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  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #75 [View instapost]
    BSF:

    Unless the yield curve steepens, banks are going nowhere. It's amazing that with relatively narrow spreads already that some keep clamoring for a short-end rate increases, as if the economy were somehow overheated, or maybe it's just plain dopiness, thinking that higher short rates will somehow ignite things from their perpetual tepid status.
    May 20, 2015. 01:31 PM | 1 Like Like |Link to Comment
  • SandRidge Energy Preferred Convertible: A 21% Yield Paid In Shares Of SD Common [View article]
    b:

    The swapper received 27.7 million shares for debt of $50MM, which was worth about $37.5MM at market prices at the time of the swap. The post-announcement trading prices of shares since then have ranged from $1.33 - $1.13. That would indicate that the seller didn't even recover his market value of bonds and set off a new selling frenzy.

    Future bond swaps of this type have been effectively nullified, it would appear, unless done at ruinous rates of dilution.

    Like so many other small E&P firms, SD has two possible futures: 1) somehow navigate the downturn on existing cash flows, or 2) undertake a major round of secured-asset financing. All the rest is merely fooling around.
    May 19, 2015. 03:14 PM | Likes Like |Link to Comment
  • SandRidge Energy Preferred Convertible: A 21% Yield Paid In Shares Of SD Common [View article]
    b:

    One wonders why any bond holder would want to swap for equity, almost regardless of the conversion rate. It sure seems like some secured-asset funding round looms, which won't be good for any existing bond or equity holder. I guess, if I were a deep-pockets existing major bond holder, I'd be trying to make a deal to add funding and convert my existing position into secured financing, not go the other way.

    It's all very curious, presently.
    May 19, 2015. 02:53 PM | Likes Like |Link to Comment
  • SandRidge Energy Preferred Convertible: A 21% Yield Paid In Shares Of SD Common [View article]
    RL:

    As a former SD bondholder (made some money) and small SDRXP (lost a few bucks) holder, the problem, now, seems to be that it's impossible to assess why SD has made its recent highly-disruptive, but near financially-meaningless, bond swap, nor predict what they'll do next. My guess is that many former investors see things exactly that way and have decided to watch, rather than play.
    May 19, 2015. 02:13 PM | Likes Like |Link to Comment
  • U.S. Economy Edges Closer To Recession [View article]
    Amazing how many people have completely forgotten what sentiment was like in 2007 and early 2008. People were in a frenzy, many using their life savings and/or taking out huge "no-docs" mortgages on their principal residences, to buy speculative homes that they fully expected to flip in weeks or a month or two at 50% gains. Let's compare that to now, where not a day, or even an hour, goes by that we don't have a new article or commentary in the press predicting the market top, followed by another devastating contraction, and suggesting all types of defensive maneuvers to avoid calamity.

    This market has endured so much disbelief and caution during its entire ascent, up until this very moment, completely different in sentiment to that which existed in 2008's pre-crash period.
    May 19, 2015. 02:07 PM | 3 Likes Like |Link to Comment
  • Paragon Offshore - It's Still Going Up [View article]
    "Moody's estimated its free cash flow at about $100m for 2015."

    Unless Moody's is using some new definition, then this doesn't demonstrate a problem unless it disappears.

    Free cash flow is:

    "A measure of financial performance calculated as operating cash flow minus capital expenditures. Free cash flow (FCF) represents the cash that a company is able to generate after laying out the money required to maintain or expand its asset base. FCF is calculated as:EBIT(1-Tax Rate) + Depreciation & Amortization - Change in Net Working Capital - Capital ExpenditureIt can also be calculated by taking operating cash flow and subtracting capital expenditures."

