This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

The Deal: PIK Interest Mounts at Pulse Electronics

NEW YORK ( The Deal) -- In the wake of Pulse Electronics' (PULS - Get Report) CFO disclosing that pay-in-kind interest is piling up at the computer and telecom components company as its revenues stagnate, one hedge fund investor who used to own the stock is glad he bailed, especially since Oaktree Capital Partners LP's holding and influence has grown.

"It's a disaster," the former shareholder, who sold his shares within the past 12 months, said by phone Wednesday. "It's one of the worst positions I've had as a hedge fund. Management did a horrible job, and Oaktree took over."

Pulse CFO Drew Moyer explained in an Aug. 6 earnings call that the principal of the company's term loans from Oaktree has increased to $110.9 million due to the addition of PIK interest, up from $103.5 million when the loans were issued in November.

Meanwhile, Pulse's revenues are languishing, coming in at $88.3 million, down from $100.4 million for the same period a year ago.

The company also has other debt concerns, as Moyer noted that it's in discussions with Oaktree regarding $22.3 million in principal of 7% convertible notes due Dec. 15, 2014.

"We are still in discussions with Oaktree regarding the possible terms of a convertible bond exchange offer as part of our investment agreement with Oaktree," he said. "Though we have not yet reached an agreement to move forward with an offer, we believe we have a number of other options regarding the retirements of the convertible bonds either before or after maturity."

Pulse's stock price has slid steadily since the beginning of 2011, when The Deal Pipeline estimated it had a market capitalization of $220 million or so before getting a takeover offer from Bel Fuse (BELFB). That market cap is now $35.84 million even after the company enacted a 10-for-1 reverse stock split in May in order to regain compliance with the New York Stock Exchange's listing requirements. The shares closed at $4.51 on Wednesday.

Now that $249 million takeover offer that fellow electronics manufacturer Bel Fuse made in February 2011 looks great in the rearview mirror.

At the time, however, San Diego-based Pulse convinced shareholders that it would get a better deal through a recapitalization, the former shareholder explained.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Try it NOW
Only $9.95
Try it NOW
14-Days Free
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
PULS $1.51 0.00%
AAPL $123.25 0.00%
FB $83.30 0.00%
GOOG $548.34 0.00%
TSLA $185.00 0.00%


DOW 17,712.66 +34.43 0.19%
S&P 500 2,061.02 +4.87 0.24%
NASDAQ 4,891.2190 +27.8570 0.57%

Partners Compare Online Brokers

Free Reports

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs