Another "call option" type equity

A riskier idea with +100% upside potential

Since closing out the DHC “left for dead” trade, I have had my eye on a second security that has similar characteristics.

The leverage in this situation is extreme - the current market cap is less than $130 million while debt outstanding is $4.3 billion.

My analysis indicates that “true” net asset value (NAV) could be as high as $1.8 billion. I believe the company’s high quality asset base and substantial NAV will help it to manage through the current situation and avoid bankruptcy.

Like DHC, I believe situational incentives to avoid the worst-case outcome are strong. However, I have no expectation that the position will achieve anything close to the theoretical NAV-based upside case.

My expectation is that there are reasonable odds for a “snap-back” creating +150% upside potential over the next 6-12 months. The downside case would be a total loss or a resolution that does not allow common shareholders to benefit from our “snap-back” target.