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So this is very interesting trading action. The bonds have cratered into the mid $70's now. Not long ago were trading at par. With less than 3 years to go til redemption, this price action is a bit surprising.

The company has some significant logistics and operational issues going on. But still with market cap equity in the half billion range and this is after a very recent and major sell off there is allot to play out.

NIHD has also been selling off some of their non-core assets in terms of cell towers and the like. They are presently making the jump to 3G in two of their biggest markets of which they are focusing on.

Wondering if anyone else is holding these, following the company, or has input. Surprisingly last I checked the RR on these bonds was a 5. Bottom line is, if the company can turn the corner with respect to their 3G deployment and execute these bonds are a big buy here.

Problem is in the most recent earnings call, you can read the whole transcript online at SA; they came up short on milestones for 2013. But again, they are not on the verge of going out of business tomorrow and there are many scenarios that will play out in 2014.
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< Wondering if anyone else is holding these >

ytm,

I hold the 8.875’s of 19 and 7.625’s of 21, but I really can’t add anything to your comments about the company and it’s chances of surviving.

All the 3 NII issues seemed to be under heavy dumping today… as if someone expects another shoe to drop.

I prefer the 2019 and 2021 issues over the 2016 because mid/hi 50’s is much closer to an estimated 20% recovery (Moody’s LGD5 rating) than mid 70’s the 2016 are selling at. In addition, I don’t mind extending my duration when I get 20% YTM. But 20% YTM indicates a high likelihood of default, so I must factor this in.

According to my spreadsheet I show the following risk/reward ratios:

Maturity coupon MktPrc YTM Face+Int Gain at Mtrty Loss if BK Gain to Loss Ratio
08/15/16 10.00 73 23.8 127.73 55 53 1:1
12/15/19 8.875 58 21.6 154.20 96 38 2.5:1
04/01/21 7.625 56 18.9 156.45 100 36 2.8:1

I bought my original position in the mid 70’s. After the recent earnings, I added the 2019 in the low 60’s. Today (yesterday) I added 2021 in the mid 50’s. I now have my basic 2% (of junk) position, so I won’t be buying anymore until I see some positive changes developing.

Howard
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Howard

What attracted to me to this play in the first place was their vast portfolio of spectrum. As you know they fell short recently with respect to milestones that needed to be executed. But a large part of this was due to a sprint equipment shutdown that was out of their control. But in terms of selling off non-core tower assets and focusing on the bigger markets with 3G still think there is allot of potential. They just need to focus on retention and acquiring new subs. If they can turn this corner its a different ball game.

What revelation that just came out today is that sir Richard Branson has now declared this on his website:

"Within the next 5 years, we hope that anyone in Latin America
can use a Virgin Mobile phone.”

Sir RICHARD BRANSON

So the reality is, NIHD has the biggest spectrum portfolio in place already running now 3G. They just have to execute. Their debt amount of nearly $6B might not make them an attractive acquisition target at this point of development, but it sounds like 2014 is all set to go. The bonds are trading as you said, another shoe is going to drop.

Makes sense buying the bonds in the $50's vs. shorter term and getting closer to the recovery rating range. At that point, if it comes to that, the time to duration is completely irrevelevant; all that matters than is your cost basis and how far of a spread it is away vs. recover range.

Have you tried Molycorp's 2020 or 2021 I think it is 10% bonds? They are senior class and have a decen recovery rating.
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ytm,

It sounds like you analyzed this company in more detail than I did. I just wait for these companies to get into trouble and when their bonds fall into my range (> 10%) and they look like they should survive, I take a small position and start following the company. If I like the story (or the odds), then I average down to a point (we are here now for NII) and then clip coupons. If things improve or it looks like they are on the verge of turning things around, I’m prepared to double down again. But I’m not sure I want to do that with NII. Their high debt sort of scares me.

I’ve read that NII has lots of assets that can be monetized (spectrum, towers, etc) in the case of BK, I’m not sure that our bonds (NII Capital Corp) are high enough on the recovery pecking order to get at these assets. If I remember correctly, Moody’s gave other bonds in the enterprise (NII International Telecom) a higher recovery rating.

But I agree, It’s a growth industry, and they should be able to turn things around. But they better do it quickly because they are running out of runway.

Yes, I hold the Molycorp converts 3.25% 2016. Not much coverage in the case of BK, but they are the first of their bonds to mature and the company does have a tangible book, so I’m guessing that they would be taken over before a default. But I agree the 10%’s have the best recovery coverage.

I also own James River 7.875’s of 2019… now that is a real distressed situation!!! They are trading in the 30’s and it looks like the market assumes the worst. But from listening to the cc’s, I think management is trying really hard to hang-on until the coal market turns and avoid BK. But who knows… “I pays my money and takes my chances”... Isn't that what junk bond investing is all about?

Howard
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