Replies to post #3332 on Global Value Investing

[bradford86]

Yes, this is interesting to me as well. If Will is anything like me he is just hanging out and run out of value-add comments at this point... I mean what else is there to say or acknowledge as the market continues to fumble this one for whatever reason...

A lot of this from where I sit is still bond funds being liquidated. That's my thought.

I believe that the valuation here is unsustainably low, as it has been for around a year now.

I am of the predisposition that there is a point in the future couple years where EBITDA stabilizes and perhaps even begins to start increasing from that point.

As I recall the company is presently paying around $87M of interest payments on something like $650M of net debt and their debt trades above par. Meanwhile, the equity is trading as if the company is in bankruptcy.

Well, it's taking longer than expected. This much is true.

http://www.stockhouse.com/Companies/Bullboard/t.y/yellow-media-limited?postid=21779106

http://www.ypg.com/en/newsroom/624-yellow-media-limited-announces-exercise-of-option-to-redeem-27-million-of-senior-secured-notes

[throwerw]

Well, Interactive Brokers announced that it would stop offering margin on the warrants several weeks ago, and phased it in over two weeks due to the low liquidity. I think it's pretty clear by the price action that some people were forced out of their positions at bad prices (me included). Lesson learned.

The debt redemption is great news, no reason not to expect more of that to come. Perhaps after a year or so of chipping away at the debt, they will go in for a full refinancing that doesn't put restrictions on dividends or share repurchases.

Take Gannett (GCI:US) as an example of what could happen. Several years ago, they had to refinance debt at 9-10%. After several years of debt reduction and revenue stabilization, they are now issuing debt at 6%. The stock is up 10x from the low, trades at 13x P/E with net debt around 1x EBITDA.

It looks like Yellow Media should be able to pull this off over the next several years. A $60 share price wouldn't be crazy once the cash starts flowing to equity, which puts the warrants at $30+.