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Pat Stout

 
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  • Short Sellers Should Thank Herbalife [View article]
    mfcantlon@aol.com,

    Interesting example but it is missing the cost to carry the short position.
    Dec 20, 2014. 01:38 PM | Likes Like |Link to Comment
  • Cliffs Nervous Bondholders [View article]
    Cliffs bondholder,

    If equity was sold to firm up the balance sheet, or asset sale proceeds were used to reduce debt then, it could be bondholder friendly. Should debt be swapped for equity it would depend upon the terms but debt holders might not wish to be an equity owner. 2015 is going to be an interesting year.

    Pat
    Dec 17, 2014. 01:01 PM | Likes Like |Link to Comment
  • Cliffs Nervous Bondholders [View article]
    Charbon C'est L'Enfer,

    Thanks. My mistake when I see a price target ($10) above the current price, I view it as a buy regardless of what the analyst rating is. The drop in the price target ($1) is seen as a downgrade. Sorry about that.

    The disclosure shows that I am long CLF and CLV, and it has been painful. I want the firm to return to basic block and tackle, and stop with the financial engineering games. Common stockholders will have a difficult time earning a return with bond yields in double digits. Bondholders have a reason to be nervous when $200 million in cash could be used for no productive purpose (share repurchase) with the remaining owners having the burden of interest and debt payments. If an investors wants a more leveraged firm then they can make use of margin loans.
    
    Dec 16, 2014. 09:51 PM | 1 Like Like |Link to Comment
  • Cliffs Nervous Bondholders [View article]
    The year just got tougher for Cliffs.

    Credit Suisse downgraded the common stock from $10 to $1 and raised the possibility of a recapitalization within a year or two.

    http://bloom.bg/1yX0ENd
    Dec 16, 2014. 08:41 PM | Likes Like |Link to Comment
  • Short Sellers Should Thank Herbalife [View article]
    The Diligent CPA in NJ,

    Thanks for catching the typo. Should have been 10-Q not 10-K.

    The 10-Q is for the period ended September 30, 2014 that was filed on November 3, 2014. The 10-Q (edit from 10-K) reported shares outstanding as of October 29, 2014. It is on the front page. The data above was a straight cut and paste.

    Pat
    Dec 12, 2014. 10:55 AM | 1 Like Like |Link to Comment
  • Short Sellers Should Thank Herbalife [View article]
    The Diligent CPA in NJ,

    Per 10-K http://1.usa.gov/16f2uSs

    Number of shares of registrant’s common shares outstanding as of October 29, 2014 was 91,799,867.
    Dec 12, 2014. 10:46 AM | 1 Like Like |Link to Comment
  • Cliffs Nervous Bondholders [View article]
    Cliffs bondholder,

    Cliffs bonds might be under pressure as some investors may not be willing or permitted to own non-investment grade debt. And non-investment grade debt traditionally is more of a challenge to trade with a wider bid-ask spread. ETF's with out-flows or not permitted to hold high yield paper might be forced sellers putting downward price pressure.

    It is possible traders could be short the debt, and would have made out very well. Unfortunately I am not aware of any reporting required that could detail the extent of any shorts, if any.
    Dec 11, 2014. 12:39 PM | 1 Like Like |Link to Comment
  • Expect Cliffs To Terminate The Common Stock Dividend [View article]
    Cliffs bondholder,

    Anything is possible but at this time it is not expected. I have faith that the board will do the right thing and terminate the common stock dividend. It would be nice if the boards compensation was also reduced and all board members placed their hard earned funds at risk in the stock. The lower the stock price falls the more shares board members might receive. For example one board member was granted 4,474 shares on Oct 16th and 5,208 shares on Dec 2nd. The stock closed Oct 16 at $9.50 and Dec 2 at $8.16. The value of the shares granted by my calculation were $42,503 and $42,497.
    Dec 6, 2014. 10:53 AM | 5 Likes Like |Link to Comment
  • The Economic Risk Of Falling Crude Oil [View article]
    Something to consider -- The plunge in oil prices might not be designed at shale, but to deny ISIS oil revenue.
    Dec 6, 2014. 10:23 AM | Likes Like |Link to Comment
  • Expect Cliffs To Terminate The Common Stock Dividend [View article]
    Dec 4, 2014 -- Moody's downgrades Cliffs' ratings -- CFR to Ba3; outlook negative

