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Seeking investments without using the ridiculous style-box approach. If I can make a return in excess of what I judge the risk to be, I'll invest. Over time, using a Kelly formula, I tend to weight positions from 2-10%. A diversified portfolio is a career-saving move, not an investment... More
  • New York Post Article On Rue 21 Close 4 comments
    Sep 20, 2013 12:05 PM | about stocks: RUE

    NYP opines that:

    1-Apax overpaid

    2-there is no out for Apax if banks fund the deal.

    3-there is no out for the banks, and that is what matters.

    My view here is that the banks will swallow their losses. Apax represents a future income stream vs a serious reputational risk from walking away now for all parties.

    In 08 reputational risk of breaking a deal went out the window. PE funds and Banks could point to each other for ready-made excuses to try and wiggle out of poorly-written agreements using break fees.

    2013 is a completely different environment. Debt markets are still strong and there is a ready market for the bank term loans, at some price, which may not be profitable to the banks. Walking from this deal and burning APAX (although Apax may not protest, too much) would be a very big deal.


    Stocks: RUE
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Comments (4)
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  • steppppo
    , contributor
    Comments (251) | Send Message
    Still a decent gap between the current share price and the buy out price. Any thoughts? Some folks still think the deal can fall apart somehow?
    21 Sep 2013, 10:34 AM Reply Like
  • arbtrader
    , contributor
    Comments (553) | Send Message
    Author’s reply » quite a gap. I'd say how you approach is a function of how you size for risk. In a simple way, if your judgement of risk is that its less risky than the market says then allocate up to whatever allocation suits your budget.


    Make no mistake there is risk here or the spread would be a few cents. Very intelligent people who 'know their stuff' are passing on RUE.


    However, you can read above and see how I am positioned. Happy with what I have. Given several days to close based on press reports no doubt the price will be driven up/down off rumors and tape watching.


    BTW price action is not always rational. Check out the daily chart of VHS. No idea what happened there but it looks like a classic late cycle freakout where selling begats selling. Best, AT.
    21 Sep 2013, 04:22 PM Reply Like
  • arbtrader
    , contributor
    Comments (553) | Send Message
    Author’s reply »


    RUE Debt is being marketed this week to lukewarm reception. Big surprise. This is 7 day old warm milk.
    key para:
    "If the company were unable to gather enough commitments by the expected closing of the buyout in early October, the banks would have to fund $544 million of the upsized term loan B and the $250 million bridge to bonds, two sources said."
    24 Sep 2013, 10:02 AM Reply Like
  • steppppo
    , contributor
    Comments (251) | Send Message
    Thanks for the head's up. Still a decent gap but lots of warning signs.
    24 Sep 2013, 10:19 AM Reply Like
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