Cunninghamew Posted July 22, 2013 Share Posted July 22, 2013 Packer, If you are ever in Dallas let me know and I will buy you some drinks. (I think someone else gave you an offer if you end up in Australia). Thanks for bringing this idea to our attention Link to comment Share on other sites More sharing options...
rijk Posted July 22, 2013 Share Posted July 22, 2013 packer, drinks are also waiting for you in europe,.... thanks for sharing! regards rijk Link to comment Share on other sites More sharing options...
LC Posted July 22, 2013 Share Posted July 22, 2013 Today I feel sour for not jumping in on this, especially after the deal was"announced" a few days ago, AND having discussed with packer months ago! Congrats to packer and everyone else who waded in! Link to comment Share on other sites More sharing options...
rainman Posted July 22, 2013 Share Posted July 22, 2013 What can I say? Packer is just amazing Thank you ! Link to comment Share on other sites More sharing options...
hyten1 Posted July 22, 2013 Share Posted July 22, 2013 packer keep the ideas coming i feel bad for not able to contribute and supply good ideas to this forum :( all my holdings have been discuss on this board Link to comment Share on other sites More sharing options...
tombgrt Posted July 22, 2013 Share Posted July 22, 2013 Today I feel sour for not jumping in on this, especially after the deal was"announced" a few days ago, AND having discussed with packer months ago! Congrats to packer and everyone else who waded in! Hey, I would almost feel sour for only buying "some" OI and ALSK a few weeks ago, and missing on plenty of things that Packer has posted about in the past... Greed is an ugly thing! ;) He's on a streak and we are very very lucky to be able to share in his profits. packer, drinks are also waiting for you in europe,.... thanks for sharing! regards rijk Might I suggest he just makes a road trip around Europe? :D In Ghent, it's "gentse feesten" right now so plenty of beer here! ;) Link to comment Share on other sites More sharing options...
LanceSanity Posted July 22, 2013 Share Posted July 22, 2013 I've been reading this forum for a month, and I gotta thank packer and everyone who contributed to this discussion. This has been really valuable. I wish I bought more! Link to comment Share on other sites More sharing options...
Packer16 Posted July 22, 2013 Author Share Posted July 22, 2013 This board has provided some great insight into area I had no clue on (financials, autos and insurance) so it is only the right thing to do is to provide some telecom/media discussion. The more folks contribute the more folks get out of this. I am sure there will be some more bumps in the telecom names on their way to fair value that we can take advantage of. Packer Link to comment Share on other sites More sharing options...
ok22 Posted July 23, 2013 Share Posted July 23, 2013 Packer, Even after the run up; based on your analysis and thoughts is ALSK still cheap/enough margin of safety? Missed the run up but tempted to buy at these prices. Quantitatively it still seems cheap and qualitatively the deal seems to improve their market position. However I am concerned that cash flow declines (through revenue and margin losses) in the face of increased competition from VZ others? I am not a telecom expert at all so would greatly appreciate your thoughts at the $3+ prices. GNCMA seems attractive too but for more qualitative reasons - any new entrant into Alaska should logically buy them as part of the continued "national consolidation" of telcos and cables? GNCMA seems expensive from a quantitative perspective? Is GNCMA something you would buy at these prices? I have trouble valuing GNCMA as it seems its cash from ops is largely consumed by capital expenditures etc. What are your thoughts on ALSK being acquired by GNCMA? Is that legally/regulator possible? Thanks in advance for your thoughts/response. ok 22 Link to comment Share on other sites More sharing options...
