Ukraine Bondholders’ Tough Talk Signals Debt Deal Won’t Be Easy

Sven

...Financial Times reported Franklin Templeton won’t accept a cut to its $7 billion bondholdings, citing people it didn’t identify. The nation’s debt, which handed investors a loss of 25 percent this year, may fall below 40 cents, according to Arca SGR SpA.

https://bloomberg.com/news/articles/2015-03-16/franklin-templeton-said-to-hire-blackstone-for-ukraine-talks

Defaulting could impact Templeton Global Bond, Global Total Return, and other bond funds that Michael Hasenstab manages.

Crash

I own PREMX. Its holdings include gov't debt from Ukraine: 1.1% of portfolio. I suppose the hit won't be TOO hard...

heezsafe

@Crash I've been increasingly perturbed by some of the investments made by PREMX management for the past 6-9 mo; they seem poorly informed and ill-advised. Since we entered this fund about the same time, I feel "a kinship" with you, and wonder where you're at with this one. I have ave. cost down to 12.65, doing the up-see/down-see like you've probably been doing, but am considering a trim. Gettin' tired of playin'' primarily due to what I've been seeing lately.

Crash

Hello, @heezsafe.
I originally entered this fund in a 403b back in 2010. It's in a rollover IRA, now. And a much smaller holding for me than it was in 2012 or so. (PREMX is 14% of portfolio, these days.) Russia and Ukraine together are 8.0% of portfolio. The latest portfolio as per M* shows a REDUCTION in Russian stuff, offering 7.5% on that "stuff." (Fund's portfolio at M* dated New Year's Eve, 2014.)

I'm not able, somehow, to very easily find trade-date records over the past 6-9 months. That stuff must be somewhere. ... The fund's position in "little ol' Serbia" is bigger than its holdings in Ukraine. i can see THAT, anyhow.

Anyhow, uncle Vladimir the THUG is no friend of mine. And Ukraine's bonds? I'm just trying to keep a healthy perspective on this mutual fund. It is, after all, EM bonds. Others here prefer the Fidelity EM bond fund, FNMIX. For convenience, I'll hold my PREMX. It's keeping pace with FNMIX, always just a bit behind the performance of FNMIX.

I guess I'm trying to say that I'm not surprised nor dismayed by what PREMX is holding. The turnover is much lower than average for the category. This is a risky category, with exchange rates and politics. But PREMX holds mostly dollar-denominated stuff. And I sure do like the monthly pay-outs. When I first got in, the monthly div. was over .07 cents per share. It's lower than that, now. But still over .06 cents. I like this one for the long haul. I continue to hold, and reinvest all pay-outs. That's where I am with it. I hope this helps?

Ted

@MFO Members: Invesco Slant:
Regards,
Ted
http://www.thinkadvisor.com/2015/03/25/ukraines-debt-is-unsustainable-invesco?t=fixed-income&page_all=1

heezsafe

@Crash Thanks for the feedback. Looks like we're close to being in the same place on PREMX. I'm just mulling the trim for now; I don't have my finger resting on the button, so to speak. I just checked at TR Price, and apparently they've decided to be a bit more transparent on their holdings, since PREMX's country distributions as of 2/28 were just posted. Still has 6.5-7% in Russia, Venezuela, and (for those who believe in the power of redemption, I guess) Argentina. Notably, Ukraine is absent, so they must have found a buyer and off-loaded the rest of it.

I hope the EM countries do something productive with all the debt they've taken on. Just read that their collective borrowing in 2002 was $2 trillion; now, it's 9 trillion! As you say, there are many things that can tip over the cart for individual EM debt, regardless of credit rating. It still comes with the territory, it's gonna happen.
e.g.
http://www.bloomberg.com/news/articles/2015-03-26/doubleline-stung-by-soda-maker-born-of-peru-s-shining-path-chaos