We like the Series A bonds issued by the Las Vegas Monorail Company (“LVMC”) which operates the monorail system on the Las Vegas strip. It’s probably very hard to buy a sizeable amount of these or even get your hands on them given the small issue size and that they trade extremely thinly so this idea is better suited to smaller funds.
The LVMC bonds are basically an orphan security from the Company’s 2012 bankruptcy that nobody has paid attention to. The legacy bondholders pre-restructuring reached a settlement with bond insurer Ambac to get a portion of their money back. Since the current holders went after Ambac for their recoveries, LVMC holders have been selling their stub investments in the Series A and Series B bonds at pennies on the dollar as these are miniscule positions and immaterial to their overall recoveries.
The Series A bonds are currently quoted at 2 cents if you can even call that a quote because last trade was on May 8th for 1 bond at a price of 8 cents. Nuveen who holds most of the 2019s had these marked to 50-60% of face per their latest fund filings. The prices are basically all over the place but at a huge discount to where they should be.
Basically we think these are worth face ($10 million) plus around $1 million of accrued interest since the bonds were PIK-ing interest from 2012-2015 and now pay cash interest with a 5.5% coupon. Plus you have a first lien on the monorail system in Las Vegas which is actually a pretty decent business at current ridership levels.