Olmsted Posted July 23, 2013 Share Posted July 23, 2013 For what it's worth, I just checked the sub bond price. 80.2 as of today, ~12% yield to maturity still. These have not really moved since Packer started the thread, though the stock is up some 70% (of course, enterprise value is only up some 10%). I am a bit puzzled they have not moved more because, on the face of it, the company possibly paying down $100m of debt senior to those sub notes would seem to make them a lot less risky. I am thinking through what exactly that is telling us. For one, the folks above us common holders in the capital structure are definitely not sending the "all clear" signal yet. But the bonds are not really signaling "impairment" either. It seems to me there are at least three potential explanations: 1) The bond investors do not care about the AWN transaction's potential to de-risk their slice of the capital structure. (Seems unlikely). 2) The bond investors do believe the AWN transaction was significant, but had priced in the AWN transaction occurring before the stock market did. Kind of a leading indicator. 3) Or, the stock has run ahead of itself. Perhaps momentum trading, perhaps it set off a squeeze, either way perhaps not reflective of that significant a change in intrinsic value. It will revert while the story catches up. Pondering these explanations and others... Someone suggested to me (a bit tongue-in-cheek) that the bonds might be a buy because of this observation. Perhaps! But it seems the common stock risk/reward is much better. In a bear scenario - Verizon taking share, declining revenue leading to reorganization, etc. - those sub bonds will almost certainly be impaired (and the common $0). So comparable downside to equity. But the bonds are capped at 25% appreciation while the stock's potential upside is very high. An unrelated note: Several posts have brought up the possibility of dividend reinstatement. The terms of the senior credit facility prohibit this as long as the leverage ratio is more than 3.5. If they use the entire $100m initial payout from AWN, they are looking at 3.4. So do-able. But I hope they don't just yet. Need to de-lever more first. Link to comment Share on other sites More sharing options...
Packer16 Posted July 23, 2013 Author Share Posted July 23, 2013 I think looking at past bond prices will provide us a clue to where ALSK is going. The bonds have go up from the high seventies to past 80 yesterday. The rally in the sub debt from the low 60s to the mid 70s with the stock not moving up is what attracted me to ALSK in the first place. If we look at where the stock was when the sub debt was at 80, it was at $3.50 in March 2012 and $5.00 in Nov 2011. If the bond do rally (which I think will depend upon the 2Q results) to lets say 90, then the corresponding stock price was $7.00 in Sep 2011. If the bonds rally back to par then you are at $10.00 per share. So if the Q2 results are good and the sub debt rallies to lets say 90 then you could go to $7.00. If the results are average then you will probably be capped out at $3.50 to $5.00. If they are below average, we could see some declines. This is the leveraged way to play the telecoms in Alaska. The more conventional way is via the cable co - GNCMA. At a price not much higher than the current price GNCMA may be as cheap as ALSK and be a better quality company. As to the dividend, that is a long ways away (probably years versus months). Packer Link to comment Share on other sites More sharing options...
Cunninghamew Posted July 23, 2013 Share Posted July 23, 2013 Not really news, but thought I would pass on anyways... they have finally released a presser on the closing of the transaction Packer, generally speaking has looking to the debt to find indicative trading levels been helpful (i.e. your example in the last post)? I do like the idea of screening for credit positive events/positive moves in credit where the equity has not moved to find ideas. Link to comment Share on other sites More sharing options...
Phaceliacapital Posted July 23, 2013 Share Posted July 23, 2013 My thoughts exactly so curious for the answer Link to comment Share on other sites More sharing options...
Packer16 Posted July 23, 2013 Author Share Posted July 23, 2013 It has if other factors are present for a turnaround. The price of ALSK bonds have rallied to the 83/84 level so we will see. Packer Link to comment Share on other sites More sharing options...
hyten1 Posted July 23, 2013 Share Posted July 23, 2013 cunninghamew, how do you screen for positive events/positive moves in credit? is there some specific online screen you use? hy Not really news, but thought I would pass on anyways... they have finally released a presser on the closing of the transaction Packer, generally speaking has looking to the debt to find indicative trading levels been helpful (i.e. your example in the last post)? I do like the idea of screening for credit positive events/positive moves in credit where the equity has not moved to find ideas. Link to comment Share on other sites More sharing options...
