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Subject:  Re: reynolds group Date:  11/21/2012  12:56 PM
Author:  trader2012 Number:  34514 of 36318


At E*Trade, min-purchases in the book on the 8.25's was just amended to include 5's and 10's. Thus, by 'paying up', a smaller lot could be bought. But the question still to be answered is whether their debt should be bought at all. This isn't classic, Ben Graham-style "value-investing". It's new-issue, junk-bond investing, which is an entirely different game.

Take at look at their yield-curve. It is flat, flat, flat, offering a max YTM of about 8.5%. On an after-taxes, after-inflation basis, the situation is even worse.

Cpn Due AdjYTM
8.500 05/15/18 1.08%
9.000 04/15/19 1.30%
7.875 08/15/19 -0.61%
9.875 08/15/19 1.47% <<==tactically, a better buy than the 8.25's of '21
8.250 02/15/21 1.37%

Do you really want to put capital at risk that offers, at best, a real gain of 1.47%? A couple of quick scalps would offer more than that, and the rest of the year one could sit in cash.

Always, always, always, in the investing/trading game, this question has to be answered: How much reward is being offered for how much risk? I'd be willing to bet that Reynolds will survive. But I'm not wiling to lend them money at current prices.
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