Ed-
KIM that when they priced the pfd (Jan. 24)they also priced $145mm of common (at $13.25) below the pfd. So, I think your 9% estimated is still rather high given that new cushion.
In fact, the pfd traded up immediately and was still at $57 by mid year whereas the common has declined to $12. To me, that means it was priced too cheaply.
By early Oct. the pfd had fallen to $47 even though the stock was still at $13 and interest rates had dropped. The bloom was off the EPEX rose at that point.
When the Oct 8th warning was issued, the convert already partially "busted", imo. The drop to $9 on the commone sealed that fate as it slid into the high 30s and the stock into the $8.50-9.00 range.
Now, given that there is only $240mm of LTD ahead of the pfd and, given that it is a large issue relative to the debt ahead of it, it shouldn't be behaving so poorly unless the market believes the debt should be getting a good haircut, already.
You see, if the pfd was a small issue then weakness in the debt would be quickly reflected in the pfd price. The fact that it is so weak leads me to think that there some belief that EPEX can't grow it's way out of its balance sheet. Namely, production simply isn't being replaced fast enough to justify the cost of that acquisition.
Back to my original point, namely, if the pfd should trade at 9% to reflect interest rates (and similarity to GMX metrics) then it should NOT be mirroring the common's price decline UNLESS it also reflects deteriorating EPEX Future and financials.
Don't know if that is clear but it strikes me as too much like other early evolving distress situations.
BWTFDIK? |
