Thursday, March 28, 2013

JUNK BOND - AK STEEL


This bond is not for the risk averse income investor; they call them junk bonds for a reason.   AK Steel, AKS, is in the steel business and they also work in the iron ore and coal area.   This post profiles a high yield bond that you may want to consider.

AK Steel (AKS) Bond Cusip # 001546AL4

Technically, this bond is not a junk bond.  Junk bonds are rated in the C categories.  Bonds rated AAA are the safest, AA and A slightly less safe, then come those rated B.   This bond is rated B- by S&P and B3 by Moody’s.

In my portfolio, I consider this bond a junk bond because the company has experienced trouble from lower steel demand and high costs.   The interest coverage ratio is -1.5 but that has improved from -4.  AK Steel’s 4th quarter update, according to Zacks, predicts a loss but less of a loss than in the past.

Bond Specifics

AKS bond Cusip is 001546AL4.  The bond will mature May 15, 2020.  The bond coupon is 7.63%. It is trading around $88.50 with a yield to maturity of 9.3%.  The bond is callable May 15, of this year and they can pay you back with some stock so you may want to wait until after that call date to make your decision.  As of May 15, 2015, the bond is callable at a price of $103.81.  

My Take

I will add this bond to my portfolio but I will watch it carefully.  Bonds of this type are for investors with some appetite for risk.

TheMoneyMadam