Unsecured Debentures

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Poirot
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Unsecured Debentures

Post by Poirot »

Anybody investing in these type of securities. Have been looking at Antrim but note there are several others.
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Re: Unsecured Debentures

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Meant to say Atrium
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Re: Unsecured Debentures

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You can edit your own posts for a period of time using the pencil icon to the top right of your post.

I do buy a few non-convertible debentures (or term notes) from time to time. Investment quality only though and typically 5 year or similar term. ENB, H&R REIT, etc.
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ghariton
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Re: Unsecured Debentures

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As far as I'm concerned, the extra return is not worth the extra risk. As I understand it, Atrium's main line of business is issuing mortgages. That looks like a high-risk business to me in Canada these days. Add to that that these debentures are at the bottom of creditor priorities, and I would worry about what happens in case of a downturn in real estate prices (quite possible, in my opinion).

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kcowan
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Re: Unsecured Debentures

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Unsecured debentures are good during periods of certainty in the markets. I would consider these days to be very unsecure. Interest rate are going up, the market is highly valued. Both times to avoid such instruments.

Yet when I look at the IPO offerings, they keep getting sold out. So I think there is froth. Like froth on a beer keg, I wait until it settles out.
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Re: Unsecured Debentures

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Thanks for comments. I was only using Atrium as an example (and yes I saw the article in the globe last Saturday about MIC's). The risk of real estate dropping has been around for a long time now but nothing much has happened yet (I live in Vancouver area). Who knows. Atrium's average loan to value is only 62.7%. There are a bunch of other debentures listed on Financial Post. Granted they are at the bottom of the creditors list but would rank ahead of shareholders who have the much greater risk. They have a maturity date so rising interest rates should not be a huge problem (better than REITS).

As you say they seem to get sold out. I still find them very compelling. Haven't done anything yet. Much better than the 2.1% I am getting on 3 yr GIC's. And arguably safer than equities.
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Re: Unsecured Debentures

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I hold a lot of exchange traded debentures, at one time probably 50 issues, now down to about 30. Lots of diversification and not a lot invested in any one issue. It has worked out well for me. Yes I have had a couple of issues default, but virtually all of these issues are convertible and a few issues have converted at way above their par value more than offsetting the losses. If I could only hold 5 issues would I follow this strategy - no. Although sometimes I will take a larger position in an issue when something seems out of whack. When the stock of DH Corp dropped like a stone the debentures dropped as well so I was able to get a substantial amount (DH.DB) at about 95, now trading at about 102. Most of my debenture holdings are in my RRSP.
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Re: Unsecured Debentures

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Transformer wrote: 12 Apr 2017 11:28When the stock of DH Corp dropped like a stone the debentures dropped as well so I was able to get a substantial amount (DH.DB) at about 95, now trading at about 102. Most of my debenture holdings are in my RRSP.
That is a risk I would never, ever take, especially in a RRSP. Unsecured debt is a total loss in any re-organization, or debt re-servicing. I'd likely even hesitate buying secured (bond) debt with a company seemingly flaming out.
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Re: Unsecured Debentures

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AltaRed wrote: 12 Apr 2017 11:45
Transformer wrote: 12 Apr 2017 11:28When the stock of DH Corp dropped like a stone the debentures dropped as well so I was able to get a substantial amount (DH.DB) at about 95, now trading at about 102. Most of my debenture holdings are in my RRSP.
That is a risk I would never, ever take, especially in a RRSP. Unsecured debt is a total loss in any re-organization, or debt re-servicing. I'd likely even hesitate buying secured (bond) debt with a company seemingly flaming out.
Fair enough but the greater risk is with the shareholders. Unsecured debt is still going to rank ahead of them.
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Re: Unsecured Debentures

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It is not that simple. They will definitely stop paying dividends on equity before they default on debt but the value of equity (or not) is dependent on the market, not the viability of the corporation itself. Equity can still have value (in the eyes of the equity market) while a corporation re-services its debt and/or re-organizes and dumps unsecured debt.
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Re: Unsecured Debentures

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The best product is Fixodent.... a prime denture adhesive.
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Re: Unsecured Debentures

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steves wrote: 12 Apr 2017 14:34 The best product is Fixodent.... a prime denture adhesive.
I'll put you down as undecided on this.

Considering the negative thoughts on this will likely leave for now. Might throw $10K just for fun at some point. Note that several REITS have these things.
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Re: Unsecured Debentures

Post by kcowan »

I am currently struggling with what to buy. I have two debentures maturing on June 30th and I am converting them both to stock. So I need to backfill my FI component. The IPO offerings from TDDI are all sh*t. At 5.3% interest.

They still seem to sell out at IPO but I am not falling for that. I will shop other banks.

Any ideas?
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Re: Unsecured Debentures

Post by kcowan »

Here are the current top performers on the list of 112 offerings:
ConvDebTopPerformers.jpg
Note that my maturing ones are the two top performers. Got lucky this time!
I hold Premium Brands as a stock and that is also a good performer...
Last edited by kcowan on 14 Jun 2017 17:36, edited 1 time in total.
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Re: Unsecured Debentures

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I don't buy convertibles. I look for term notes of say, 5 years to maturity or so, BBB or higher. My last one was a Enbridge Income Fund one and the one before that a H&R REIT one. Fixed income is fixed income.... not interested in paying a premium for a pony that might have the potential to turn into a stallion. I'd buy the commons instead for that potential.
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