Bond Investments and Rodney Dangerfield

It was Rodney Dangerfield that made a living telling people that he did not get any respect. Well neither do I. I have a friend that relies on me for investment advice. Their broker years ago laid some big eggs and made their investment net worth fall to half its value. I took over in January 1, 2009, moving their account from a full brokerage firm into an online discount brokerage firm.

I started in January 2009 with $49,726.03. As of January 1, 2012 their Net Worth will start out at $102,454.27. That is an increase of 106.04% over three years. If you go by the Dow, it only increased in the same time period by 39.21%. The Dow was the best gaining index in the world outside of the Utility index for 2011. My friends gains beat both of them for the year. The Dow is up 5.6% and the Dow Utility Index 15%. My friend made 15.35% for the year. Tell me, would you be happy with that?

My friend’s problem besides being greedy, they had three companies in their portfolio that filed for chapter 11 bankruptcy. If that did not happen, they would have made more money.

If you look at the data above, you will see that from 2009 until now, the money accumulated was done at a steady pace. But if you would have been looking at these investments day to day, you would have seen a different picture. My friend’s net worth would have been going up and down all the time. They saw one bad surprise after another in the economy and in the bond market. Business in 2011 went to “hell in a hand basket” as well and we were looking at an economic collapse in Europe. Even with all that, my friend made $12,649.07 or 15.35% in 12 months.

The objective of this story: when investing in the bond market, remember that you are investing for the long term. You are not investing for the short term. If you have this idea that you are going to make a killing in the market over the next few weeks, you should not be in the market at all.

A&P is moving ahead

On Dec.19, 2011, the United States Bankruptcy Court for the Southern District of New York entered the Order for the Great Atlantic & Pacific Tea Company, Inc., Approving;

A) The Adequacy of the Debtor’s Disclosure Statement
B) The Solicitation and Notice Procedures With Respect to Confirmation of the Debtor’s Proposed Chapter 11 Plan
C) The Form of Various Ballots and Notices in Connection in the Plan
D) The Scheduling of Certain Dates with respect to the Disclosure Statement Order.

If you hold one of the bonds of the Atlantic and Pacific Tea Company Inc., you should have gotten Chapter 11 court papers from the “Counsel to the Debtors,” Kirkland & Ellis LLP. If not, call your broker or attorney Paul M. Basta at (212) 446-4800.

The voting deadline for executing and returning a completed Ballot with instructions is January 24, 2012 at 5:00 PM, Pacific Time. Failure to do so may disqualify your Ballot and your vote on the Plan. Any objection to the Plan must be sent in writing and it must conform to the Major Bankruptcy and Local Bankruptcy Rules. You must state the name and address of the objecting party plus you must state the amount and nature of the Claim or interest. You must state the nature of the objection to the Plan. You must state the proposed modification to the Plan that would resolve your objection. You must serve all interested parties of this information by January 24, 2012.

The Confirmation Hearing for this Plan will be on February 6 and 7, 2012 at 10:00 AM Eastern Standard Time before the Honorable Robert D. Drain, US Bankruptcy Judge, in the US Bankruptcy Court for the Southern District of New York. At that time, the Plan may or may not be modified.

After approval of the plan, bondholders will have a very good idea of what they will receive as payment from the new owners of the company. Any questions should go to your broker or the Debtor’s restructuring hotline at (877) 660-6625. You can use the Debtor’s restructuring Website at www.kccllc.net/APTea.

The above information came from the Great Atlantic & Pacific Tea Company, Inc. c/o Kurtzman Carson Consultants LLC, 2335 Alaska Ave., El Segundo, CA. 90245.

You are Your Own Worst Enemy

Stephanie Ann Tulloch

I am going to make a point. I took the above picture from my daugher's facebook. This is how easy it is to take personal information from Face Book. For you people who don't understand what I am getting at, what if I take your personal pictures and videos of your party with you acting a fool? What if I use that to evaluate if I want to hire you for a good paying job? A good recruiter like Stephanie Ann Tulloch will look at your personal information on Facebook and other sites and make an evaluation of you for a job. You parents, I would have your children read this blog because this is what this blog is all about!

