Tuesday, May 13, 2014

NII Holdings Bonds Trade At New Low $NIHD

Under 33 cents, yielding 77 percent.

From the earnings call:

Walter Piecyk - BTIG
Can you comment today whether you are actually going to be making those June 30 payments, or are you just not commenting on that at this point?

Juan Figuereo - Chief Financial Officer
We are not commenting on that at this point.
The earnings release and call seemed to be a negative catalyst for the bonds and stock prices.


Anonymous said...

NII Holdings up 21.3% on strong volume.

A few million 2016 senior notes also changed hands this morning.

Perhaps a distressed fund is looking to arrange a sale to $AMX or, in the event that fails, restructure?

Is it a good time to initiate a put and/or short position?

What are your thoughts on the liquidity + timing risks involved in a bear put trade relative to the cost to borrow vs. potential gain (if NIHD fails to make the June 30th payment)?

CP said...

The 10% 08/15/2016 note (fulcrum?) is still in the low 30s - an 83% yield.

Yields of close to 100% are generally the point of no return for the common stock.

Anonymous said...

That's true, but NIHD has gone up as much as roughly 50% from where it was trading 2 days ago.

That makes NIHD an attractive opportunity, more or less.

What do you think is behind the volume?

Also, who owns the fulcrum?

Why is 81% of the float held by institutional investors (as of 3/31/2014)?

CP said...

Nobody smart seems to own the equity.


The iShares Dow Jones U.S. Telecommunications Sector Index Fund and the Vanguard Telecommunication Services Index Fund own more than 8% because they have to.

CP said...

As for the volume, there's a dynamic where these names with distressed debt become heavily shorted and start having squeezes.

That attracts daytraders like this guy:

I've seen that particular guy buy a number of names that we've shorted to zero.

If you're a timid hedge fund short NIHD, day traders can bully you into covering.

If you own 2016 puts you can just yawn while the company pays 5.5x its market cap and 8x ttm EBITDA on interest expense.

Or watch the fulcrum bond sit at 33, unch.

Anonymous said...

The largest holder, Capital Group, is smart but perhaps someone is risking his or her job with the 11% stake of NIHD.

Aurelius funds hold more than 25 percent of NII’s $500 million of 8.875 percent notes due 2019 and a “significant percentage” of NII’s $800 million of 10 percent bonds due 2016.

Anonymous said...

What makes you say that Capital Group is smart?