LIVE FROM THE DESK 

A hodgepodge of information this morning with a few fund updates:

• Continuing with our thesis of owning short-dated, refinance candidate bonds, we were pleased last Thursday to see Fibrek call their remaining 7% convertible bonds outstanding.

• We recently performed a site visit to one of our bonds maturing in 2012 in order to confirm our comfort level that the bond will be refinanced.  We have learned to always be wary of securities based on a single asset and therefore find a real benefit in seeing, touching and smelling those operations.  Our visit helped to reinstate our expectation that they will not have trouble refinancing.  Here's what we found out:

• The company's leverage has come down materially over the past few years and the trend looks to continue.
• Their Joint Venture partner (a direct comparable) was able to raise money at a good level.
• We had a large US restructuring Fund claim that they don't see this bond fitting their mandate, now, or in the immediate future
• Business has been bustling with a 5-month long bowling tournament that led to consistent bookings  

After leaving, we felt stronger about our position.  So, we came back to the office and added more to our current holding in the 12%+ yield bond and even initiated a position in the same bond for the Vertex Fund.  

• In other news, the FriendFinder IPO proved to be the polar opposite of the Linked-In IPO (which had over a 500x P/E during its first day of trading), it is down 45% in the first two weeks of trading.  Fortunately for us, $45m of the $50m in IPO proceeds came straight through to the bondholders (effectively, a 16% de-leveraging).  Which means, that now the company has paid down 21% of the issue in the first seven months it has been outstanding, thanks to a "cash sweep" that sends any profits directly to the bondholders.   Needless to say, we are fans of the concept of a "cash sweep".  

until next time...  

#The Vertex Team