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Re: Heh, ISM/OSM again
Old 04-16-2007, 09:29 AM   #81
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Re: Heh, ISM/OSM again

Brewer...

What about the two mega banks... each own 24.9% would indicate that if there were some problems one or both would step in and fix it... maybe even buy out the buyout firm... sounds to me like they are the 'anchor' for the reg filing..
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Re: Heh, ISM/OSM again
Old 04-16-2007, 09:54 AM   #82
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Re: Heh, ISM/OSM again

On swapping ISM for OSM: I dunno if thsi would be OK, but I would think so. AFAIK, you have to buy a security that is significantly different to get the write off. Different maturity and coupon seems like it would be OK. Anyone care to opine?

Wab: it depends on where they get downgraded to. If they were BB rated, I would guess that 225BP spread for ISM and OSM would be about right. I don't know what a reasonable bumber for B ratings would be, maybe 300-350BP. 225 would imply about 20.50 for ISM/OSM, 300+ would imply about 19. I would be slobbering and drooling to buy at 18.

TxProud: My read of thinsg is that the two banks will explicitly or implicitly state to the ratings agencies that they will in no way guarantee SLM's obligations. To do so would invite a downgrade of their own ratings. Now I could see either one evetually buying out the other partners and servig as the "exit strategy", but that would be years down the road.
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Re: Heh, ISM/OSM again
Old 04-16-2007, 10:00 AM   #83
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Re: Heh, ISM/OSM again

Fitch rating is in: link (F1 = not bad!)

Moody's still pondering: link

These pups will likely be falling significantly from here. Not sure 18 will be the floor, but it might be close.
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Re: Heh, ISM/OSM again
Old 04-16-2007, 10:08 AM   #84
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Re: Heh, ISM/OSM again

Quote:
Originally Posted by wab
These pups will likely be falling significantly from here. Not sure 18 will be the floor, but it might be close.
Yup, probably falling from here, but how far or how long is an open question. But again, at 18 I will be buying, and i still want to see them get the necessary regulatory approvals. The stock price is at almost a 10% discount to the offer price, which suggests the market has some skeptics on the deal as well.
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Re: Heh, ISM/OSM again
Old 04-16-2007, 10:17 AM   #85
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Re: Heh, ISM/OSM again

Eh, I don't mind owning junk. I just don't like paying prime-quality prices for it.

Update on the CDS market:

The perceived risk of owning Sallie Mae's bonds surged. Credit-default swaps based on $10 million of the company's debt rose by $30,000 to $116,500, according to Deutsche Bank AG prices. The price of the contracts has more than trebled since April 12. The contracts are used to speculate on the company's ability to repay its debt.
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Re: Heh, ISM/OSM again
Old 04-16-2007, 10:23 AM   #86
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Re: Heh, ISM/OSM again

Quote:
Originally Posted by wab
Eh, I don't mind owning junk. I just don't like paying prime-quality prices for it.
That was always the appeal of these bonds: prime credit for a scratch & dent price. Now the credit might match the price. Pity the poor slobs who bought JSM at 24 and change earlier this month.
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Re: Heh, ISM/OSM again
Old 04-16-2007, 10:31 AM   #87
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Re: Heh, ISM/OSM again

Quote:
Originally Posted by brewer12345
On swapping ISM for OSM: I dunno if thsi would be OK, but I would think so. AFAIK, you have to buy a security that is significantly different to get the write off. Different maturity and coupon seems like it would be OK. Anyone care to opine?
As long as the bonds have different coupons or maturity dates you are clear of the wash rules.
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Re: Heh, ISM/OSM again
Old 04-16-2007, 10:41 AM   #88
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Re: Heh, ISM/OSM again

I owned too much of this, and I am relieved to have gotten rid of a good bit but not all at <$0.35 per share loss.

I would have sold more at my price, but once the rating change was out the bids evaporated.

My take home:

Corporate bonds have unquantifiable event risk which is some ways make them no less risky and possibly more so than well-financed equity.

My plan going forward-

Any amount can be invested in treasuries. All other debt should be treated like an equity security and limited to no more than 5% exposure invested in any one issuer.

This income stream looked so inviting that I failed to follow that plan.

Ha

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Re: Heh, ISM/OSM again
Old 04-16-2007, 10:54 AM   #89
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Re: Heh, ISM/OSM again

Quote:
Originally Posted by HaHa
I owned too much of this, and I am relieved to have gotten rid of a good bit but not all at <$0.35 per share loss.
I lightened up Friday with a small profit. Still holding the rest till maturity (SLM willing, of course).
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Re: Heh, ISM/OSM again
Old 04-16-2007, 10:54 AM   #90
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Re: Heh, ISM/OSM again

I sold my ISM for a loss and will be watching OSM.
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Re: Heh, ISM/OSM again
Old 04-16-2007, 10:56 AM   #91
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Re: Heh, ISM/OSM again

Quote:
Originally Posted by HaHa
I owned too much of this, and I am relieved to have gotten rid of a good bit but not all at <$0.35 per share loss.

I would have sold more at my price, but once the rating change was out the bids evaporated.

My take home:

Corporate bonds have unquantifiable event risk which is some ways make them no less risky and possibly more so than well financed equity.

My plan going forward-

Any amount can be invested in treasuries. All other debt should be treated like an equity security and limited to no more than 5% exposure invested in any one issuer.
Because I don't analyze debt for a living, my personal policy is to only loan money to those who can print more of it when they need to pay me back.

