Seeking Alpha

Wsh's  Instablog

Wsh
2 Followers
0 Following
Send Message
Currently Senior Financial Analyst with Lend Lease Corporation, MBA and CFA Charterholder.
My blog:
Wush's Finance
  • Time to Invest in AIG Senior Unsecured MTN (02687QBL1) 3 comments
    Aug 24, 2009 10:07 PM | about stocks: AIG
    The AIG Senior Unsecured MTN (CUSIP 02687QBL1) (the “AIG Note”), maturing on 3/20/2012 with coupon rate of 4.95%, currently trades at about 84 cents on the dollar and represents an attractive investment opportunity.
     
    This AIG Note is currently rated A3/A- by Moody’s/S&P and its yield to maturity currently stands at around 12.5%. Treasuries with the similar maturity dates are currently yielding about 1.2%. This implies that the Note has a spread of 11.3% over the risk free rate. By comparison, newly issued notes with 3 years to maturities and comparable credit quality yield no more than 3-4%. Similar existing A3/A- rated bonds from other issuers are yielding no more than 10%. This indicates that the AIG Note is offering quite a bargain.
     
    The deep discount on the AIG Note is largely due to investors’ avoidance of the AIG name. However, over the last 6 months, AIG has largely emerged from the crisis it was in early in the year. It is also supported by the U.S. government. It has a strong insurance franchise that is capable of generating revenues to support debt service payments. This Note is a senior unsecured note, which will likely to retain significant value in the worst case scenario of a bankruptcy.
     
    Overall, this AIG Note offers very attractive returns relative to the risk embedded.
    Themes: bond, fixed income Stocks: AIG
Back To Wsh's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

This post has 3 comments:

Track new comments on this article
  •  
    You definately found a good bond. I agree with your comments. However, the YTM has since deteriorated to about 7.5%.

    Do you have any other CUSIPS that you think are as good a bargain as the AIG bonds used to be before the run up?
    12 Sep 2009, 10:18 AM Reply Like
  •  
    The AIG was a good call. However, the price has run up and the YTM has dropped to about 7.4% Like you said other A- notes have YTM of 10% or so.

    Which of these do you like best? The AIG has just become to expensive.
    12 Sep 2009, 10:21 AM Reply Like
  •  
    Sorry I have not been checking back--had a baby last fall and been tied up.

    I have been looking for another such opportunity myself but the High Yield market has been so hot last year and the spread on low investment grade/high yield bonds has been driven down so much. So I do not have another recommendation for you. But I want to thank you for reading my blog. I just posted a new blog on hotel REITs in case you are interested.
    21 Jan 2010, 05:07 PM Reply Like
Full index of posts »
Latest Followers

Latest Comments


Most Commented
Posts by Themes
bond, fixed income, Hotel REITs, Oil Gas
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.