QVC Sells Baby Bonds

QVC Inc. the home shopping channel from a zillion years ago, has sold a new baby bond issue with a coupon of 6.375% and a maturity date in 2067.

The new permanent ticker will be QVCD.  There will be no grey market trading in the issue.

This new issue has the normal terms, quarterly interest payments and an early redemption option beginning 9/13/2023.

This is a fairly large issue with 9 million shares being sold with another 1.35 million being available for overallotments.

This issue is expected to be rated low investment grade by S&P and Fitch but a couple notches below investment grade by Moodys.

The prospectus can be found here.

The pricing term sheet can be found here.

We have no interest in this issue because of the long dated maturity even though we know nothing about QVC (we didn’t know they still existed) but will do a little homework on the company.

 

14 thoughts on “QVC Sells Baby Bonds”

  1. No QVC for me….But I went to the JBK well one more time at 25.68 for 3 hundo again. I got 1000, Im a bit too stuffed here, but will hold for now…

    1. Gridbird, what is the yield of JBK at 25.70 price. TD shows 6.17% while QUANTUMONLINE says 3-month LIBOR + 0.75%. Looks conflicting to me. Would you please clarify, if you can.
      Many thanks.

      1. MFZ, there could be a book written on the history of JBK, as it involves Lehman who issued the certificates and administered it as a synthetic adjustable. The intent in 2004 was for Lehman to pocket the spread between underlying bond and the adjustable payout. All while keeping claim to the call warrants to redeem it to scalp the underlying bond premium if it happened from JBK owners. Well they went bankrupt, the trust that actually holds the Goldman Sachs bonds (US Bank), declared the counter party swaps void per perspectus terms. So then by its terms it became a fixed rate with all interest received from underlying 6.345% Goldman Sachs trust debt, being distributed in exact amount to JBK owners…So the 6.345% Goldman par debt becomes 6.345% par JBK payment….The trust is just the pass through recieving the interest from Goldman and passing it on to JBK certificate holders who lay claim to identical amount of the actual trust debt. So roughly its a ~ 6.05% YTM at recent price point if memory serves.
        JBK suffered price wise for years as Lehman from the grave sued to lay claim to those assets and get their money back. They sued and lost and just this past winter, lost on appeals. This I suppose is why Origen an unrelated 3rd party just recently offered a tender at $26.50 which is a bit over 11 million in value was tendered, leaving over 13 million or a little over half million JBK shares outstanding. They took the redeemed shares and withdrew that amount from the trust and booked an instant ~13% zero risk profit with this transaction. I wouldnt be surprised if Goldman was somehow behind this as they are trying like heck to get this bond retired. It was over $2 billion and they got it whittled down to a bit over a billion. But they cant call it because of the make whole provision.
        So yes there is great value in JBK, but largely for us it is untappable value as we are peons who cannot exchange our certificates for the bonds at par. But on a relative yield basis it is a great deal…You are getting over 6% for the exact same debt that yeilds 4.8% in the open bond market.
        http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?symbol=GS.SF&ticker=C181534

        1. Gridbird, I don’t understand how Origen made its money, buying at 26.50 and redeeming at 25. Can you explain a bit more? Thanks.

          1. Sure, no problem…In trust, $25 of JBK equals $25 of the actual bond held in trust (the original par value). The actual bond last week traded around $117 when redeemed. Lets put the math on equal plan using $100. So when Origen paid $26.50 they actually got the 80 cent interest payment that conveniently was due after tender expiration…So they really paid $25.70 for the bond… Times that buy 4 shares, and they paid $102.80 for $100 worth of the par bond…. But as the link above shows the actual bond sells for $117. So they pay $102.50, get a $100 par bond with proceeds, and then sell off bond at $117 and pocket an instant ~14% profit no risk….The JBK filings showed those bonds are gone….So its one of two things…Origen made a quick guaranteed flip profit….Or they are a front for Goldman somehow, and they are using using private LLC somehow to get them off their books. As they want them redeemed as the interest payment is too high, but they have no means to redeem them with the make whole provision hanging over the actual bond. Origen is conveniently located in NYC where Goldman resides.
            If they offer another tender next payment cycle they can pound sound trying to get them from me at that price. I am not letting them make money off my rear, that plus 6%, decent quality, 18 year duration debt is just fine for me holding and collecting the coupons.

          2. Jay to put the math another way….Since a dollar of par JBK is worth a dollar of the par 6.345% debt, in a true relationship, JBK should be selling for over $29 now….It wont ever trade there and I am under no illusions, I am just saying as of today, that is the true worth of JBK. Trouble is we are the peons and cant extract the underlying value….In other words I cant self redeem and liquidate into the actual bonds my certificates lay claim too….

      2. MFZ, I just wrote a nice long explanation of JBK and sent it and it never posted. Hopefully its just being held up from link…Too demoralized to retype all of it. Hopefully it will pop up…So the short story is this…Lehman no longer exists, so per terms of prospectus US Bank as trust administer now act as a sole pass through agent. Goldman Sachs delivers the semi annual bond payment of 6.345% par to the trust. And US Bank in direct proportion issues the 6.345% yield to the $25 par certificate holders of JBK. Since it trades above par you get the yield you sited. It has been fixed since 2009 and will remain that way.

        1. Many thanks Gridbird for taking the time to explain. I really do appreciate your insight, knowledge and sharing ideas.

    1. Initially I was very skeptical. The common stock is QRTEA. Morninstar description. Qurate Retail Inc, formerly QVC Group is currently one of Liberty Media’s three tracking stocks. Liberty Interactive shares track the performance of a subset of Liberty Media’s business units, including QVC which generates the majority of the revenue and several small online retailers. It also includes the firm’s minority stakes in Expedia, HSN, Interval Leisure, and Tree.com.
      Morningstar has the tracking stock about 17% undervalued.

      Etrade tipranks has 7 analysts – 6 buys and 1 sell about 17% undervalued. Tracking stock over last 5 years has ranged from $18-$30. Currently trading about $21.25. Target us about $25 from both morningstar and tip ranks.

      The tracking stock is owned by respected mutual fund value managers including Dodge & Cox Balanced, Weitz Partners, Oakmark Select, and IVA worldwide.

      Of course, as preferred stock holders we care about their ability to pay the dividends. Two credit agencies say low end investment grade. However, Moody’s is a dark yellow flag to me at BA2. I would have expected a BA1, closer to other credit agencies.

      My long winded explanation is done.

      I am in, the question will be a one year flip strategy and am I dipping the toe or my foot.

      1. Maybe not a good buy. On 9-11-2018 this showed up in my etrade news (not on schwab). Lawsuits are filed for misleading investors although it was back in 2016. This combined with Moody’s BA2 may make 😈 this a pass. A double yellow flag has appeared

        https://www.businesswire.com/news/home/ … roup-QRTEA

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