So after several posts in which I presented carefully crafted analysis, it turns out I was wrong on Alltel. Can't say whether the make-whole possibility is in play or not right now. I'm hearing the 5-year issue about 50 wider at the open. More in this space as it develops. Or within a couple days anyway. Hey, I'm a busy guy.
Monday, May 21, 2007
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4 comments:
What changed? When I read about the Alltel LBO I immediately thought of your position and thought you would be having a great day...are the bonds not going to get tendered after all? If your previous statement is correct:
"But their current debt does not allow new debt to be secured ahead of old debt. That might mean that the private equity buyer also has to foot the bill for a bond tender, further increasing the price of the deal."
then you should be laughing. And if the bonds widen, just buy more. The banks always want to be at the front of the queue for assets.
Well the bonds moved about 80bps wider right off the bat, but are now more like 50bps wider. I think fair value on the 10-year bonds is around 220-200. So I'm waiting for that level.
I was wondering if maybe you could help me with one thing.
I'm looking at high yield spreads and the premia in CDS (CDX). My guess is that there is a high correlation between these, right? But those the premia in the CDX contain something that the high yield spread don't? I mean can teh CDX turn higher while the high yield continues lower...?
I've heard the CDX contract is very technical. By that I mean that its relatively thinly traded, so the price action on any given day has more to do with whether buyers or sellers of protection are more prevelant on that day.
Search for my post on how CDS work for some other thoughts on this same subject.
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