Cunninghamew Posted July 24, 2013 Share Posted July 24, 2013 cunninghamew, how do you screen for positive events/positive moves in credit? is there some specific online screen you use? hy Not really news, but thought I would pass on anyways... they have finally released a presser on the closing of the transaction Packer, generally speaking has looking to the debt to find indicative trading levels been helpful (i.e. your example in the last post)? I do like the idea of screening for credit positive events/positive moves in credit where the equity has not moved to find ideas. Hyten, I do not specifically screen for ideas that way. Rather, I was suggesting that it sounded like an interesting approach. I actually rarely find stuff using screens. I do look at where the debt is trading whenever I am doing DD on what I would term a "hairy" idea. For me it is a quick confirmation. I might like an idea (maybe it is a deleveraging story like the one Packer presented) and I have bought into the thesis. I will check where the debt is trading and has traded to see if the credit markets confirm what I am seeing. If the credit isn't responding well to developments it is a sign that I might be missing something. That is the way I use it. I thought Packer's comments about where the equity had previously traded when the debt was at certain levels was very interesting and it is something I do not do, but may start (only an extra few seconds of work too :). On a sidebar... my exp. has been that the people I have met at high yield funds are often better equity analysts than the people I have met at equity funds. Margin of safety seems to be a concept branded into their forehead. Full disclosure: my exp. is limited. I am 28 and have only been working for 4 years in finance. Prior to that, I was in grad school for a worthless degree. Link to comment Share on other sites More sharing options...
xtreeq Posted July 24, 2013 Share Posted July 24, 2013 Cunnigham / Packer Where can I find online the trade quotes for the debt so I can also track it? It is an interesting idea but the question is aways what is the coorelation between the price of debt and the price of equity and whether the correlation is spurrious ... Also, do we have enough data points and whether the series is stationary or AR / ARCH (ah, CFA Quant Methods back to haunt me!). Link to comment Share on other sites More sharing options...
Cunninghamew Posted July 25, 2013 Share Posted July 25, 2013 Cunnigham / Packer Where can I find online the trade quotes for the debt so I can also track it? It is an interesting idea but the question is aways what is the coorelation between the price of debt and the price of equity and whether the correlation is spurrious ... Also, do we have enough data points and whether the series is stationary or AR / ARCH (ah, CFA Quant Methods back to haunt me!). I haven't been able to find this particular issue that they are quoting. Packer, are you looking at the Alaska 6.25% May 2018 Convertibles... CUSIP 01167PAD3 I am not seeing anyone active Link to comment Share on other sites More sharing options...
Packer16 Posted July 25, 2013 Author Share Posted July 25, 2013 Yes I am. It has fallen back to 81.5 from 83 earlier in the week. This is from a BB terminal. Packer Link to comment Share on other sites More sharing options...
mcliu Posted July 25, 2013 Share Posted July 25, 2013 cunninghamew, how do you screen for positive events/positive moves in credit? is there some specific online screen you use? hy Not really news, but thought I would pass on anyways... they have finally released a presser on the closing of the transaction Packer, generally speaking has looking to the debt to find indicative trading levels been helpful (i.e. your example in the last post)? I do like the idea of screening for credit positive events/positive moves in credit where the equity has not moved to find ideas. Hyten, I do not specifically screen for ideas that way. Rather, I was suggesting that it sounded like an interesting approach. I actually rarely find stuff using screens. I do look at where the debt is trading whenever I am doing DD on what I would term a "hairy" idea. For me it is a quick confirmation. I might like an idea (maybe it is a deleveraging story like the one Packer presented) and I have bought into the thesis. I will check where the debt is trading and has traded to see if the credit markets confirm what I am seeing. If the credit isn't responding well to developments it is a sign that I might be missing something. That is the way I use it. I thought Packer's comments about where the equity had previously traded when the debt was at certain levels was very interesting and it is something I do not do, but may start (only an extra few seconds of work too :). On a sidebar... my exp. has been that the people I have met at high yield funds are often better equity analysts than the people I have met at equity funds. Margin of safety seems to be a concept branded into their forehead. Full disclosure: my exp. is limited. I am 28 and have only been working for 4 years in finance. Prior to that, I was in grad school for a worthless degree. Having worked in the HY debt space, I must agree that there's a much stronger focus on downside/"what can go wrong" since your upside is limited. Link to comment Share on other sites More sharing options...
