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Strategies & Market Trends : IPPs and Merchant Energy Co.s -- Ignore unavailable to you. Want to Upgrade?

To: majaman1978 who wrote (820)	12/27/2002 10:47:26 AM
From: KyrosL	Read Replies (1) \| Respond to of 3358

I have studied RRI, MIR and ILA in detail. Didn't look much at AES because its D/E ratio is too big. At current prices I would rank the stocks as: RRI MIR ILA. I would rank the bonds as: ILA MIR (RRI does not have bonds). ILD is a bond, not a preferred. Big difference, since in a BK the preferred probably gets zip, but the bond has a good chance of fully recovering at least its current price. In the case of ILA, the most probable event that will precipitate bankruptcy are their tolling contracts. My understanding is that in a bankruptcy those contracts rank below the bonds in seniority (though above stock and preferred), so the chances of good recovery on ILA bonds are pretty good, and ILD trades for a bit more than 50 cents on the dollar. MIR's bonds are also way undervalued, IMO. MIR keeps selling assets and will have a pretty hefty cash position once it reduces its trading book and the netting agreements come into effect next year. Its bonds go for less than 50 cents on the dollar. I wouldn't even look at the preferreds right now because the bonds sell for roughly the same price as the preferreds and have much better security to boot. Kyros

To: majaman1978 who wrote (820)	12/27/2002 10:55:19 AM
From: KyrosL	Respond to of 3358

My previous post addressed the bonds -- I have MIR and ILA bonds. As for stocks, my opinion is that RRI is much better than the rest, with the caveat that there is a definite refinancing risk which can be exacerbated by events such as a war in Iraq that starts out badly just at the time when refinancing must close. So conservative investors better wait after refinancing -- and of course pay more. I do have a large RRI position, and it is my only common stock among the IPPs. Kyros