Herb's Hotline: The Value of Bond Analysts

Hotline hoopla: Now, let's see what spin the Street puts on the report from Lehman Brothers convertible bond analyst Ravi Suria. (A very gutsy report, at that, considering the firm's stock analyst, Holly Becker, has a buy on Amazon.com (AMZN Quote). But, hey, memo to Lehman: Use it to show just how independent your analysts really are!) Any bets that the stock analysts focus on the company's ability to narrow its losses, rather than its ability to raise cash? I'd take that bet because that's all the stock side is ever interested in. (Or mostly interested in!)

But for highly leveraged companies (and as you can see in my Extra, Amazon sets new parameters for high) more important than earnings is the balance sheet and cash flow and a deep-in-hock company's ability to cover its debt. That's why you should watch the red flags being raised by a good bond analyst any day over the green flags being raised by the stock side ...

Amazon isn't the only company in Suria's sights. Overlooked in the Amazon swirl was that he also stabbed his knife into the recent convertible preferred stock deal from eToys (ETYS Quote), recently mentioned in this column. "We believe that the structure of the convertible preferred stock clearly indicates the desperate need for financing that the company faces and the total lack of reasonable financing alternatives," he wrote. "This type of conversion feature, occasionally called the exploding put or death spiral, is usually among the most expensive forms of financing that a company can have."

Onward: Staples (SPLS Quote) downgraded this ay-em by Merrill. Like that should be any surprise? With prices at its Staples.com higher than OfficeDepot.com on certain key items, why (as I pointed out earlier this week ) should any price-conscious shopper like yours truly shop there? When you have Twiddle-dee and Twiddle-dum, the difference, in the end, is the weight of my wallet ...

Race to the finish: Took my kids to the Nascar Silicon Motor Speedway at the Palisades Center near Nyack, N.Y. This is the real thing: Race-car simulators. Feels like the real McCoy, so much so that I almost lost the dinner I hadn't yet had as the sweat was pouring off my forehead. You feel like you're driving these cars at 180 miles an hour -- spinouts, crashes and all. My son is 11. He has never driven. My daughter will soon be 16; again, never driven (can't get a learner's permit in New Jersey until you're 16). And I've driven for 33 years. The race lasts six minutes (six minutes in hell, if you ask me!) I kept the thing floored the whole time but felt kinda sorry for the kids 'cause they had never driven; heck, they couldn't even get the engine started without the help of the attendant! But a race is a race and ... darned if I didn't come in dead last! ...

Did someone say Nascar?: One recent item here that questioned the relationship between International Speedway (ISCA Quote) and Nascar said that the relationship between the two is almost as if the NBA commissioner owned more than half the teams in the NBA and decided that his teams would be first in line on draft day. Close but no cigar, says reader Mike Spivey, who thinks a better analogy would be if the NBA owned over half of the stadiums, promoted the games and then paid the teams whatever they felt like paying. And set the schedule." Better yet, says Rob O'Leary, would be "a hotel franchiser with a great brand, e.g., Comfort Inn or Holiday Inn, that keeps a large number of the top markets for a sister division or itself vs. granting them to franchisees." But the best comes from Steve Cole Smith, executive editor of Auto World weekly (and former executive editor of Car and Driver) who uses this analogy: "Suppose McDonald's (MCD Quote) owns every cow in the world, yet has attempted to convince Burger King that it will get fair and equal access to the beef." Imagine that. ...

And speaking of Burger King: The company that owns BK is spinning it off as a public company. I have a long history with this company. When I covered the food beat for the Chicago Trib I went down to Miami and talked to the whole gang, back then, and did a great piece (if I don't say so myself) on the late James McLamore, who co-founded the company. It was always so hard for them to compete against Mickey D's. In recent years BK appears to have made real headway. (Though I don't have a clue why BK doesn't have frozen yogurt, or something like that! Can't imagine how many drive-through dollars go to ice cream cones at McDonald's. I know my family pays its fair share.) My history goes beyond that, however. I was raised in the minuscule Miami suburb of West Miami. My house was seven blocks from the second BK ever built. We had more than our share of dinners there. (We didn't have much moola and it was really good back then. The shakes were real!) The same building at 61st Avenue and Southwest Eighth Street is still there, but last time I drove by it was a Cuban food joint.

While we're on food, one last round of Tuna Talk: Vince Flanders suggests adding thyme to tuna salads. "Gives it a wonderful, healthy, clean taste," he says. "Try it." And yesterday in my haste, I said that albacore tastes as good as chunk light. (Thanks Matt Savino for pointing out the err of my ways.) What I meant to say is that I don't like the taste of albacore ... tastes too much like fish! Don't even ask me what I meant by that! Finally, we hear from Keith Kurtz, who writes: "Let me get this straight. On June 15 you start your series on Tuna Salad. The very next issue of the Washington Post Food Section, whose articles are planned weeks in advance, is published on June 21, and what do you think is on the front page? An article on 'building a better tuna salad'? Coincidence or inside information?" Inside information, of course. I hacked my way into the Washington Post's publishing system and found that the most compelling story they were sitting on -- the one I wanted to steal the most -- was about, of all things, how to build a better tuna salad! The truth is finally out ... and speaking of out, that pretty much describes what I am with information for this edition of ... The Hotline.

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