Today we spent almost all available time investigating FTR/PR, the 11.15% preferred debt issued by Frontier Communications in early 2015. This issue has a mandatory maturity date in late June 2018 when it will be converted into between 17.0213 and 20 something shares of the underlying company (the high end doesn’t matter, it’s going to covert at 17.0213 unless Verizon and Comcast go out of business). Analyst consensus for stock price around time of maturity range from $3.50 to $4.50, which would put our return from this position between 41% and 72% annualized. We’re not even close to that confident, so we project a price just over $3.00/share for a return slightly over 27% annualized.
Frontier Communications has struggled over the last few years, but they still have high quality assets in their operating areas. We’ll be devoting a few posts a month exclusively to FTR – since the bulk of this position depends on the price of the underlying asset.