Stephanie on right and her husband Damine Tulloch on left at a corporate dinner party.

In many countries, we have government agencies that spy on average citizens. They keep records of what they do and what they say. In some places, what you say can get you killed. In America, we have freedom of speech but we also have the freedom to do something to you if we do not like what you do or say.

In My Day

I am very happy that I am at the end of my working career. When I started working in 1970, people walked into an office with their “typed” resume in their hand, wearing their best suit, and start selling themselves. If you sound like you knew what you were talking about, you usually got the job. In my youth we had more jobs than people, so getting the best job was nowhere near as hard as it is today. Your background check when they did one was usually a call to a neighbor, minister, or friend. Past employers usually did not say anything bad about you on fear of a law suit.

But Today

Today things have changed. In America, people spy on people and you are your own worst enemy. Many people are not working in this country because of what they did or said, not because they are not qualified. We have computer systems that gather information on average citizens. We gather it when we are stopped for traffic violations and when we pay income, property, and school taxes. Companies and government agencies gather information that includes our DNA. Even our cell phones, cars, and home computers report personal information to a central data base. Your credit information is stored by the Credit Bureaus. In these times, a high amount of debt can stop you from getting many high security jobs.

Actions at 16 can hurt at age 36

But some of the young people who use these dating and friend sites like Face Book and Yangutu really are shooting themselves in the foot when it comes to getting jobs in the future. They seem not to understand or care that what they say or post by video on the computer at age 16 is stored forever. When an experienced person tries to tell these ignorant people about the dangers of what they are doing, they act like the person trying to help them has the problem not them.

The New Interview

My daughter, Stephanie Tulloch over sees the human resource department for CREDO Technology Solutions. Many times she will interview someone for a high paying job over the phone. The job maybe to staff IT people in corporations anywhere in the world. After the interview, she goes to work. She pulls up the internet on her computer and investigates the person who she just talked to. Stephanie will check out all professional and education information. She will look at records that originated from the FBI, court houses, State Police Agencies in just about all 50 states, Interpol records, vital statistics, and etc.

Then she will type in the name of the interviewee in the web-browser and see what comes up. Last, she goes into places like Facebook, Yangutu, and Tag. Then she rates her candidates by qualifications, background checks, and what she found out on the personal web-sites. One person who could have landed a $125 per hour job was rejected because of multiple DUIs in different states. Another was excused because of the things they said on their personal website.

When she makes her picks on who will get these high paying jobs, she has documentation on her candidates and she can prove why she made the choices that she made. Most people do not challenge her because if they take her to court, their personal trash will be out in the public for the people to see.

In my day we called it “Putting your business out in the street.”

With the economy the way it is, (The First Great Depression of the 21st Century) businesses are starting to do the same type of investigations for people looking for $9.00 per hour jobs.

The moral of this story is, keep your personal complaints about people, party pictures, and stories off the computer. You have a hard enough time landing that future job without your personal information holding you back.

When you press “Enter” on that key board remember that information will be in someone’s database forever, even after your death.

Contact information for:

Stephanie Tulloch, MBA
Resource Manager
Credo Technology Solutions
110 Sunset Ave.
Harrisburg, PA 17112
Office: 717-657-7017
Fax: 717-657-1439
http://www.credotechsolutions.com/

Connect with her on LinkedIn

Speculation on Great Atlantic & Pacific Tea Company; Return to Solvency

On December 8, 2010, I was taken by surprise when the Great Atlantic & Pacific Tea Company (A&P) filed for Chapter 11 bankruptcy. Personally, my IRA is made up of only 2% of this company’s bond investments but the Darnell L Williams Foundation has a large percentage of these bonds in its portfolio. The company is supposed to come out of chapter 11 as a private company in early 2012.

However, I do not know if the new company will pay cash for the bonds that make up the companies’ debt in full or in part. Since the company is going private, it is very unlikely that they will give bondholders stock in the company. The current stockholders will more than likely lose their investment in full in the company. I would not speculate in the stock of this company that still trades on the Pink Sheets under the symbol GAPTQ.

