Suntech Power (STP)

With the debt maturity of Suntech’s $541 million in convertible bonds at the end of this week it’s not a surprise that this issue is getting a fair amount of attention recently. Today the company announced that it had entered a forbearance agreement with 60% of the convertible debt holders. They have agreed to not exercise their rights until May 15, 2013 if the company doesn’t pay at the end of this week. Suntech’s plan is to try to restructure the notes. My bet is that this is going to result in massive dilution for the equity. Bankruptcy as a step in between also seems like a plausible scenario since 40% of the bondholders haven’t signed the agreement. It could take some time to see how this is going to play out.

WSP Holdings (WH)

Basically nothing has changed fundamentally between 21 February, when I first wrote about the going private arbitrage opportunity, and today. We are still waiting on the SC 13E3 filing, so it’s probably going to take at least a few more months before before it will go private at $3.15/share. Despite this the price has gone up from $2.83 to $3.05: changing the potential return from 11.3% to 3.3%. Annualized that would still be decent if it’s a transaction with zero risks, but it isn’t. So I’ve decided to substantially reduce my position in the company, and I’ve sold all my shares that I bought two weeks ago.

Salem Communications (SALM)

SALM has been on fire since I bought the stock a bit more than a year ago, returning almost 170% including dividends. Intrinsic value has been moving upwards at a significantly slower pace, and while I don’t think the company is expensive at current prices it’s probably getting pretty close to fair value. At the same time SALM had grown into a big position in my portfolio. Because of this I’ve decided to sell 50% of my position last week at $6.99. I’ll keep the other half to see at what rate they will be able to refinance their debt: I expect that this will provide a nice boost to FCF.

Deswell Industries (DSWL)

I have been looking at various Chinese small caps, but in most cases I’m thinking that I simply like DSWL more because it’s profitable, the balance sheet is rock solid and the company has a long history of returning cash to shareholders. Since Deswell wasn’t a very big position to begin with I thought the logical thing to do was to add a bit to this position instead of buying into an inferior idea. Increased my position size last week by 33% at $2.51.

Disclosure

Short STP, Long WH, SALM, DSWL