Wednesday, May 07, 2008

They Are Back... Debt Fueled Buybacks From Junk Rated Companies....

I missed them.... I would have bet that this kind of behaviour was out of favour at least for another few months.... I don´t know anything about DirectTV as a company but it is very brave to buy back the stock within 2 percent of the ATH on debt... I doubt that this kind of action is in the best interest of the shareholder..... Nevertheless it is a clear sign that at least some live has come back into the credit markets.....Here are a few examples of what could easily happen when buybacks go sour....The Great Private Equity Cash Robbery of 2007 from, Big Buybacks Begin to Haunt Firms, Eddie Lampert Is Averaging Down....., Reviewing The Home Depot Buyback History......., "I Want my Buyback Back" .....

Ich habe Sie vermißt......... Endlich gibt es wieder kreditfinanzierte Aktienrückkäufe von Unternehemn die eh schon im Junkbereich bewertet sind ! Bin ehrlich erschrocken das dies bereits jetzt wieder möglich zu sein scheint. Ich habe keinerlei Kenntnis über die durchführende Firma Direct TV aber meine Erfahrung sagt mir, das wenn man dieses Verhalten bei einem Aktienkurs nahe dem Allzeithoch an den Tag legt, diese Käufe allzu häufig nicht sehr "clever" und im langfristigen Interesse der Aktionäre sind .......Immerhin ein klares Zeichen das sich die Lage am Kreditmarkt erstaunlich schnell entspannt hat ...... Hier ein paar prominente Beispiele wie solche Dinge ausgehen können......The Great Private Equity Cash Robbery of 2007 from, Big Buybacks Begin to Haunt Firms,Eddie Lampert Is Averaging Down....., Reviewing The Home Depot Buyback History......., "I Want my Buyback Back"

DirecTV To Sell $2.5B Of Debt To Fund Buyback Barrons Tech Trader
DirecTV (DTV) this morning announced plans to buy back up to $3 billion of stock, or just over 10% of its outstanding shares. The company also said it will raise $2.5 billion through the issuance of new debt with the proceeds to be used to fund the buyback. DirecTV plans to sell $1.35 billion of senior notes due 2016 plus another $150 million for over-allotments; it also intends to to raise $1 billion in in incremental term loan under its existing senior secured credit facility.

In connection with these transactions, DTV said it reached an agreement with Liberty Media (LMDIA) which limits their voting power to their current ownership percentage of 47.9%, regardless of the number of shares we buy through the repurchase program.

JP Morgan, Banc of America Securities and Credit Suisse
were the joint bookrunning managers for the sale .

BORROWER: DIRECTV HOLDINGS LLC/ DIRECTV FINANCING CO
AMT $1.35 BLN COUPON 7.625 PCT MATURITY 5/15/2016
TYPE SR NTS ISS PRICE 100 FIRST PAY 11/15/2008
MOODY'S Ba3 YIELD 7.625 PCT SETTLEMENT 5/14/2008
S&P DOUBLE-B SPREAD 395 BPS PAY FREQ SEMI-ANNUAL
FITCH N/A MORE THAN TREAS NON-CALLABLE 4 YEARS*
*NON-CALLABLE 4-YEARS, THEN AT 103.813, 101.906, 100.
MAKE-WHOLE CALL 50 BPS.
EQUITY CLAWBACK 3-YEAR 35 PCT AT 107.625.

Chart for DirecTV Group Inc. (DTV)

WSJ DirecTV Group Inc. said it plans to raise $2.5 billion in new debt to buy back stock, a sign that skittish credit markets are on the mend -- at least when it comes to well-performing companies with conservative balance sheets.

Borrowing money to buy back stock is a transaction few, if any, companies have been able to undertake in recent months, since the credit market crunch began.

DirecTV's bankers went into the market Wednesday, selling all $1.35 billion of DirecTV bonds to investors in the afternoon. The eight-year bonds pay annual interest of around 7.625% and were priced at par, or their full value. J.P. Morgan Chase & Co. led the bond sale. The $1 billion secured loan, meanwhile, matures in 2013 and is expected to be sold later in the week.

DirecTV has long carried substantially less "leverage" -- debt relative to its earnings -- than other satellite and cable companies. Wall Street had been expecting the company to undertake a buyback using borrowed funds for many months. Plans were on hold until Liberty completed the purchase of its stake in the company from News Corp., a deal that was finalized in February. Liberty, though, was supportive of the deal, having said in the past that it believed DirecTV was "underleveraged."

A Liberty spokesman said the company supported the buyback as a "great way to return capital to shareholders."

Still, continuing nervous credit markets kept a lid on how much money the company could borrow. "We recognize this level of debt will not optimize our balance sheet, but we think it's a prudent step in today's challenged credit markets," Chief Executive Chase Carey said on the company's conference call.

Still, analysts said other companies that deliver strong performances could also seek to take on leverage more aggressively, analysts say.

> "Wall Street Finest" ........ Thank god there are still some CEO´s that ignore them.... This example via Jeff Matthews sums it up How to Buy Back Stock: Not “Just Because We Can” . A must read!

> Was wären wir nur ohne den weisen Rat von "Wall Street Finest".... Schön zu sehen das es zumindest vereinzelt noch Verantwortliche gibt die es schaffen diesen Weisheiten zu widerstehen.... Dieses Beispiel von Jeff Matthews Beispielhaft How to Buy Back Stock: Not “Just Because We Can” . Nicht verpassen!

"We've seen a very meaningful rally in the credit markets, and there's been a dramatic drop-off in the supply of new debt from a year ago," said Paul Scanlon, a bond fund manager at Putnam Investments in Boston. "People are now testing the waters again and pushing the risk boundaries a bit further," he added.

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