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Market Watch Carla Pasternak,on Stock Lehman Brothers (NYSE:LEH)
Market Watch Carla Pasternak,on Stock Lehman Brothers (NYSE:LEH) 
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| Carla Pasternak,on Stock Lehman Brothers (NYSE:LEH) |
| Tuesday, 19 August 2008 | ||||||||
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Carla Pasternak, editor of the High-Yield Investing newsletter, is partial to Lehman ABS 7.70 Ford (NYSE:XKN), preferred shares based on Ford Motor Co. (NYSE:F) bonds that come due in 2097. Pasternak explains that in 2001, brokerage firm Lehman Brothers (NYSE:LEH) bought a quantity of these bonds and repackaged them for sale to individual investors. Hence, although Lehman issued the repackaged shares, interest and principal payments are sourced from Ford. "At current prices, it delivers an astounding yield of 15%. Payouts are taxed as ordinary income and are best held in a tax-deferred account," Pasternak says. The High-Yield Investing editor points out that Ford seemed on track to return to profitability in 2009. However, the rising price of crude oil and gasoline has eroded Ford's outlook. In late May, the company announced it would not turn a profit in 2009 and was cutting North American vehicle production. "In March, perhaps sensing a turnaround, billionaire investor Kirk Kerkorian offered $8.50 a share for 20 million shares of Ford's stock (for a total holding of about 5.5% of the company). His offer was at a premium to where the shares were trading. Despite a drop in Ford's share price since that time, Kerkorian has so far not withdrawn his bid," says Pasternak. "While Ford will likely not be profitable until 2010 at the earliest, the company does not seem in imminent danger of bankruptcy. It has roughly $29 billion in cash, an amount that should cover the company's expenses and debt obligations over the next few years until it turns a profit," Pasternak says. She adds, "Despite Ford's financial woes, then, the company appears to be solvent and able to meet its debt payments for the foreseeable future." Shares of Lehman ABS 7.70 Ford are currently trading around $12 or nearly 50% below their 52-week high of $18.45 reached on Oct. 29 and just above its year-to-year low of $11.30 on July 7. Happy investing!
Ian WyattChief Investment Strategist NewsletterAdvisors.com
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