DXM - Dex Media

[gary17]

Hayman is an interesting company - I did some read up - seems like he is a macro guy; correctly predicted the 09 financial crisis and calls on Europe. 

 

I am wondering if someone could let me know how I can look at buying the debt for this company...

 

I just use google and yahoo finance for research and RBC Direct Investing and IB for transaction.  Do I need a full brokerage firm to buy debt?

 

TIA.

[siddharth18]

Hayman is an interesting company - I did some read up - seems like he is a macro guy; correctly predicted the 09 financial crisis and calls on Europe. 

 

I am wondering if someone could let me know how I can look at buying the debt for this company...

 

I just use google and yahoo finance for research and RBC Direct Investing and IB for transaction.  Do I need a full brokerage firm to buy debt?

 

TIA.

 

InteractiveBrokers as well as E*Trade allow you to buy the debt. Under CUSIP 25212WAA8.

[txvalue]

44% of Hayman Advisors LP's total assets are in DXM according to Morningstar (see Institutions tab):

http://investors.morningstar.com/ownership/shareholders-concentrated.html?t=DXM&region=USA&culture=en-US

 

I thought that can't be correct, but Whalewisdom also shows the same number:

http://whalewisdom.com/filer/hayman-advisors-lp

 

I'm not familiar with Hayman Advisors, but they seem to make very concentrated bets. TPX ~50%. NSM ~40%.

 

Hayman manages much larger sums than shown here, so similar to Klarman etc. this does not give you the full picture.

[fenris]

44% of Hayman Advisors LP's total assets are in DXM according to Morningstar (see Institutions tab):

44% of his portfolio of exchange traded securities. I believe he remarked at some point in 2012 that the majority of his portfolio was invested in mortgage backed securities.

 

Also it's worth pointing out that a retail investor can buy either the common stock or the bonds whereas firms like Hayman can also purchase into the senior secured syndicated loans. My recollection of his presentation on DXM is that he owns DXM across the capital structure but I may be wrong.

[gary17]

Thx,

some more questions if i may,

1 Is this the dex debt that we are talking about

 

http://quicktake.morningstar.com/StockNet/Bondsquote.aspx?cid=0C000008P1&bid=34b17ea2ec9a7191b84c5c8e2276ba9f&bname=Dex+One+12%25+%7c+Maturity%3a2017&ticker=DEXO&country=USA&clientid=dotcom

 

2. Par value is 1000 , and its only trading at $65.. So if the company survives in 2017, the company would buy back at 1000, implying about a 14 times gain?

 

I think I'm missing something here, seems not right

 

Thanks

[Packer16]

Debt is usually quoted in units of 100.  So the debt is trading at $650 per bond. 

 

Packer

[gary17]

Packer, thanks

 

You had mentioned if the commons go to zero debt holders will get residual cash flow.... Can you elaborate on what you mean by that.... 

 

I'm trying to figure out if let's say there's a 75% chance the company will not survive and 25% chance it does,  it might be possible to work out a the max. gain and loss  and looking at if it's worthwhile doing a split between investing in the debt and the stock. 

 

e.g.

 

25% - company OK  -  shares: _____, debt _____    total gain = X

75% - company dead - shares: zero, debt _____  total gain/ loss = Y

 

risk adjusted gain/loss = 0.25X + 0.75Y......

 

Thanks

[Packer16]

Given that currently the FCF is $352 million per year and last year it declined 45% and the debt level is $2.8 billion.  Unless things dramatically turn around the equity is 0 and the debt will receive about 125% of last years FCF over the next 6 years (assuming the decline rate does not change) so about $440 million (or 40 cents on the dollar).  For the current bond pricing to be fair, the rate is going to have to decline.  Given that I would stay away until the bonds fall to below 35.

 

Packer

[gary17]

siddharth18: thanks for pointing this out - i've updated my post 

 

Hi Packer

thanks for responding to my question on the bond for DXM.  don't have a finance background so trying to understand this; may be i should take a course at some point.

 

I'm trying to make sense of what you are saying

 

Given that currently the FCF is $352 million per year and last year it declined 45% and the debt level is $2.8 billion.  Unless things dramatically turn around the equity is 0 and the debt will receive about 125% of last years FCF over the next 6 years (assuming the decline rate does not change) so about $440 million (or 40 cents on the dollar).  For the current bond pricing to be fair, the rate is going to have to decline.  Given that I would stay away until the bonds fall to below 35.

 

let me see if i can follow the math here

 

1) Free cash flow .... yahoo shows ttm operating cash flow = 323.5M  so less 4M in capex that's about $320M ... not exactly 352 but ok close enough

 

2) right now some of FCF goes to pay down the debt while some goes to other corporate activities.

 

3) this is where I was lost

 

Unless things dramatically turn around the equity is 0 and the debt will receive about 125% of last years FCF over the next 6 years (assuming the decline rate does not change)

 

So 125% of 352M = 440M .... where did 125% came from. 

 

If the equity is zero (meaning company is bankrupt?) - I'm not following why bondholders will still get the interest payments of $440M for 6 years....  I thought at that point the company just liquidates and pays off the debt as much as it cans?

 

4)

 

For the current bond pricing to be fair, the rate is going to have to decline.  Given that I would stay away until the bonds fall to below 35.

 

so right now the bond price is $650.  i see there are 220Mil units issued

 

so $440M / (220M / 100) = $200 / bond   

 

so $200/yr x 6yr / $650 = 2  .....  so if a bondholder can get 6 years of 125% FCF, there's a gain of 200% over 6 years or 12% per year 

 

I guess you are suggesting the return is only attractive if the bond drops to $350, in which case

 

$200/yr x 6 yr / $350 = 3.4 or 23%/year  .. i.e., the reward justifies the risk.... ?

 

**im assuming bond holders only getting the interest , no principal back in the above**

 

5)  Just a quick check on the financial statements from DXM. 

assuming the 440M x 6 years = 2.6B 

I don't see how DXM has $2.6B if it is going under.  on the balance sheet it says it has 3.7B in Asset - but most of that is good will and intangible assets... 

 

 

 

Thanks

Dex_Media_Q2_2013_GAAP__Non-GAAP_Financial_schedules.xls

[siddharth18]

Just FYI - Yahoo Finance can be inaccurate a lot of times so make sure you base your analysis on numbers sourced from nowhere except SEC Filings.

 

If you have to rely on a 3rd party platform to glean data from filings, Morningstar is a lot more accurate than Yahoo Finance.

[BargainValueHunter]

DXM up ~27% today.

 

Up 86% over the last four months.

 

Turnaround or head fake?

[siddharth18]

You can buy options on DXM equity (which itself is an option on the company's future) effectively making them option squared!