alertmeipp Posted July 30, 2013 Share Posted July 30, 2013 back down quite a bit from recent high, thoughts? Link to comment Share on other sites More sharing options...
newbee Posted August 1, 2013 Share Posted August 1, 2013 Alaska reports 2nd quarter http://finance.yahoo.com/news/alaska-communications-systems-reports-second-200500518.html Also CEO's letter to the shareholders http://www.alsk.com/presentations.asp Link to comment Share on other sites More sharing options...
tombgrt Posted August 1, 2013 Share Posted August 1, 2013 Very nice. Glad I bought more yesterday at $2.36, got lucky! Link to comment Share on other sites More sharing options...
Olmsted Posted August 1, 2013 Share Posted August 1, 2013 Alaska reports 2nd quarter http://finance.yahoo.com/news/alaska-communications-systems-reports-second-200500518.html Also CEO's letter to the shareholders http://www.alsk.com/presentations.asp The letter is good background, and I finished impressed with the clarity of Vadapalli's business plan and execution to date. Direct link to letter: http://www.alsk.com/assets/presentations/Alaska%20Communications%20CEO%20Letter%20-%20August%201%202013.pdf Background: As a new management team starting a little over 2 years ago, we were facing two external events – one, competitive, with the planned entry of a national provider into our wireless market, and two, regulatory, with significant changes in the wireless high cost support revenue (“CETC”) program. We shared with you that roaming revenue and CETC alone represented $66 million in revenue in 2011, while our free cash flow was $41 million. The anticipated declines in these high margin revenue streams over time put our financial future at risk. When considered in combination with the fact that we had net debt of 4.4X EBITDA and were paying out about 94% of our free cash flow in dividends, we knew we had to take decisive action in the near term to create long term value for you, our customers and our employees. We suspended our dividend as a protective measure, painful though that was to our shareholders, including many of our own employees. As a value creating step, we entered into a joint venture transaction to form AWN, a step we announced in June 2012. 2012 also happened to be the first full year of operating under our new business plan aimed at creating long term value, which I will detail later in this letter. And the plan: AWN creates value to Alaska Communications in two ways 1) right out of the gate we received $100 million upon closing of which we used $65 million to pay down debt, and 2) on an ongoing basis, we are eligible to receive preferred distributions of $50 million each in years 1 and 2, $45 million each in years 3 and 4, and after four years we will receive distributions proportional to our 1/3 share in AWN. ...Looking ahead, we will generate earnings in two different ways. First, by selling broadband on our top-quality network in the State, and a variety of services associated with broadband. Second, from distributions we get as an investor in AWN, which start at higher levels during the preference period and will reduce once we get into steady state pro-rated distributions after four years. We expect our earnings to be about $90 million of EBITDA in our first full year of operations following the close of AWN. ...we are very careful about how we spend money. In our first full year of post-AWN operations, we expect our free cash flow after interest payments and capital expenditures to be about $15 million. Since we expect EBITDA to grow and debt to reduce over time, we expect that our free cash flow will also grow over time. We think carefully about how we invest a $1 in cash we generate – what part of that dollar goes towards investing in our business and what part goes towards paying down debt. ...I look at the data points from our performance over the last year and half since we started performing to our new business plan. Broadband revenues for full year 2012 have grown 11.9% over full year 2011; and for six months 2013 have grown 20.8% over the same period 2012. At the same time, since 2012 we have paid down $115 million in debt, $50 million of which came from cash flow from operations and $65 million from the closing of the AWN transaction. We are doing what we set out to do. And presentation: http://www.sec.gov/Archives/edgar/data/1089511/000115752313003811/a50682844_ex99-2.htm Essentially on track. Solid fcf, decent yoy revenue growth, capex down, and ebitda guidance higher than I was using to value it. Link to comment Share on other sites More sharing options...
tombgrt Posted August 2, 2013 Share Posted August 2, 2013 Yes, very transparent letter. Like it a lot. Earnings call is clarifing as well. Up 60% pre-market. Link to comment Share on other sites More sharing options...
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