    That means that it is calculated after its debt amortization is already calculated, as well as taking into account capital expenditures. It is not the cash flow generated merely to service debt.
    May 19, 2015. 01:28 PM | Likes Like |Link to Comment
  • Paragon Offshore: Playing To Lose? [View article]
    DI:

    Revolvers often have covenants and may be subject to accelerated repayments; bonds do not. When times are uncertain, it may be a safer play to reduce loan balances.
    May 18, 2015. 08:33 PM | 1 Like Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #75 [View instapost]
    "What worries a lot of us now is that the stock market is way over valued, we still do not have the jobs we need to get the economy really humming, etc. etc. etc. When will the next financial melt down occur? "

    As long as all the worry continues, we're OK. Start worrying when the worrying stops.
    May 18, 2015. 08:49 AM | 3 Likes Like |Link to Comment
  • Our Weakening Economy Is Getting Harder To Ignore [View article]
    ""The bigger the boom, the bigger the bust." I suppose the corollary of that is the milder the boom, the milder the bust."

    And, the corollary of the corollary is that the slower the growth rate, the longer it can endure.
    May 17, 2015. 11:16 AM | 6 Likes Like |Link to Comment
  • SandRidge Energy Preferred Convertible: A 21% Yield Paid In Shares Of SD Common [View article]
    Management did the swap, instead of a sensible secured-asset financing, because it's their desperate attempt to stay in charge. As soon as a covenant-laden secured financing is done, somebody else will be calling all the shots. For me, this was the signal to exit my SD bond position at a small profit, rather than sticking around to see what rabbit jumps out of the next hat.
    May 16, 2015. 01:06 PM | Likes Like |Link to Comment
  • Oil & Gas Stocks And Leverage: What Are Potential Implications Of Debt-For-Equity Swaps? [View article]
    "....the reduced debt benefit is counter-acted by the reduction in credit rating many times...."

    The difference is that one effect is real, and the other is imaginary.
    May 16, 2015. 01:01 PM | Likes Like |Link to Comment
  • SandRidge Energy Preferred Convertible: A 21% Yield Paid In Shares Of SD Common [View article]
    RL & F:

    Yes, I missed the fact that preferred dividends were being paid in common shares. That likely means they'll continue to pay, but, basically, it reduces the preferred to common status. The only beneficiaries of these swaps are the remaining senior bond holders.
    May 15, 2015. 10:27 PM | 1 Like Like |Link to Comment
  • SandRidge Energy Preferred Convertible: A 21% Yield Paid In Shares Of SD Common [View article]
    RL:

    I'll raise the same issue I mentioned above.

    Why would SD turn cartwheels to do a debt swap to eliminate a small amount of debt and its related interest, then allow much larger outflows from payment of the preferred dividends, which they can halt at their own discretion by the wave of a hand? The answer is that they wouldn't, so that explains why the preferred is dropping like a rock, even though the outflows of issues senior to the preferred are now less.

    The only way this isn't so is if something collusive and nefarious is going on to aid and abet short sellers, who want lots of cheap shares to cover their positions. I'm going to assume that this isn't the case, so a dividend suspension appears imminent for the preferred. Of course, assuming that SD stays around, it will all have to be made up later, but, meanwhile, if such suspension is announced, I'd expect the see the preferreds selling in the low teens.
    May 15, 2015. 07:01 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #75 [View instapost]
    LMH:

    Have a small position in TCAP, but at 1.47 price/nav it's a bit rich.
    May 15, 2015. 01:42 PM | Likes Like |Link to Comment
  • Best Ways To Invest -- What's Your Opinion? A Place To Share Ideas! #75 [View instapost]
    FG:

    Are you asking about due diligence of an investor to monitor BDC positions, as opposed to other holdings? If so, I don't think so.

    The BDC space has become very tough since the issues were removed from indices, as this has seemed to cause them to be out of favor and more volatile. In the last two years at time when the economy has been improving and while rates have been falling, BDC's have been battered, just when one would think they'd be in favor. This poses a dilemma, as, as someone else said, they will likely be under more pressure if rates rise, as yield issues get sold off, even though 85% of BDC lending is floating rate.

    I rarely try to trade BDC's for capital gains, but will adjust portfolios if the price/nav gets far above or below fair values. Mostly, I try to keep a longer term perspective and just keep milking those yields. It's amazing how many sins are made up for by compounding 9-12% yields over and over again.

    A few of the BDC's I like, presently, are ARCC, AINV, BKCC and KCAP.
    May 15, 2015. 12:50 PM | 2 Likes Like |Link to Comment
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