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Author: charliebonds Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35367  
Subject: Digging Into Entergy’s Recent Bond Date: 4/21/2011 8:34 PM
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I’m going to do this post fast, giving the bond being touting in another thread no more than the 15 seconds it deserves.
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Stock or bond, an investor bets on the issuer. Why, then, is Entergy Corp, the issuer of the security listed below, trading just off its 52-weeks low in a market that’s on a rampage to go higher? http://finance.yahoo.com/echarts?s=ETR+Interactive#symbol=et... Clearly, that is one divergence that needs to be explained by anyone touting the bond: Why is the stock crashing? Alternatively, it needs to be explained why a basic, analytic tool such as inter-market analysis is not relevant in this case.

Second point: EMZ, the very newly-issued security, is not being supported by the underwriters in terms of its price for having closed today below par. When their shares become unrestricted, and they start selling them into the market, the price of EMZ is going to go lower.

Third point. EMZ is a split-rated bond, which means, at the very least, that one rating agency sees larger problems ahead than the other. Also, neither of the ratings are very attractive for being as much as eight notches below the top rating for investment-grade and only three notches above junk bond status. Are you really willing to bet that this downward, rating movement won’t continue?

Fourth point. As the issuer of the bond freely warns, this bond will “trade flat.” That is the same terminology used to describe bonds of issuers that have declared Chapter 11 or whose interest payments are in question. In this instance, the language might have a less sinister meaning. But the cash-flows of this very long-dated bond need to be identified and assured. What place in the capital structure and credit-line will note-holders have?

I have no objection to anyone touting any price of trash they want to, because I assume that anyone who reads or posts in this forum is experienced enough to filter out the bad suggestions from the good ones, which is self-referential remark. I don’t like that bond, and I think it is a dangerous piece of trash. Someone else thinks it’s a wonderful opportunity. Obviously, one of us is wrong, and it doesn’t make me any difference whom anyone thinks it is. I won’t be buying, because I avoid that kind of obvious grief. What you do is up to you.

Charlie
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Entergy Mississippi, 6.00% Series First Mortgage Bonds due 5/1/2051
Ticker Symbol: EMZ CUSIP: 29364N835 Exchange: NYSE
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