Is JC Penney Debt a Viable Investment?

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Oct. 16 (Bloomberg) –- Maglan Capital Co-Founder David Tawil discusses distressed situations such as JC Penney, Puerto Rico and the effect of U.S. government turmoil on capital. He speaks with Pimm Fox on Bloomberg Television’s “Taking Stock.” (Source: Bloomberg)

This is taking stock.

I'm pimm fox buried my guest is someone who is used to distressed situations.

David howell is the -- david t awil focuses on companies in bankruptcy or in stress situations.

If the united states was a company, distressed as it might be, would you invest in it?


I think that the issues that confront us are resolvable.

On a balance sheet basis, things may look difficult.

On a going forward cash flow basis, things can be worked out.

There is clearly meeting of the minds at this point to make some progress.

That is going to be at 5:30 eastern, the vote on the proposal to reopen the government and raise the debt ceiling.

What effect if any has this wrangling over the issues had on the bond market, the cost of capital?

In the short-term, there was a fair amount of concern.

On the longer term, folks were confident that this would be worked through.

Investors, folks like me that find probability to certain events occurring, signed a zero to potential default.

A zero braid what about private companies?

-- a zero.

What about private companies.


Is it a viable investment?

Currently it is not viable.

It is trading close to par.

Why is that?

Folks think the equities are worth something.

The company did $900 million two weeks ago.

There is enough appetite in the market that equity is worth what it is currently trading.

We tend to disagree.

Time will only tell.

What companies are you looking at right now?

For the most part, the situation we've been in over the last two years and done well for us, more than 34%. this year we are up 41% rate last year we focused on companies that went through restructuring.

Still working through operational issues and otherwise, and are undervalued in comparison to their peers.

In terms of current distress, we are looking at puerto rico seriously.

It is my corporation.

It is a different flavor.

Six point people who may not be following the finances of order rico what the situation is.

Explain what the situation puerto rico is.

They have a lot of debt.

In terms of pension issues they will have over the years for folks retired from working.

In the short-term, they are getting closer to running out of available cash.

There is a question of whether they will be able to continue to access the public markets and issue more debt in order to be able to raise the liquidity.

Do think they will?

. editable default?

-- two i think they will default?

They have shown that they have made progress in terms of reforms to some of their pension obligations.

In terms of raising tax revenue.

In terms of focusing on eating bread of assets and selling them -- focusing on selling off assets.

There is this balance sheet profit they can work through.

They will be able to access the public market when they need to.

It is not as if they are in an esoteric situation.

Many investors look to puerto rico for something special about puerto rican bonds.

It has been reported widely that puerto rico is a triple tax free issue were of municipal debt.

That is you need to puerto rico.

Therefore it is one of the most wildly held bond issuances in the country.

It is held between 75% of all mutual municipal bond funds.

There is good reason because of the tax-free basis.

Therefore, to your point, vrable effect would be substantial to the extent that there was a default in puerto rican debt.

I have a feeling there were people on the conference call yesterday.

This text has been automatically generated. It may not be 100% accurate.


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