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URL:  http://boards.fool.com/altstrat91-i-also-hold-those-avaya-975-110115-30518875.aspx

Subject:  Re: Williams Clayton’s 7.75’s of  Date:  2/1/2013  12:35 AM
Author:  howardgt Number:  34746 of 35387

altstrat91,

I also hold those Avaya 9.75% 11/01/15 bonds, but I have to agree with Charlie about this issue. I bought it after half a bottle of wine, and when the wine wore off, I had second thoughts about whether the risk was worth the reward. I bought at the end of Oct @ 90.40, so if the company survives and my principal is returned, I will make 43% on my money. But if they go BK, I probably get nothing, because of the large debt ahead of me. Normally I would NOT buy junk unless I can earn a minimum of 50%. And this company has not seen a profit for many years and has an atrocious balance sheet.

I also bought because I read they were “finally” going to do their long awaited IPO, but a few days after my purchase, I read the IPO may get delayed AGAIN, and the bonds were down to the low 80’s. I have heard this IPO story many times over the last couple of years and meanwhile Avaya continues to burn cash. According to the links you provided, on Sep30, 2012 they had $337 million in cash and on Dec31, 2012 cash was down to $285 million. They are only talking about $1B of equity against $6B of debt... Still leaves a heavy debt level.

And from article linked below:

“The company’s interest expense in its fiscal year that ended in September 2011 was more than four times operating income of $100 million as debt-service costs make Avaya unprofitable.”

December article about Avaya debt problems.
http://www.nj.com/business/index.ssf/2012/12/basking_ridge-b...


If the Fed’s zero interest rate environment continues until maturity, I probably will come out ok, but this is really a speculation, with only a 43% payoff at that... Pretty risky investment (only recommended for winos:)... IMHO

Howard
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