Medley LLC 6.875% Senior Notes

Ticker: MDLX, Buy below $25.

Why I Would Buy

  1. Yield – These notes (baby bonds) yield 6.875%! Despite the high yield they are relatively safe.
  2. Investment grade credit rating – The issuer Medley LLC has been rated “A-” by Egan-Jones Rating Company.
  3. Below Par – The baby bond  has a face value of $25 but currently trades below that, creating an opportunity for capital gains.
  4. 3 Year Call Protection – These bonds cannot be called earlier than 8/15/2019.
  5. High Insider Holdings – Insiders hold about 75% of Medley LLC, making it unlikely that they would permit a default or bankruptcy.

What Could Go Wrong

  1. High Yield – 6+% yield is rather high for a safe bond, there could be risks here that I am missing.
  2. Credit Rating Agency –  The A- credit rating was issued by a smaller rating agency. Egan-Jones is not one of the top three rating agencies, however it is a Nationally Recognized Statistical Ratings Organization (NRSRO) just like the three more well known ones.

Disclosure: I am long MDLX, please read additional disclosures here before taking any action based on this post.