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Re: Heh, ISM/OSM again
Old 04-16-2007, 10:59 AM   #92
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Re: Heh, ISM/OSM again

Quote:
Originally Posted by HaHa


This income stream looked so inviting that I failed to follow that plan.

Ha

We've all done it, Ha. Hard to be disciplined when things look too juicy. Unfortunately, someone else with bigger pockets sometimes comes along and swipes the pie.
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Re: Heh, ISM/OSM again
Old 04-16-2007, 02:19 PM   #93
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Re: Heh, ISM/OSM again

Quote:
Originally Posted by HaHa

Corporate bonds have unquantifiable event risk which is some ways make them no less risky and possibly more so than well-financed equity.
My plan going forward-

Any amount can be invested in treasuries. All other debt should be treated like an equity security and limited to no more than 5% exposure invested in any one issuer.
I haven't changed my positions, and plan on keeping the large quantity in my IRA. The smaller amount in my taxable account which have now swung into the loss column I probably will sell.

A significant part of the appeal of these instruments was the security offered by the quasi-governmental status. I understand much of this is illusionary, i.e. the government isn't going to reimburse us bondholders. Still I think too many powerful people in Washington and Wall Street, would work much harder to keep something really bad from happening to Sallie Mae. If Sallie Mae goes bankrupt or fails to repay bondholders, it will relect badly on Fannie Mae, Freddie Mac, the Farm Credit Bank, etc and ultimately on the treasury department.

This being said I now remember why I have essentially avoid non-governmental backed debt. The upside gain is small and the downside risk is large (default, rising interest /inflation rates)
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Re: Heh, ISM/OSM again
Old 04-16-2007, 09:49 PM   #94
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Re: Heh, ISM/OSM again

Just goes to show, once again...if it looks too good to be true, someone else knows something that you dont...
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Re: Heh, ISM/OSM again
Old 04-17-2007, 07:46 AM   #95
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Re: Heh, ISM/OSM again

An article mentioning the credit default swaps and the proposed SLM deal . . .

http://www.businessweek.com/bwdaily/...mpaign_id=yhoo
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Re: Heh, ISM/OSM again
Old 04-17-2007, 08:46 AM   #96
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Re: Heh, ISM/OSM again

Interesting article. What is to prevent a PE firm or hedge fund from picking up a cds then start shooting the fish in the barrel by making a bid for that company? I wonder if the SEC watches this market as closely as it does the equity options market for front running and inside information?

Beats hell out of asset allocation and riding out the market swings!

Ha
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Re: Heh, ISM/OSM again
Old 04-17-2007, 10:04 AM   #97
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Re: Heh, ISM/OSM again

The March CPI-U is out. 205.352.

ISM will pay 4.83% (based on $25 PAR) for the period June 15 through July 14.

Of course, this assumes they haven't defaulted by then sending their bond holders to window ledges preparing to jump.......!!!

Is anyone familar with what a default might look like in the ISM/OSM instance? Suddenly, they just stop paying monthly? We get partial payments monthly? Would a total default be their announcement that the bonds no longer receive monthly payments and also would not be honored at maturity?

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Re: Heh, ISM/OSM again
Old 04-17-2007, 10:20 AM   #98
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Re: Heh, ISM/OSM again

Quote:
Originally Posted by youbet
Is anyone familar with what a default might look like in the ISM/OSM instance? Suddenly, they just stop paying monthly? We get partial payments monthly? Would a total default be their announcement that the bonds no longer receive monthly payments and also would not be honored at maturity?
We are a long, long, long way from default, so I wouldn't get hysterical.

If a large issuer is in trouble, you will hear about it for months or years before a default.

If they default, they would just stop paying. Then the bankruptcy process would start, which can take years. In this case, teh senio unsecured bond holders (llike ISM/OSM/JSM) would typically come out of the BK owning the company.
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Re: Heh, ISM/OSM again
Old 04-17-2007, 10:40 AM   #99
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Re: Heh, ISM/OSM again

Quote:
Originally Posted by brewer12345
We are a long, long, long way from default, so I wouldn't get hysterical.
No hysteria here. Just curious.
Quote:
If a large issuer is in trouble, you will hear about it for months or years before a default.

If they default, they would just stop paying. Then the bankruptcy process would start, which can take years. In this case, teh senio unsecured bond holders (llike ISM/OSM/JSM) would typically come out of the BK owning the company.
Do they stop payments on all issued bonds simultaneously? Or do they get to pick and choose?

If unsecured bond holders wind up owning the company, could that result in their bonds having some value, even if it is much less than PAR?
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Re: Heh, ISM/OSM again
Old 04-17-2007, 10:46 AM   #100
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Re: Heh, ISM/OSM again

Quote:
Originally Posted by youbet
Do they stop payments on all issued bonds simultaneously? Or do they get to pick and choose?

If unsecured bond holders wind up owning the company, could that result in their bonds having some value, even if it is much less than PAR?
Usually default happens on everything at once. Once you default on an obligation, the bondholders can petition to push you into BK. The holder s of all other obligations then have the right to join the petition. So it is usually not pick-and-choose.

Sometimes the bondholders get less than par recovery, other times they get more than par. There is currently a gigantic fight among the holders of various securities issued by Delphi (the BK auto parts company) over who gets what. Bonds are trading at or above par even though the company is still bust. People who bought Conseco bonds at the right time made a fortune.
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