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A while back I bought $3000 worth of Northern Telecoms 6.88s of 23 in the $.13 range. The price had run to the $.30 range and sat.

With a nice auction result last week, the price has popped to $.70 and I'm trying to decide if I cut and run or hold on for more.

With $12b in liabilities and $4.5b in the patent auction alone, I'm not sure where this one ends up. There have been many sales along the way, but I don't have a good tally. Have the sales totaled $8.4b+ as the price suggests or is someone just spending money with some wishful thinking.

Is anyone else out there watching this one?

I think if I can get $70, then there probably isn't a significant time adjusted upside from here, but I'm hesitant I could be missing something.

Plus a 5 bagger in 2 years isn't something to complain about.

Thanks for any info,

Scott
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Scott,

FWIW I would take the cash and run. With the most valuable assets off the table I cannot see a better upside from a work out. IIRC there are still patent infringement lawsuits rolling around and they are probably the most value left to the company and they are an absolute crap shoot.

The only bother is putting the capital to work but with .70ish in hand I cannot see much upside only downside.

Great price point to enter. Well done.

jack
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I would seriously be doing cartwheels in my front lawn right now if your particular outcome had been my particular outcome for some or any of my own previous high flying distressed debt speculative plays.

I am not sure exactly where your bonds are in the proverbial food chain, if they are senior or subordinated, secured or unsecured, etc. but I learned the hard way that just because you own a bond, does not entitle you to necessarily anything when it comes to bankruptcy proceedings and how it ultimately plays out.

Add to this mix the fact that you actually bought them at a price of collapse, so you are looking at a home run once in a lifetime type trade and your decision is a very easy one. Its not like you bought them years ago and paid face value for them and was looking at a devastating loss.

On the flip side of the coin, I have sold distressed bonds way too early as well leaving a small fortune on the table as I did with YRCW, so I can respect your perogative in exploring possibilities.

I am not privy to the scenarios that your bonds face. Is this 70something cents on the dollar an amount that is not going to change, now that they have secured the patent sale and can potentially move up from here or is that 70 cents on the dollar merely reflect trading price activity of a more or less illiquid supplied bond in the secondary marketplace? If you have access to one of the electronic virtual exchanges, I would suggest you check out the bid size on your bonds to get a better gauge. If this is something you can not do, let me know and I will find out for you.
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Jack,
Point well taken. I persued a few articles and can get my head around why someone would throw a dart at .70 being the eventual workout. There is a potential upside, could they find another .10 ? maybe. Am I happy with .70, I would be, unfortunately E*Trade's offer was .6150, so I sit for now.

I will likely close this position out, but need to do some more homework before settling for low 60s.

Thanks for the compliment, but there was quite a bit of room for error when buying companies like this as depressed as they were 2 years back.

Scott
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I think the upside is limited from .70... maybe .80. Even if full face is 1 year out - thats 43% in a unlikely scenario. A more likely scenario of 80 a year out is 14%, which would be nice, but I wouldn't kick myself for getting out too early for that.

An offer of low 60s leaves me hanging on for a while.

Funny you should mention YRCW I'm sitting on some covertibles of '23, waiting for that one to play out.

Thanks for the input.

Scott
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Scott

Nice play on staying put with YRCW. The other big one I blundered was a medium term MGM bond as well. I had bought a ton of them for just under 30 cents on the dollar and exited way too soon.

Anyways I looked into a bit more of the price action for you on your Nortel notes. As of right now, that Etrade offer is actually good. The best I could find on the virtual bond exchanges like Value Bond is a 1000 size bidder, or 1 million face for $60.00 flat.

Looks like late last week there was some decent action going on, I am assuming that must have been when the news broke out on the patents/Apple, and there was a bunch of big size trades going through where dealers were buying the bonds from folks like you at the $70 handle.

Regards
Brandon
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"""unfortunately E*Trade's offer was .6150, so I sit for now"""


If I remember correctly, one of the bond desks let you set your own offer, maybe it was etrade?? and that option just kicked in after I had already put in a bid request twice on the same day.

Also, I did find that bids changed quite a bit in just a few days when I was trying to sell come bonds that had a good run up in price.

Cudos on a nice play
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With E*Trade, after the offer expires (10 mins to 90 min+/-, probably set by the offering desk), you're able to reply with a limit sell offer.

I'll stick it out a few days anyway, hope for a little more news and I may have a chance to get out at a reasonable price.

Scott
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FYI

Today showing a bidder @ $65.00 flat with decent size.
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Thanks,
Got an offer earlier in that range. Might have to try it again.

Scott
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Am out. Figured I'd let the few of you who took interest know how I made out.

Bought 1000 3/19/09 119.60
Bought 2000 3/25/09 240.60
360.20

Sold 3000 7/6/11 1976.00

Net $1615.80 (448.58%)
Holding Time 27.5mos

Time to do some shopping I suppose.

Scott
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nice. can i ask which brokers you use to do your shopping? e-trade? what does a typical screen look like for you?

i run searches in e-trade that aren't all that great in terms of sifting - need to improve the process.

congrats on the nice investment.
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E*Trade

When I was buying heavily, I was looking for specific buckets.

I'd bracket my search mostly by dollar ranges maybe $10-30, or $50-70 depending on my mood and penchant for risk and the news of the day. Always was looking for issues regardless of credit rating in my screen.

I sorted the list by Issue and 500 results per page and would sift from there.

Scott
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Thanks!
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What is web site for Value Bond?

Just a nit pick, but bond pricing is quoted in *percentages* of par value, not dollar values. So it would be more correct to say the bidder was at $1M face value for 60% (or .6).

This I think you understand, but many people never clean up their terminology when writing about it.
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Persistent,
Stating the price of a Bond in the Price per $100 of face value is as common as using the percentage and doesn't require cleaning up of terminology.

Take for example E*Trade. When you're in the bond bid form, you can click on the word price which is a hyperlink to a glossary of terms which defines price as :

Price
The dollar amount per bond stated as a value of $100.


Other sites, such as Investingbonds talk about price being a percentage.

Scott
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