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Hi,

I purchased some United Refining Company bonds in late November at about $938 per bond. Definitely low B junk, but with a due date of August 2012, I figured it would limp in and I would make 10%+ interest for almost two years, and make a small profit on each redeemed bond given the small discount I bought in at. (I hate to admit it, but my junk bond portfolio is a lot "junkier" than even the junkman's! Most of my positions are in the low B range!)

United Refining has now made a tender offer of $975 a piece along with a consent payment for $30 for total consideration of $1005.

Looking at one of the newswires on the move, apparently they now want to pay off their 2012 bonds and issue new debt:

http://online.wsj.com/article/BT-CO-20110222-715446.html

My inclination is to hold tight given that I've read nothing dire about the company and maturity is not even 20 months away. The quick profit I would make per bond is too small and the lack of really good alternative income investments also pushs me in that direction.

Any thoughts?

Sal AKA folgore
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The page cited didn't give any information, although I am not a subscriber.

You didn't say what the coupon is on the bond.

Personally I usually accept the tender offer. You'll have to be shopping in another year in any case.

I'm becoming enamored of ESD, which is paying 7% on a monthly basis. While I hate bond funds, one devoted to emerging markets in an ETF is looking pretty good.

Best wishes, Chris
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The coupon is 10.5%. My yield is a little bit higher give the discount I bought in at. I'm surprised the link didn't work. I found the article via a google search. I'm not a subscriber to wsj.

I'll have to give ESD a look. Finding decent yields on individual bonds is becoming ever more difficult.
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Bond fund managers have the same pool of bonds to look at that you do, basically.
With a 10.5% coupon, yes, I'd give serious thought to holding another year to maturity.
The current yield is what is displayed for boud fund; you have to look at their annual or semi-annual report to know whether those are premium bonds. If so, the premium will erode to maturity. The high coupon bonds will mature or be called and NAV deteriorate over time, apart from the overall trend of interest rates.

I'm eager to own a piece of multi-natiional countries and generally to have assets not demarcated in US dollars, hence the interest in ESD.

Best wishes, Chris
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Something I just noticed at E*trade, United Refining is next callable on "03/29/2011 at 100 on 30 days notice." What's the point of the tender offer then? The difference in cost between their tender offer and simply calling the bonds seems insignificant. What gives?
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Something I just noticed at E*trade, United Refining is next callable on "03/29/2011 at 100 on 30 days notice." What's the point of the tender offer then? The difference in cost between their tender offer and simply calling the bonds seems insignificant. What gives?
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Welcome to the wonderful world of junk. Very simply, there is likely something in the covenants or indenture of your bond which could be interpreted as not allowing hem to refinance in the way they intend. So for the avoidance of doubt/litigation, they are offering a smidge above the call price in return for the bonds and consent from the bondholders to do their refi. If they get enoough bondholders to agree (commonly 2/3 of total or some such), they can do the deal. Usually they then immediately call the remaining bonds after the tender offer is complete.

Since they will call anyway, I would go with the tender and get the extra pittance. It is your best option.
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Sal or anyone....

Did you tender? I am wondering if that $975+$30 included also getting paid the accrued interest since the coupon payment just last month or so?

Thanks
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No, I haven't tendered. I've decided to take my chances. The fact that they have the right to call the bonds at the end of this month anyhow makes me think they want to retire some but not all of their outstanding bonds. If I'm right, I can collect 10% plus to maturity. The current tender off isn't much higher than what I would get if it were simply called, so I'm not really tempted by it.
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I did not read through this, but it sounds like they got enough.....

This just hit the wires late yesterday:

http://energy.einnews.com/article.php?pid=342213
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