No. of Recommendations: 2

After finishing my usual weekend, marking myself to market, I took a look at Black Elk but backed away, for these reasons.

This isn’t a value situation, but a new-issue high-yield, and I’m a value player, not a junk-bond specialist. E.g., the fact that they had to pay 13.75% to borrow money screams that no one trusts them to deliver (even though the Moody’s report was very favorable). Also, the min-purchase is five bonds, which is bigger than I’d want to go for an opening position in a company whose payables are larger than receivables, and whose total-liabilities are bigger than total-assets.

In short, I don't see nominal rewards as being proportional to nominal risks. I.e., how are bondholders going to get paid if/when Black Elk files Ch 11? Their survival depends on the global economy not crashing, and that's not a bet I'm willing to make when my entry price is so far from a probable workout.

I could be wrong. But I’d vote “Pass” on this one.

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