Peter Cleveland published a story in Smallcap Network, “Great Atlantic & Pacific Tea Company (GAPTQ); Looking to Emerge from Bankruptcy”. Here he said that GAPTQ ”has entered into an agreement under which it will receive $490 million of debt and equity financing from private investors, which include The Yucaipa Companies LLC, Mount Kellett Capital Management LP and investment funds managed by Goldman Sachs Asset Management L.P. The agreement requires an approval from the U.S. Bankruptcy Court for the Southern District of New York.”
“A&P believes that the agreement with the private investors will allow it to complete the restructuring of its balance sheet and emerge from Chapter 11 as a private company in early 2012.”

“Based in Montvale, New Jersey, GAPTQ filed for bankruptcy after struggling with too much debt and competition from other retailers. A&P, which once operated more than 15,000 stores, now operates 336 stores in seven U.S. states.”

“CEO Martin noted that A&P has been working extremely hard over the last year to execute a successful turnaround by improving the value and in-store experience it provides to its customers and by successfully driving significant efficiencies across its operations and supply chain to bring down its cost structure. Martin added that going forward; the investors are committed to supporting additional operational and service improvements.”

“A&P expects to emerge from Chapter 11 early next year in a much stronger competitive and financial position. “

“On completion of the transaction and after emerging from bankruptcy, GAPTQ’s existing Board of Directors will be dissolved. The company will appoint a new Board under the terms of the plan of reorganization.”

Less Risk than Stockholders

Another financial disaster that my foundation and my IRA owned, River Rock Entertainment Authority 9.75% of 11/01/2011 bond issue, which paid it interest on time until May 2011. They refinanced and have paid off its old bonds. Just to tell you how these types of disasters can work out for you, I paid $890 per $1,000 bond in 2010. From May 2011 they did not pay me. When they paid me off, I received a new River Rock Entertainment Authority Sr. Note 9% of 11/01/2018 bond plus $66.29 in interest and late fees per bond.

Buying Quality at Junk Prices

How would you like to buy quality bonds at junk bond prices? With the problems facing Europe at the moment, all financial bond prices are down and investment ratings are being lowered for European Financial institutions. If I were you, I would take advantage of the situation and buy investment grade bonds that are trading at junk bond prices. Two of these bonds are;

Unicredit Luxembourg Fin SA 6.0% Oct 31, 2017

As of Dec. 16, 2011, it yielded 8.532% and matures on Oct. 31, 2017. It gives interest for 5 years 11 months. So you would get $350 interest for the life of the bond. You would get $115 bond appreciation because it sells at $885. For each bond owned you receive $465 for the life of the bond. The bond pays semiannually and has a S&P Rating of BBB+.

UniCredit Luxembourg S.A. provides various financial services in Luxembourg. The company primarily engages in corporate and investment banking, treasury, and private banking services, focusing on the management of wealth for high net worth and ultra-high net worth segments, as well as providing specialized services in the areas of the asset management of life insurance policies. It also serves small and medium sized enterprises, large and multinational corporate clients, equity funds, and real estate clients. The company was formerly known as HVB Banque Luxembourg S.A. and changed its name to UniCredit Luxembourg S.A. in August 2009. The company was founded in 1971 and is based in Luxembourg...

Dresdner Bank A G 7.25% Sep 15, 2015

As of Dec. 16, 2011, it yielded 13.118% and matures on Sept. 15, 2015. It gives interest 3 years 9 months. So you would get $271.88 in interest for the life of the bond. You would get $169.25 bond appreciation because the bond sells at $830.76. For each bond owned you receive $441.13 for the life of the bond. The bond pays semiannually and is rated Baa3 by Moody’s and BBB by S&P.

