tag:blogger.com,1999:blog-726517614184169426.post8659799719486250858..comments2023-08-23T04:15:41.751-05:00Comments on The Jaded Consumer: ACAS Reports 4Q2009Jaded Consumerhttp://www.blogger.com/profile/04631410690179296528noreply@blogger.comBlogger2125tag:blogger.com,1999:blog-726517614184169426.post-18878308078647982842010-02-25T08:06:36.862-06:002010-02-25T08:06:36.862-06:00Also among ACAS' weapons against the risk of i...Also among ACAS' weapons against the risk of interest-rate increase is ACAS' lending at variable rates. I haven't looked at the size of ACAS' hedges, but would expect ACAS would hedge against rate risk on its fixed-rate portfolio, trusting its variable rates to protect it against most of the remaining risk. <br /><br />Unfortunately, ACAS has had more debt than expected become non-current, which has impacted ACAS' income and the valuation of its affected debt holdings. The hope is clearly that as the economy turns around, so too will the fortunes of companies that owe ACAS money – to the benefit of ACAS' income and its NAV.<br /><br />In the meantime, increases in interest both (a) threaten still-paying portfolio companies' ability to stay current (to the extent their rates are variable, their ability to keep current will be affected at the margin by the rate applied to the debt), and (b) impact income (to the extent not offset by gains in hedges). The fact that ACAS is hedged against rate risk is good, of course, but the fact that "somewhat" isn't "entirely" means that there's some risk to consider.<br /><br />Frankly, ACAS' cash position at the moment is such that it could tolerate a lot of trouble and still make interest payments, even at default rates, which is itself a hedge against unexpected risks. Unfortunately, cash isn't a traditional producer of high-yield returns. <br /><br />I look forward to ACAS being able to make high-quality investment again. I hope ACAS' debt swap does what ACAS needs. Hmm. Might the share issuance authority be part of a debt conversion feature to give lenders an alternative to acceleration?<br /><br />Any thoughts welcome :-)Jaded Consumerhttps://www.blogger.com/profile/04631410690179296528noreply@blogger.comtag:blogger.com,1999:blog-726517614184169426.post-32704603056204843492010-02-24T23:27:04.519-06:002010-02-24T23:27:04.519-06:00ACAS owns derivatives that protect it somewhat aga...ACAS owns derivatives that protect it somewhat against interest rate increases. Check the portfolio.Anonymousnoreply@blogger.com