What I'm Doing Today
-Sold more GGC at 15.6.
-Adding capital to my short YRCW / long U.S. Freightways 8.5% note due Apr 2010 trade - see the 8-K they just filed about an exchange offer.
-Looking at adding capital to my short REG / long REG-E trade.
I need to write more about the YRCW trade. Also I am reviewing the third quarter REG earnings and conference call and I'll be posting about it later.
Posts
6 comments:
These notes are the 4/15/2010, right?
CUSIP 916906AB6?
Correct.
However: the notes have rallied 10 points, and the stock has sold off more, so the trade isn't AS attractive.
The stock is pretty clearly a zero, though. But now it is hard to borrow everywhere.
Just in case there's a silly rally, any hints on the appropriate stock/notes ratio?
Here's my math (which could just be a finger exercise this point, seeing as YRCW is not borrowable).
For $540M of notes, the noteholders get 42M of common, and 5M pref, which is convertible into 220 common each, for a total of 1142M common. So for $0.47 of bond face value, you get 1 share. But the notes are trading at 72, so that's really $0.34/share.
But if they were shortable, you could sell a share of YRCW for $1.23 today! That's about 3.5X return.
So buy 1 note for $720, sell 2115 shares of YRCW?
I'm actually not planning to exchange my notes. You are not required to. However, if enough people don't exchange then of course the deal won't happen.
What I'm banking on is that I'm one of a small number of holdouts that gets paid in full.
But regardless, the stock is a 0 and I'm short more $ of stock than I own bonds.
Post a Comment