As of May 11, 2009, Dresdner Bank AG was acquired by Commerzbank AG. Dresdner Bank AG, together with its subsidiaries, operates as a commercial bank primarily in Germany, other parts of Europe, North America, Latin America, and the Asia/Pacific. It offers a range of banking products and financial services, including loans and deposits, securities and custody services, payment transactions, and trading and capital market services, as well as s life, health, and non-life insurance products to private, corporate, and institutional customers. The bank’s Private & Corporate Clients division offers private clients with personalized financial solutions comprising products for asset accumulation, financing, retirement provision, and insurance; individual asset management for high net worth private clients, such as retirement provision, financing concepts, and financial and asset planning; and advice on personal and business finances for business clients.

Money for people who wait!

I bought the Nebraska Book Co. 10s of 12/01/2011 bonds in a cash account (not my IRA or Foundation Account). I knew that it was a speculative play when I bought them about 3 years ago. I bought the bonds at a deep discount and received over $200 per bond in cash interest. Secured lenders of the company is owed about $26.3 million, and secured noteholders of the company is owed about $200 million. If the bankruptcy goes through as written, these bondholders of Nebraska Book Co. would be paid in full with cash. If you are interested in this gamble, it is up to you to see what type of bond you are buying, secured or unsecured. The 10s of 12/01/2011 bond sold on Dec. 7, 2011 for $860. Other secured notes sold for $400.

Below is an article about the Nebraska Book File for Bankruptcy and Noteholders’ Support.

Nebraska Book Files for Bankruptcy With Noteholders’ Support

By Michael Bathon - Jun 27, 2011 1:00 PM ET

Nebraska Book Co., an operator of a nationwide chain of college bookstores, sought bankruptcy protection with a pre-arranged plan supported by noteholders to restructure about $450 million in debt.

The company, based in Lincoln, Nebraska, listed about $657.2 million in assets and about $564 million in debt as of Feb. 14, including the debt and assets of affiliates, in Chapter 11 documents filed today in U.S. Bankruptcy Court in Wilmington, Delaware.

Nebraska Book reached an agreement on a restructuring with the support of more than 95 percent of the holders of its 8.625 percent senior subordinated notes and more than 75 percent of its 11 percent discount noteholders. The company said in a statement today it will restructure about $450 million in loans and bonds of its parent, NBC Acquisition Corp., and affiliates.

“This agreement solves balance sheet issues we have been addressing for months,” President Barry Major said in the statement. “We are clearing a path toward continued growth.”

“It will remain business as usual,” with little to no effect on operations, he added.

Nebraska Book started as a single bookstore in 1915 near the University of Nebraska College Campus, according to court documents.

The company currently has about 280 stores on and off campus. It also has one of the largest wholesale distribution networks of used textbooks, supplying college bookstores with more than 105,000 different book titles and selling more than 6.3 million books a year.

‘Stagnant’ Profitability

The company said in court papers it was forced to seek bankruptcy after “several years of declining or stagnant levels of profitability” at bookstores, predominately those located off campus. Debt maturity also constrained liquidity.

The textbook retailer has adapted its business strategies, catering to the changing market by expanding its online presence in recent years as well as developing a textbook rental program, court papers show.

The company has more than $20 million of cash on hand, and has commitments for a $200 million loan to help fund operations while in bankruptcy, according to court documents.

Noteholder Control

Nebraska Book has proposed a restructuring that would turn control of the company over to noteholders, court papers show. “The plan is a remarkable result under the circumstances and will result in the highest possible recoveries for all stakeholders,” as well as a “full recovery by trade creditors and other general unsecured creditors,” Chief Financial Officer Alan G. Siemek said in court documents.

Under the proposal, $175 million in 8.625 million senior subordinated notes would be converted into $30.6 million in secured notes, $120 million in unsecured notes and 78 percent of the new equity, according to court filings. Holders of the $77 million in 11 percent discount notes would receive the remaining 22 percent of the stock.

Secured lenders, owed about $26.3 million, and secured noteholders, owed about $200 million, would be paid in full with cash.

The case is In re Nebraska Book Co. Inc., 11-12005, U.S. Bankruptcy Court, District of Delaware (Wilmington).

To contact the reporter on this story: Michael Bathon in Wilmington, Delaware, at mbathon@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

Nebraska Book Co. Inc. website: http://www.nebook.com/info/Recapitalization.asp