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Author: howardgt One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35392  
Subject: Re: What is Your "C" List (C - Caa1) ? Date: 4/14/2011 10:05 PM
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I hold a whole slew of C rated bonds. Most of these bonds were purchased at considerable discount to par, when the market was pricing in a high probability of default. But since the Fed began their easy money policy, many of these companies have extended their maturities through debt exchanges and issuing of new debt. I think most of these bonds are richly priced today and I would NOT buy at current prices. I still hold many of these C rated bonds for their income stream, and since my cost is well below current prices, I can afford to risk a few defaults over the coming years. Some issues that I hold are First Data, Harrahs, Clear Channel, Realogy, Hovnanian, Energy Future Holdings (TXU) and various others.

At current prices, I’m having trouble finding new buys. It looks to me like the single B rating category now present the best opportunities. Here are 2 new positions I recently purchased.

Yesterday I added some ALBERTSONS (I agree with Charlie on this one) 8.7% due 05/01/2030 with a CY and YTM over 10%. The company (SVU) has good cashflow and even pays a dividend to stockholders. Two lines of defense for a bondholder. And a CY of 10% should be sufficient to protect against rising inflation in later years. They reported quarterly results today and it looks like the market was impressed.

I recently took a speculative position in DEX ONE 12.0% due 01/29/2017 selling at about 65 and yielding close to 24%. They recently reorganized the company and I’m hoping business can be sufficiently stabilized so that my 12% coupons can reduce my costs enough that I have a limited amount at risk. I now have adequate diversification in my portfolio, that I can afford to take high risk positions. But the payoffs must be worth it. If Dex One survives to maturity, then I earn > 2.5 to 1 on my investment in < 6 years, so I consider the risk/reward worthwhile on this purchase.

I’m NOT recommending any of these positions for others, just reviewing my thoughts on some REAL junk!

Howard
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