Double Blind

The best news for holders of debt is when the underlying company raises money through an equity offering. Harvest Energy raised CAD$117 million through an equity offering of their trust.

The people who “pay” for this transaction are the existing shareholders – they are forced to share the earnings of the company with the other shareholders.

As an owner of Harvest Energy’s debt, however, I absolutely love it since I am higher up on the capital structure. My ownership is not diluted in any respect and the company will be receiving CAD$117 million extra, which means that it is more likely I will be paid when the debt matures in 2012/2013.

The debt was a great buy at 40 cents on the dollar (where my TFSA went), it was a good purchase at 50 cents, but right now at around 70 cents on the dollar it is becoming OK, which puts it out of my investment criteria as I tend to look for dirt cheap bargains. I stopped purchasing the debt at 55 cents.

This entry was posted on Tuesday, May 12th, 2009 and is filed under Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.