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Get 8.3% Yield To Maturity With Rent-A-Center 2020 Bonds

Published Tue, 17 Apr 2018 23:43:37 -0400 on Seeking Alpha

Rent-A-Center’s (RCII) 2017 financial slide created fear in shareholders and bondholders alike. The company’s financial operating performance slipped notably, and concern mounted as to whether the company can remain solvent. Rent-A-Center’s 2020 bonds, despite a recent rally, are still priced 96 cents on the dollar. After factoring in the coupon rate of 6.625%, the bonds are yielding 8.315% to maturity. These bonds represent a great return for high yield fixed income investors.

Source: FINRA
Rent-A-Center’s difficult year is best displayed in the company’s income statement. Revenues slipped by more than half a billion dollars from their 2015 levels to $2.7 billion. At $1.7 billion, gross profits were $200 million below 2016 and $400 million below 2015. While the operating loss of $63 million may seem encouraging to investors compared to the $1 billion loss of 2015, investors should note that all of 2015’s loss was due to a goodwill impairment charge, a non-cash write-off. Rent-A-Center is going to need to find greater efficiencies in its cost structure or grow revenues to avoid insolvency.

Source: 10-K
Despite the bad year, Rent-A-Center was still able to reduce the balance on its secured debt by $50 million, while its senior notes balance remained flat. Rent-A-Center’s asset value declined $200 million despite zero store closures. The asset decline was offset by an equivalent liability decline thus preserving... Read more

Stock name Last trade   P/E Earnings/Share Dividend/Share Dividend yield
RENT-A-CENTER 25.50   12.1 2.10 1.00 0.00


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