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No. of Recommendations: 2
First - It's really a shame that Constellation, an otherwise profitable company, ran a muck with trading, derivatives, and leverage. CEOs and CFOs should be required to read "When Genius Failed," by Roger Lowenstein. Oh well...

Second - Just an idea, but what do you guys think about going long on the debt and hedging by shorting the equity. The equity, which I thought would usually have better arbitrage room than the debt, has only 8% to reach the agreed buy out price while the debt has 8% and it pays 10% coupon. I haven't worked out the math as far as how much ROI would be given the length of time, but it might offer some interesting options.

I no longer have my FOOL PRO account, but I wonder if it's something they'd consider.

On the other hand, given the unlikelihood of the deal falling apart it may be better to buy the debt only, but if I could leverage 100 to 1 it may be more interesting... Wait a minute isn't that how Constellation got into trouble to begin with?

MJK
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