Atlantic Power Corp. (ATP.TO)

Just did a restructuring that benefits the bondholders but at the expense of the equity holders. Given all the restrictive covenants now, it will be very, very hard to grow their assets from here to create any sort of shareholder value. Right now he thinks the business is actually worth $2. If you own, consider selling.

When stock gets to 8-10% yield, you get questions about sustainability. Starting to recover a little bit. He doesn’t know it well enough to know if they are going to turn it around. Don’t make it a big part of your portfolio.

He owns the bonds. This would be more for aggressive accounts. Don’t be adding it at this time. He is watching it. The bond is a better way to play it. He is not concerned about them defaulting.

(Market Call Minute.) They have serious problems. Two short power purchase agreements issues as to whether they can renew them when they roll off. Also, have a credibility problem.

His company has this as a Sector Underperform with a $4 target. He has been buying the bonds. Also, have convertible debenture that he likes. They are trying to define where they go next. Have some cash that they don’t know what to do with.

In a real tough spot. Unfortunately last quarter was not good. Missed Q3, so their payout ratio went up to 95%. Then they announced they wanted to accelerate their debt repayment, and any actions to reduce debt, could mean an equity solution. This means that if they have more shares, their payout ratio spirals higher.

(Market Call Minute) Does not like it. Still isn’t terribly interesting.

(Market Call Minute) Lots of problems with their assets.

Undergoing a strategic review process. May sell assets, restructure debt, or cut dividend (over 100% still). Thinks they have to do all three. It could be dead money.

Stable distribution stream. But this is a disaster waiting to happen. Has not heard an argument as to why this would bottom out.

Steady eddy business but they cut the dividend and this is not the type of business you want that to happen to. It will take time for them to re-instate the dividend and confidence to return in them. A good sector but he prefers others.

He was surprised by the dividend cut, because he already knew that they would have $155 million by year end and there was no need for them to cut, probably until the end of 2014. The risk is, whether or not they can do an equity raise to finance expansion. For this year they are fine, but next year are probably going to structure their debt. He has a breakup value of $6. This is not for the faint of heart as it is highly volatile.

He wouldn’t add to this one, but rather would try to find some of the convertibles. They have a convertible right now that is yielding about 14%. If you want the yield, this would be a good one to be buying, but the convertible debenture is a little bit better. Sitting on about $100 million that they have to figure out what to do with.

Sold his holdings quite a while ago, but at these levels, he has started to add a little bit for more aggressive clients. It will do well in a reversal and at some point it is going to hit a bottom. His company is neutral with a $4.50 target. If you own, he would definitely hold and even consider adding at some point. Has about $150 million on the balance sheet but doesn’t know what they are going to do with it. They have a convertible bond that he likes, which is trading at a big discount.

A diversified power name, gas, heating oil, coal. The problem with this company is that the average duration of their purchase agreements are sub-10 years and he likes to see greater than 10 years. Leverage is high and the payout is high. They cut the distribution earlier this year. Have a number of plants that are going to be re-contracted later this year and if some of these are recontracting at considerably lower levels, there could be another distribution cut.