tag:blogger.com,1999:blog-1527840491496268397.post6653521055678532434..comments2024-03-08T11:20:30.095-07:00Comments on Credit Bubble Stocks: Trade Idea: Suntech Power Bonds vs Equity ($STP)Unknownnoreply@blogger.comBlogger16125tag:blogger.com,1999:blog-1527840491496268397.post-90470788814937056532012-12-19T13:23:16.123-07:002012-12-19T13:23:16.123-07:00You can read the bond indenture here:
http://www....You can read the bond indenture here:<br /><br />http://www.sec.gov/Archives/edgar/data/1342803/000114554908001071/h02152asfv3asr.htm<br /><br />They are NY law bonds.CPhttps://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-79943462084058872492012-12-19T11:48:38.770-07:002012-12-19T11:48:38.770-07:00hey GZ,
I think that's a good sign for the tr...hey GZ,<br /><br />I think that's a good sign for the trade. <br /><br />I'm adding to the short. If you read between the lines of the article, they are going to let the firms BK and the survivors will pick up the pieces. <br /><br />I'm not aware of a Cayman Islands bankruptcy where shareholders received hundreds of millions in value when bondholders received nothing. CPhttps://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-34045879303577207522012-12-19T09:32:59.525-07:002012-12-19T09:32:59.525-07:00It's kind of interesting that the stock rallie...It's kind of interesting that the stock rallies but bond does not change much. Sometimes I suspect that I missed something and in the end the stock will not go to zero but bonds will default. But if the conviction remains, this might be a good entry point. GZhttps://www.blogger.com/profile/11730771928743379202noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-43363633974979580792012-12-04T12:56:46.812-07:002012-12-04T12:56:46.812-07:00Maybe earlier, but they are both up now. Just not ...Maybe earlier, but they are both up now. Just not as much as the stock is down, which is to be expected since delta <1. <br /><br />We care about the terminal outcome anyway: the debt maturity.CPhttps://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-24815010270290280402012-12-04T08:29:46.836-07:002012-12-04T08:29:46.836-07:00The problem is both 1.0 and 0.5 puts are expensive...The problem is both 1.0 and 0.5 puts are expensive. Like today, both the put and the stock lost value. GZhttps://www.blogger.com/profile/11730771928743379202noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-2183795215358923012012-12-01T21:18:41.186-07:002012-12-01T21:18:41.186-07:00I think ITM puts are good too.
That sort of impl...I think ITM puts are good too. <br /><br />That sort of implies that you think the equity is going to do OK, though.<br /><br />I really think the whole holding company capital structure goes to zero.CPhttps://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-49228996702951152132012-12-01T09:37:08.244-07:002012-12-01T09:37:08.244-07:00In retrospect I think an in the money put might be...In retrospect I think an in the money put might be better. <br /><br />GZhttps://www.blogger.com/profile/11730771928743379202noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-19823150424010527902012-11-30T23:38:40.958-07:002012-11-30T23:38:40.958-07:00Have you looked at the 50 cent puts? Those might b...Have you looked at the 50 cent puts? Those might be an even better hedge to owning the bonds.CPhttps://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-24483817584982450752012-11-30T20:06:52.333-07:002012-11-30T20:06:52.333-07:00Yes I do. Yes I do. GZhttps://www.blogger.com/profile/11730771928743379202noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-8134159365484564892012-11-30T19:38:29.863-07:002012-11-30T19:38:29.863-07:00Interesting! You own the March puts?Interesting! You own the March puts?CPhttps://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-49817406783276894362012-11-30T19:28:07.397-07:002012-11-30T19:28:07.397-07:00I hope you (we) are right. I actually have this ex...I hope you (we) are right. I actually have this exact trade on since the August. It was a little early and I lost tons of premium. Fingers crossed.GZhttps://www.blogger.com/profile/11730771928743379202noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-27571698830270863522012-11-30T18:56:29.521-07:002012-11-30T18:56:29.521-07:00Let's imagine that the stock only falls to 20 ...Let's imagine that the stock only falls to 20 cents after a missed principal payment on the bond. That's a pretty realistic scenario. (And that the bonds go to zero.) <br /><br />In that case, the puts are worth 80 cents (2x), so you lose $350 on the bond but make $600 on the puts, a net of $250 which is 25% roi.<br /><br />There are $541 million in bonds outstanding - I'm not worried about an involuntary petition being filed if the company misses the payment and doesn't file one itself.CPhttps://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-13293865542427330582012-11-30T18:44:40.388-07:002012-11-30T18:44:40.388-07:00Another thing that is uncertain is what happens to...Another thing that is uncertain is what happens to my short stock position. By the time the put is exercised, the stock might have been delisted and traded on the pink sheet. I am not sure if we are required to cover immediately because it won't be shortable, or we can still short but pay dearly on the borrow. If we have to immediately cover, then one leg of the trade would be closed at a loss, but the long bond will stretch out for months and eventually be worthless. <br />Although they eventually do converge at 0, we might still have lost money on both legs.<br /><br />An even horrifying thought just came to me -- they might just default on the bond without filing for bankruptcy. There is very little one can do about it. I am not sure it can actually happen, but if it happens, people wouldn't have to go to Cayman island to file a law suit?GZhttps://www.blogger.com/profile/11730771928743379202noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-19500046114516412232012-11-30T18:30:57.633-07:002012-11-30T18:30:57.633-07:00That happens in the short run, but in the long run...That happens in the short run, but in the long run if the bonds don't get paid the stock will be worthless.CPhttps://www.blogger.com/profile/12701174164478027499noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-8029364741660689622012-11-30T17:55:21.385-07:002012-11-30T17:55:21.385-07:00Thanks for the very detailed blog. I have been wat...Thanks for the very detailed blog. I have been watching this one for a few months now. One thing I am not so sure is if the stock will be wiped out after bankruptcy. I know it sounds crazy, but I saw some stocks still trading near 1.00 after chap 11 (sorry I forgot the name I was looking at). If that happens, you lose on both sides of this trade. GZhttps://www.blogger.com/profile/11730771928743379202noreply@blogger.comtag:blogger.com,1999:blog-1527840491496268397.post-67736874929985591502012-11-30T02:35:57.662-07:002012-11-30T02:35:57.662-07:00This comment has been removed by a blog administrator.Anonymoushttps://www.blogger.com/profile/16756375232887571844noreply@blogger.com