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Subject:  Stonemor’s 10.25’s of ‘17 Date:  2/12/2013  10:36 AM
Author:  globalist2013 Number:  34780 of 35623

About a year ago, there was a thread on Stonemor’s 10.25’s of ’17. One side of the debate was enamored of the fat yield. The other side urged caution, using a metaphor to describe the risks.

If I like to fly in fast airplanes, I want a pilot who can do two things: 1) Fly fast 2) Keep the airplane in one piece so we get to fly another day

Any time you have a situation where the pilot has incentives to fly the airplane fast, but doesn't feel a need to keep the airplane in one piece, you have a problem, particularly if you are inside the airplane. :) By analogy, I maintain that an MLP like ETP with general partner ETE is built to give the general partner strong incentives to keep ETP in good shape. If they reach for too much distribution and "crash" the company, ETE's huge unit holdings in ETP become worthless. This incentivizes them to *both* reach for higher distributions *and* keep the company intact.

I maintain at Stonemor there is an incentive to reach for distributions, and insufficient incentive to keep the company from crashing. At Stonemor, the pilot is flying the plane remotely, and if goes down no big deal to him he will just get a new airplane and fly again.

I applaud caution. It is far easier to make up a lost opportunity than a realized loss. But let’s take a look at how Stonemor has done (so far). At the time of the thread, the ASK for the bond was about 95.500 for a single. Currently, the ASK is 106.00 (min 4) by 104.815 BID. And a price chart of the bond confirms the upward direction of prices. A different story is reflected by the stock price, which is flat from a year ago, but did suffer declines between then and now.