Message-ID: <31781419.1075862450563.JavaMail.evans@thyme> Date: Fri, 23 Nov 2001 10:02:13 -0800 (PST) From: grants@wsrn.com To: j.kaminski@enron.com Subject: Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Grants Publishing @ENRON X-To: Kaminski, Vince J X-cc: X-bcc: X-Folder: \VKAMINS (Non-Privileged)\Kaminski, Vince J\Deleted Items X-Origin: Kaminski-V X-FileName: VKAMINS (Non-Privileged).pst S: Grant's Interest Rate Observer (Vol.19, No. 22/Nov 23, 2001) Hot Off the Cyberpress! A new Grant's publication is now available at www.grantspub.com. Here are highlights of the newest 'OPERATION ENDURING BUBBLE' Late Monday, a Revlon subsidiary issued $363 million of four-year senior secured notes. Rated Caa1/B-, the securities bore a 12% coupon and were priced to yield 13.125%. Two things to know about this transaction: The offering size was bumped up from $250 million, and the price spurted by three points right out of the investment banking gate. So far from being risk averse are the bond and stock markets that they border on being fact averse. Revlon hasn't been profitable since 1997, when its stock was quoted at 50 (today, it's less than seven). In the past 12 months, cash flow (as defined) has failed to cover interest expense. The chairman is Ronald O. Perelman. "I'll be honest with you," says Michael Lewitt, junk bond investor deluxe in Boca Raton, Fla. "There are things you can buy with a 13% yield that probably have a lot less aggravation." . . . THE INNERMOST FARRELL "Don't confuse my opinions with the management of the company," advises Michael A.J. Farrell, chairman and CEO of Annaly Mortgage Management (NLY). Those opinions and that management are the topics at hand. Annaly, as constant readers know, is a mortgage REIT, a virtual thrift on which Grant's has been, and is now, bullish. (For the record, family and friends of Grant's have invested in it.) It pays a repo rate on its liabilities and earns a mortgage yield on its assets. In the September quarter, it paid and earned so well that its annualized return on average equity topped . . . . CALLING ALL CHICKENS Freeport-McMoRan Copper & Gold owns one of the world's best ore bodies in one of the world's worst locations. The mine is Grasberg, and the setting is Irian Jaya (West Papua), Indonesia. Just step on a plane in Los Angeles and 37 hours later, you're there. Location isn't the only bearish fly in what we judge to be a bullish ointment. There is the balance sheet (highly leveraged), the global economy (receding), World War IV (as the struggle with militant Islam was styled on Tuesday's Wall Street Journal editorial page) and the altitude of the pay dirt (towering). Grasberg is situated at 14,000 feet in an environment so hot, yet so cold, that a nearby mountain supports an equatorial glacier. However, if good things happen to cheap stocks, something good may happen to Freeport (FCX). . . NEW NEWMONT What about Franco-Nevada in view of its proposed (and contested) consolidation with Newmont and Normandy? We have high hopes for a successful deal, assuming that Newmont trumps a rival bid from Anglogold. . . . THEY SAID IT Kevin Landis, co-founder of Firsthand Capital Management and hardy tech- stock bull, had some advice for the value-seeking audience at the Grant's conference last week. "[O]ne of the trade-offs of prudence," said Landis, "is that you don't participate in what everyone else is excited about." Technology, because it glows with excitement and because, as Landis noted, "it's cool," is especially prone to confound prudent people. Pressed for some favorite investment ideas, Landis mentioned. . . . Grantspub.com Dispatch is sent free to all registered subscribers and e- mail recipients. Dispatch carries between-issue articles by our editors and reporters, reprints relevant stories (and cartoons!) from our archives, alerts readers to the posting of new issues and highlights other items of interest. Dispatches are archived at http://www.grantspub.com. Grant's Financial Publishing Inc. is the publisher of Grant's Interest Rate Observer. Copyright 2001, all rights reserved. If you no longer wish to receive Grantspub.com Dispatch, go to http://www.grantspub.com/remove.cgi?email=vince.j.kaminski@enron.com