Glenn, all: I have been looking into the Echostar Convertible Bonds of 1/1/2007. They are officially "junk" which is to say "Caa1" [Standard & Poors] or "B-" [Moody's]. The bonds currently trade around 69, have a current yield north of 6%, and a yield to maturity of 15+%--obviously one does not get these kind of returns with T Bills, so the assumption is that there is a real risk of default. Each bond is convertible into 22+ shares of DISH common. At a current price of 15, the conversion privilege is worthless so the bonds fall into the 'busted convertible category'.
I have no position in any Echostar security, debt or equity, and no axe to grind. It just seems to me that with DISH going cash flow positive next year, a continued strong increase in subscribers, and a decent cash position, that the risk of default is on the low end, and that a 15% return is therefore a reasonably likely outcome. Adding spice to the salsa is the possibility that the common takes off sometime in the next five years and the bonds' conversion privilege would take them to a premium over par. This of course would be a home run, but if the true downside is 15%, one would not need to be rolling the dice on the DirecTV merger, or much of anything else. If it happens, great; if not, no worries.
Thoughts? Mike Doyle |
