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Earn 11% Yield To Maturity With CSI Compressco Bonds Maturing In 2022

Published Wed, 13 Mar 2019 11:10:05 -0400 on Seeking Alpha

CSI Compressco (Nasdaq: CCLP) stock has cooled off from the short rally following the company's fourth quarter earnings announcement. Shareholders have also had to deal with the company cutting its dividend by more than 90% in January. The company's high yielding 2022 bond has had far more price stability over the previous 6 months. At a price of under 90 cents on the dollar, combined with a coupon of 7.25%, the bond yields more than 11% to maturity. Unlike the dividend, the bond's coupon can only be skipped in the event of a default. Therefore, it can make a great investment if the company's financials can justify it.

Source: FINRA
CSI Compressco's financial performance in 2018 was improved from 2017, but still disappointing. The company was able to increase its revenues, and consequently, its gross margin (revenues less cost of revenues) grew by about $30 million. After increases in operational expenses, the company's net profit came in at a loss of $34 million, which was an improvement of only $3 million from the prior year.

Source: 10-K
CSI Compressco's balance sheet had some changes in 2018. First, the company increased its long-term debt by $120 million. The increase in debt was mostly offset by a combination of increased fixed assets and current assets. While the company's equity declined, bondholders should be encouraged that the $50 million increase in current assets will likely translate to increased cash flow in early 2019.

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