Tuesday, May 28, 2013

Suntech Bonds Trade @ 27.5 $STP

Ho hum... a million bonds traded at 27.5, valuing the whole issue at $149 million. Also, lest we forget, there is an additional $50 million loan to the holding company from the IFC. So assuming that is pari passu with the 2013 notes then the EV of the debt is $163 million.

Meanwhile, with the stock market capitalization at $185 million, the stock market is valuing the enterprise at $776 million.

If anyone rational thought that the company was worth that much, a more sensible thing to do would be to offer the bondholders cash for their claims. That way you would wipe out the debt and own all the equity. Buying stock in an enterprise with bonds trading for this little is irrational.

7 comments:

Steve said...

The people buying STP this week are being forced to buy by their brokers. Notice the spike right at the open-- that's when the brokers call people that their positions are going to get bought in.

jHurt said...

Steve, how does that work? Is that a margin call (the "being forced to buy in")?

RJ said...

STP and the Ad Hoc group will drag this out... With borrow rates approaching 100%, being short the equity is very costly until you know when the end is near..

Steve said...

jHurt,

Losing the ability to borrow shares.

You are required to buy in same day, no matter what your position or how much capital you have.

Steve said...

The broker calls at 9:30am and says "we're no longer able to borrow shares of STP, you have until 3pm to cover your short or the margin desk will do it for you."

These calls have been going out this week.

Steve said...


There's more money to be recovered by lending the equity out than there is in to be recovered by resolving the bonds, hence the higher market value for the equity than for the bonds.

jHurt said...

got it. thanks Steve