Hybrid Vigor: Vol 1 Issue 13 "Getting Back to Business"

Dear Friends,

Welcome to the third and final week of our abbreviated late-summer once-a-week issues. Beginning next week we return to our regular Monday/Thursday publishing schedule.

We’re very encouraged to see a flurry of new issuance welcoming market participants upon their return from summer vacation.  The new deals—all discussed here—speak to the bread and butter of convertibles, smallish companies looking for growth capital, raising several hundred million dollars. Big enough deals for most investors to take reasonably meaningful positions, but small enough to make the bonds interesting to trade and susceptible to value-added research.

We also discuss several names in the news this week. Kent Bailey evaluates Exelixis’ chances for survival after this week’s devastating news, while Roman Terekhin discusses the two software companies that put themselves in play, Concur and Tibco.

As always, we update our trademark Hillside Ugly 20, as measured by our proprietary Hillside Adjusted Risk Points (HARP). HARP is primarily a warning measure, best suited for convertibles that have appreciated since issue but that still retain a significant amount of premium.

Readers have thanked us for creating HARP—it’s become a conversation piece, with every Ugly 20 containing some bonds that market participants find attractive. We don’t necessarily disagree—any good new statistical measure should generate discussion mixing some “ah-hah” with a little “get out of here.”

But since the overarching theme of the Ugly 20 is caution, we’ve also been asked to provide recommendations. While we’ve talked about names we like—including names with relatively low HARP scores—readers have told us they want to see more regular lists. We’re glad to tell you that we are continuing to refine a convertible rating system that we plan to start publishing later this year, around the time we go to a subscription-based model.  We have been using the system internally to evaluate new and existing convertibles and have been pleased with the results. More to follow soon.

A final note—readers in the New York area should have received this week invitations to our September 18 cocktail event.  We ask that you RSVP as soon as possible. If you did not receive one and would like to attend, please contact us.

We thank you, as always, for your interest and support.

Bill

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