Market Vectors' Fran Rodilosso on Dish Network's Surprise Bid for Sprint Nextel and What It Might Mean for Fixed Income Investors
Sprint Nextel bonds are currently the second largest weight in the index underlying Market Vectors Fallen Angel High Yield Bond ETF (ANGL)
NEW YORK--(BUSINESS WIRE)-- On Monday, Dish Network announced that it had made a $25.5 billion bid for Sprint Nextel, the third largest wireless carrier in the U.S. and currently the second largest issuer weight (6.3%) in the BofA Merrill Lynch US Fallen Angel High Yield Index (H0FA) that underlies the Market Vectors Fallen Angel High Yield Bond ETF (NYSE Arca: ANGL). The approach detailed by Dish seeks to derail a planned takeover of Sprint Nextel by Japan's SoftBank. This comes at a time when Sprint Nextel needs to make some key decisions about the company's future, according to Fran Rodilosso, Fixed Income Portfolio Manager at Market Vectors ETFs.
"Sprint Nextel's stock and bonds are up significantly from where they were one year ago, and are, in fact, far ahead of the market in both cases," said Rodilosso. "However, the company will be hard-pressed to continue to compete with the top two firms in the industry, AT&T and Verizon, as a standalone at this point. This is why both of these potential deals may be appealing to investors versus the alternative of doing nothing and potentially losing market share."
"Dish does not have the deep pockets of Softbank, and so a Dish deal would likely be a more highly leveraged one," added Rodilosso. "But Dish has been stockpiling cash, ostensibly to help fund an acquisition."
Rodilosso also noted that Sprint bonds have sold off, though not dramatically, following Monday's announcement as investors continue to weigh the possible outcome of this still-developing situation.
"SoftBank may have more cash on hand to deploy as part of any deal, but Dish arguably brings more to the table, in the form of content and the ability to deliver consumers a fully integrated menu of service offerings," said Rodilosso. "A combined Dish/Sprint Nextel entity might be better able to compete in the challenging U.S. wireless market."
"In my opinion, it is unlikely that this bid is the final one," he added. "Any escalation of the price for Sprint adds a little more leverage to the final equation, therefore the situation around this 'fallen angel' will continue to bear watching for some time."
Mr. Rodilosso has 20 years of experience trading and managing risk in fixed income investment strategies, including 17 years covering emerging markets. In addition to ANGL, among the Market Vectors ETFs under his watch are Emerging Markets High Yield Bond ETF (NYSE Arca: HYEM), International High Yield Bond ETF (NYSE Arca: IHY), Investment Grade Floating Rate ETF (NYSE Arca: FLTR), LatAm Aggregate Bond ETF (NYSE Arca: BONO), Emerging Markets Local Currency Bond ETF (NYSE Arca: EMLC), Renminbi Bond ETF (NYSE Arca: CHLC), and Treasury-Hedged High Yield Bond ETF (NYSE Arca: THHY). As of March 31, 2013, the total assets for these ETFs amounted to approximately $1.9 billion.
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Please note that the information herein represents the opinion of the portfolio manager and these opinions may change at any time and from time to time. This is not a recommendation to buy or sell any security nor is it intended to be a forecast of future events, a guarantee of future results or investment advice. Current market conditions may not continue. Non-Van Eck Global proprietary information contained herein has been obtained from sources believed to be reliable, but not guaranteed.
About Market Vectors ETFs
Market Vectors exchange-traded products have been offered since 2006 and span many asset classes, including equities, fixed income (municipal and international bonds) and currency markets. The Market Vectors family totaled $26.1 billion in assets under management, making it the fifth largest ETP family in the U.S. and ninth largest worldwide as of March 31, 2013.
Market Vectors ETFs are sponsored by Van Eck Global. Founded in 1955, Van Eck Global was among the first U.S. money managers helping investors achieve greater diversification through global investing. Today, the firm continues this tradition by offering innovative, actively managed investment choices in hard assets, emerging markets, precious metals including gold, and other alternative asset classes. Van Eck Global has offices around the world and managed approximately $35 billion in investor assets as of March 31, 2013.
There are risks involved with investing in ETFs, including possible loss of money. Shares are not actively managed and are subject to risks similar to those of stocks, including those regarding short selling and margin maintenance requirements. Ordinary brokerage commissions apply. Debt securities carry interest rate and credit risk. Interest rate risk refers to the risk that bond prices generally fall as interest rates rise and vice versa. Credit risk is the risk of loss on an investment due to the deterioration of an issuer's financial health. The Funds' underlying securities may be subject to call risk, which may result in the Funds having to reinvest the proceeds at lower interest rates, resulting in a decline in the Funds' income.
The Funds may be subject to credit risk, interest rate risk and a greater risk of loss of income and principal than those holding higher rated securities. As the Funds may invest in securities denominated in foreign currencies and some of the income received by the Funds may be in foreign currency, changes in currency exchange rates may negatively impact the Funds' returns. Investments in emerging markets securities are subject to elevated risks which include, among others, expropriation, confiscatory taxation, issues with repatriation of investment income, limitations of foreign ownership, political instability, armed conflict and social instability. Investors should be willing to accept a high degree of volatility and the potential of significant loss. The Funds may loan their securities, which may subject them to additional credit and counterparty risk. For a more complete description of these and other risks, please refer to the Funds' prospectus and summary prospectus.
The "net asset value" (NAV) of an ETF is determined at the close of each business day, and represents the dollar value of one share of the ETF; it is calculated by taking the total assets of an ETF subtracting total liabilities, and dividing by the total number of shares outstanding. The NAV is not necessarily the same as an ETF's intraday trading value. Investors should not expect to buy or sell shares at NAV. Total returns are based upon closing "market price" (price) of the ETF on the dates listed.
Fund shares are not individually redeemable and will be issued and redeemed at their NAV only through certain authorized broker-dealers in large, specified blocks of shares called "creation units" and otherwise can be bought and sold only through exchange trading. Creation units are issued and redeemed principally in kind. Shares may trade at a premium or discount to their NAV in the secondary market.
BofA Merrill Lynch US Fallen Angel High Yield Index (H0FA) is comprised of below-investment grade corporate bonds denominated in U.S. dollars that were rated investment grade at the time of issuance.
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