    ...At the same time the rating on Cliffs' senior unsecured notes and senior unsecured shelf were downgraded to B1 and (P) B1 respectively from Ba2 and (P)Ba2. The outlook is negative...

    http://bit.ly/1w0s9YO

    This might help explain why Cliffs bond refi was pulled. The cost of financing goes higher. The 2018 bonds due to the credit downgrade may see the coupon move higher again.
    Dec 6, 2014. 10:18 AM | 3 Likes Like |Link to Comment
  • Update: Cliffs Natural Resources Terminates Debt Tender Offer [View article]
    Charbon, C'est L'Enfer,

    The 2018 issue had language that increased the coupon in the event of a credit downgrade. And should the credit rating improve from current levels, then the coupon can be lowered back to the original coupon. The coupon has gone from 3.95% to 4.95%. It currently yields nearly 18%.

    The common and convertible preferred stock is owned. I believe the iron ore industry will rebound, and have seen Cliffs ups and downs over the decades. Without bondholders doing well, stockholders are going to suffer greatly.
    Pat
    Dec 4, 2014. 10:22 PM | Likes Like |Link to Comment
  • Update: Cliffs Natural Resources Terminates Debt Tender Offer [View article]
    Charbon, C'est L'Enfer,

    Secured lenders are looking for their loan to be repaid, not having the assets pledged put to them for repayment. When monies go out to door to repurchase stock or pay dividends, the money is not available to make interest or principle payments. It places lenders at greater risks of having to sell the pledged assets for cash.

    Cliffs has seen the interest rate on its 2018 issue increase when its debt was downgraded. The increased interest expense is less monies available for stockholders, roughly $5 million extra in interest expense per year. If Cliffs can make bondholders happy, then stockholders may enjoy a nice return. Unfortunately, the board at Cliffs does not seem to care about the bondholders, otherwise their first action wouldn't have been to authorize a $200 million share repurchase, the bonds reacted by falling sharply.


    Pat


    Dec 4, 2014. 08:47 PM | 1 Like Like |Link to Comment
  • Update: Cliffs Natural Resources Terminates Debt Tender Offer [View article]
    Bugle Boy,

    US Treasury rates have declined by a few basis points. The fall in commodities (crude oil, coal, iron ore) during 2014 may have unsettled lenders. Lenders may have been caught off-guard with the sharp crude oil decline, and pulled back on more risky lending. Cliffs by paying a common dividend and its $200 million share repurchase plan may have also been a factor in the re-fi going up in flames.

    Pat

    Dec 4, 2014. 12:37 PM | 1 Like Like |Link to Comment
  • Update: Cliffs Natural Resources Terminates Debt Tender Offer [View article]
    Frm clv,

    Why would an investor want to lend to Cliffs, when the board has indicated they want to use $200 million of funds to repurchase stock? The repurchase of stock would not generate any cash-flow needed to pay interest or retire the bonds.

    I'd consider lending to Cliffs if they suspended the common stock dividend and cancelled the share repurchase authorization, and focused on the business rather than financial engineering. I'd support a dividend payout based upon earnings once the bonds are rated investment grade.


    Pat
    Dec 4, 2014. 09:54 AM | 1 Like Like |Link to Comment
  • The Economic Risk Of Falling Crude Oil [View article]
    Reuters is reporting a drop of almost 40% in new well permits for the US in November.
    Dec 2, 2014. 06:18 PM | Likes Like |Link to Comment
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