Takota Income Value Portfolios Successfully Tender Sherritt Bonds for 135% Return!

Date Added: February 23, 2018 | Comments (0) | Filed under: Blog

Back in the dark days for commodities, in March of 2016, we purchased the Sherritt 8% 2021 senior bonds at $47 per $100 of face value for a running yield of 17% and a yield to maturity of 26.6%. This past week we tendered our bonds to a buyback initiated by the Company at $95 per $100 face value for a total return of 135%.

Thanks bond market for remaining inefficient!  Thanks Sherritt for misallocating capital to an unnecessary debt reduction (my view).

Why did we tender with the bonds still providing a new owner with a running yield of 8.4% and a yield to maturity of approximately 9.6%?

1. I’m generally happy to achieve liquidity in my distressed debt holdings at 95 cents on the $1.00.

2. More importantly, when Sherritt successfully extended the maturity of these bonds in 2016 they offered a “consent fee” payable in either cash or common share purchase warrants. We chose to take the warrants and so our Income Value Accounts have a no risk ongoing exposure to Sherritt and the recovery of its share price as the nickel price turns positive.

Recently a couple of former stock market darlings have become fallen angels, and so, despite our tendering of these Sherritt bonds and other securities reaching fair value and being sold, we find our Income Value Accounts now have an increased 60% weighting in investments, while cash and cash equivalents have fallen to 40% – the inverse of my previous report.


This blog is for information purposes only. It is not a solicitation to invest in the Takota Income Value Strategy or any other Takota investment strategy. Individuals interested in actually investing in the Income Value Strategy would need to review with the Portfolio Manager the appropriateness of this strategy for their financial/investment objectives. The Takota Income Value Account is a managed segregated account strategy offered by Takota Asset Management. It is designed to provide income from a diverse source of opportunities, with reduced volatility, while preserving capital and retaining the capacity for some capital growth.

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