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Author: pauleckler Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 35345  
Subject: Re: Addendum: GP/GPW solvency Date: 8/15/2000 10:20 AM
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Isn't it Georgia Pacific that bought Union Camp a few years ago? High debt load could be associated with that acquisition.

Paper/packaging shipments are taken as a traditional indicator of the health of the economy. One can easily understand those who think we may be headed for recession not wanting to hold the securities of a debt laden paper maker.

The high yield seems justified. There is risk of default. But its a well managed company. If any one can pull it off, its probably GP. (You would expect them to be selling off assets to work down their debt.)

From your description this sounds like a typical, better quality junk bond situation. Its a great opportunity and purchasers will do quite well if they succeed. But the risk is there. So this kind of investment is best for those who are diversified and willing to take the risk.

Since the issue is low cost to the issuer, it is not likely to be called any time soon. Opportunistic buyers can lock in the good yield fixed income for the long term. Of course, if interest rates go up more, share value will decline. So there could be some paper losses along the way. You will need to be patient in that case. But share values will likely increase as they work down debt and their credit rating improves.

Clearly buyers of this issue are betting on the quality of management.
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