Schroders Fixed Income Fund Manager Mihkel Kase Passes Away at 56

Schroders fixed income fund manager Mihkel Kase has died at the age of 56. Kase was a prominent figure in the investment industry, known for his expertise in fixed income and his contributions to the field. The news of his passing has been met with sadness and tributes from his colleagues and peers. Kase's death is a loss to the industry, and he will be remembered for his significant contributions to the field of fixed income.

Following the sale of UScellular to T-Mobile, Array Digital Infrastructure's (AD) bond prices have experienced a significant dip, presenting new investment opportunities. The $4.4 billion deal, which saw T-Mobile acquire UScellular, has led to a substantial reduction in AD's operational footprint, with the company focusing on its tower business and non-controlling investment interests [1].

The sale has resulted in a substantial reduction in AD's outstanding bonds, which have sold off dramatically since the closing of the deal and the subsequent special dividend payment of $23 per share to its common shareholders. The company's bonds have dipped by roughly 22% from their prior high at the start of August, reflecting a perception of increased risk in the company's financial profile [1].

Seeking Alpha, a financial news and analysis website, highlighted that the bonds of AD, specifically the 5.50% Senior Notes due 2070 (NYSE:UZE), are currently trading at $17.10 per note, offering an 8.05% yield on cost. For context, the Series VV preferreds pay out $1.5 per share annually, with a yield on cost of 7.98%. Despite the higher yield, the preferreds have not experienced a selloff, suggesting that the bonds could be a more attractive investment opportunity [1].

Fitch Ratings has rated both UZE and the Series VV preferreds at "BB+," a notch below investment grade, and placed them on rating watch negative ('RWN'). The bonds, which have a liquidation value of $25 per note, are currently trading at a 31.6% discount, presenting a compelling opportunity for investors seeking higher yields [1].

AD's total debt balance will fall from nearly $3 billion to around $700 million following the closure of the USM sale, with management targeting a 3x bank leverage ratio. The company's cash and cash equivalents are also set for growth, with the tower business expected to continue generating positive operating income and revenue growth [1].

The market's reaction to the special dividend has sparked a selloff of AD's fixed-income securities, leading to significant discounts to their liquidation values. Investors with a view to higher yields and potential growth in the tower business may find UZE an attractive investment, particularly as the company's operational footprint and debt levels are significantly reduced [1].

References:
[1] https://seekingalpha.com/article/4816954-array-digital-infrastructure-and-telephone-and-data-systems-closure-of-t-mobile-deal-creates-opportunities-with-bonds