BCE to take yellow out?BCE spun out Yellow at $10 bucks and could easily take it private at under $2. The cash flow from such an acquisition would be very accretive to the the BCE share price. They have big profits and would instantly solve the perceived debt load that currently overhangs the stock. They could then re-capitlaize it and spin it out again at $10 a year or two later.
Yellow did not have to sell Trader to service its debt - it did so to acquire additional Yellow assets. S&P and other analysts jumped on the bandwagon with a series of downgrades because they felt they had to "burn the furniture to heat the house". Analysis are just sheep and follow the herd and thus their analysis is always backward looking when it should be forward looking. I recommend reading "The Big Short" and those that happen know anyone who works in the S&P debt department know we are are dealing with the bottom of the financial gene pool here.
As a result these events will force YLO to reduce debt loads on this cash cow to a very low level relative to cash flow making it a very attractive take over and thus my bets are on BCE. Either way holding the prefs or the debt will be a very safe and rewarding bet with or without a takeover.
Yellow's latest move (call it forced) is very bullish for the debt as most of the cash flow is going to reduce or eliminate it. I have done this several times before and once a company decides to reduce its debt the debt trades at par soon after unless it bought out an then the debt automatically is bought at $101. The YLO.DB.A is the best risk reward out there.
Just remember no one out there can service the needs of the small and medium business owner like yellow pages. They have a monopoly in this area and will ultimately prevail or someone will buy that monopoly power.