IAG)

Issuer: IAMGOLD Corporation
Coupon: 6.75%
Maturity: 10/1/2020
Ratings: B1/BB-
CUSIP: C4535AAA8
Pays: Semi-annually
Price: 81.5 (2/11/2015)
Yield to Maturity: ~11.27%

In December 2015, IAM Gold had cash, cash equivalents and gold bullion of $783 million, with long-term debt totaling $635 million. This makes it one of the least leveraged gold miners in the industry. More on IAM Gold.

10.6% Fortescue Metals Group (FSUMF)

Issuer: FMG Resources
Coupon: 8.25%
Ratings: Ba2/ BB
Maturity: 11/01/2019
Pays: Semi-annually
CUSIP: Q3919KAD3
Price: 91.375 (1/23/15)
Yield to Maturity: ~10.6%

In its 2015 fiscal year, ended June 30, 2015, Fortescue Metals Group reduced its operating costs by 21%, along with a 33% increase in iron ore production. Also, in November 2015, the company repurchased $311 million of these 2019 notes. More about Fortescue Metals Group.

9% 5N Plus (FPLSF) in CAD

Issuer: 5N Plus Inc.
Ticker: VNP (Toronto Exchange), FPLSF (OTCBB)
Price: $2.63 CAD (1/24/2015)

Coupon: 5.75%
Maturity: 6/30/2019
Conversion Price: $6.75 CAD (at bondholders option anytime prior to maturity)
Ratings: NA
Pays: Semi-annually
CUSIP: 33833XAA9
Price: 88.0
Yield to Maturity: ~9.07%

Although revenues have declined in 2015 due to continuing decreases in relevant underlying commodity prices, total liabilities decreased to US $132 million in the first nine months of 2015, down from $203 million at year-end 2014. More on 5N Plus.

12.5% Cobre Del Mayo

Issuer: COBRE DEL MAYO, S.A. DE C.V.
Coupon: 10.75%
Maturity: 11/15/2018
Ratings: B-
CUSIP: P28628AA6
Pays: Semi-annually
Price: 94.5 (1/8/15)
Yield to Maturity: ~12.50%

In December 2015, Cobre Del Mayo announced an exchange offering for the 2018 notes made up of US $119.5 million senior secured PIK toggle notes due 2021 and US $97.8 million in junior non-interest bearing 2045 notes. More about Cobre Del Mayo.

*Yield indications at the time of recommendations for addition to individual portfolios are not presented as year to date performance averages. Also, please note that all yield and price indications are shown from the time of our research, and our reports are never an offer to buy or sell any security. We are not a broker/dealer, and reports are intended for distribution to our clients. As a result of our institutional association, we may obtain better yield/price executions for our clients than is initially indicated in our reports. We welcome inquiries from other advisors that may also be interested in our work and the possibilities of achieving higher yields for retail clients.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article covers one or more stocks trading at less than $1 per share and/or with less than a $100 million market cap. Please be aware of the risks associated with these stocks.