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High-yield junk preferred - A&P supermarkets - GAJ - GAP

|Includes: GAJ, The Great Atlantic & Pacific Tea Co. Inc. (GAP)

A&P is a grocery company based in the northeast US. It operates about 420 stores under the A&P, Pathmark, Waldbaum's, Food Emporium and Food Basics banners. The company's official name is "The Great Atlantic & Pacific Tea Co., Inc."
 
It would be an understatement to call A&P "troubled."  It has had unceasing management turnover (3 presidents over a short span of time), weak sales, huge operating losses, and is losing sales as competitors like Wal-Mart enter its trade area and as other stores from Target to the dollar stores increase their food offerings. With its limited profitability, it has difficulty responding to competitors initiatives or expanding its store base. With instability in its executive office, it lacks leadership and direction.
 
By any rational analysis, A&P should be roadkill. But it  is attracting a fair amount of attention from a plethora of wealthy investors, like its long-time owners the Tenglemann Group, one of Europe's laregest retailers; the very low-profile Emil Capital, an affiliate of Tenglemann; activist investor Ron Burkle of Yucaipa Companies, and the somewhat mysterious Los Angeles based Aletheia Research and Management group with its "new and improved website coming soon." 
 
(Burkle is attempting a takeover of another retailer, bookseller Barnes & Noble. According to a shareholders letter from B&N, Burkle and Aletheia collaborate on deals. B&N has complained that Aletheia and Burkle are taking control without paying a control premium.)
 
A&P is closing and selling stores and divisions under its new management team, which includes Office Max veteran Sam Martin as President. A&P's previous president was booted in less than a year, his departure announced at a quarterly conference call.
 
A&P has a publicly-traded common stock, GAP, which closed around $3.21 and a 9 3/8% trust preferred, GAJ,  that pays a $2.34 quarterly dividend and trades around $17.75 for a 13.2% yield. The common has skidded 50% over the last year.
 
The waves of good and bad publicity offer some good  trading opportunities, particularly in the preferred when small investors or funds decide to head for the doors. The preferred traded as low as the 13's in August, offering a nice 30% return for the nimble. News reports indicate that the Tenglemann Group would like to find a buyer.
 
Do your research before you buy and don't put in any money you can't afford to lose. This is a distressed company with a convoluted history and a cast of characters making grand entrances and exits worthy of a Kabuki opera.
 
Just my opinion.
 
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The kabuki stage features a ...a walkway which extends into the audience ...via which dramatic entrances and exits are made....(The stages) include ( recent innovations like) revolving stages and trap doors.... A number of stage tricks, including rapid appearances and disappearances of actors, have evolved using these innovations."
 
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Great A&P Names New CEO; 1Q Loss Widens As Woes Persist
http://www.automatedtrader.net/real-time-dow-jones/7260/-great-aampp-names-new-ceo-1q-loss-widens-as-woes-persist
 

 



Disclosure: Long GAJ