Hybrid Vigor Just Another Small Cap Monday - The Hillside Convertible Advisory Letter - Harvest Exchange
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September 22, 2014
Hybrid Vigor
The Hillside Convertible Advisory Letter
Volume 1 Issue 18
Just Another Small Cap Monday
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Dear Friends,
First, thanks to all of you who attended our cocktail gathering last week in New
York. It exceeded our hopes. I think as inhabitants of a small market we need to
strike a balance between competing with each other and collaborating for the
greater good, and the latter theme abounded on Thursday.
Our San Francisco event on September 30 promises to be more of the same. We
Our Team still would like to visit with convertible players in the City of Angels the next day—
you folks will be resting while the Bay Area baseball teams are (hopefully) scratching
Bill Feingold out survival those days. Drop me a line, Angelenos, and let’s try to have a little
Co-Founder and event on October 1st.
Managing Principal
In today’s issue we provide our traditional Hillside Ugly 20 list, as measured by
George Chuang HARP (Hillside Adjusted Risk Points). One of the mainstays of the list nearly fell off
Co-Founder and
last week. We explain why.
Managing Principal
Jeffrey Alton, CFA We also discuss several small issues on a day that’s seeing small-cap names take
Head of Equity Research, quite a beating. Value is surely out there—it is just a question of finding it. Kent
Principal Bailey discusses Amarin, George Chuang covers the new Violin Memory deal, and
Jeff Alton finds something new under the sun with DHT.
Kent Bailey, CFA
Head of Credit Research, For good measure, Roman Terekhin recaps the Concur deal, which he’d discussed
Principal in a previous issue. If you hear a scream, it’s probably Roman after patting himself
on the back.
Sue Wu
Associate
One more thing. After getting a bunch of feedback from readers seeking Hybrid
Vigor in more digestible bites, we will be going, beginning this week, to Mondays
only for our main publication. We will also be posting more regularly on the “Our
Insights” tab on our site, so please bookmark it (http://www.hillsideadvisors.com/
insights-blog/) and make a habit of stopping by. Future subscribers will receive
e-mails when there is an update.
Bill
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The Ugly 20 Recap - Lam(b) Leads the Way Down
Bill Feingold
Last week’s Ugly 20 suggests a bit more cheapening—or richening-reduction—in some of the market’s most
exposed bonds. As you know by now, every Monday we publish a list of the 20 most dangerous bonds in the
market, as measured by HARP (Hillside Adjusted Risk Points). We exclude long-dated bonds, financials, and
bonds with underlying shares yielding more than 4%. We also exclude extremely small and highly illiquid
deals.
Lam Research’s pair of convertibles led the way. The underlying shares performed admirably, gaining $4.30,
or exactly 6% on the week. No huge surprise there from this multi-year winner. But the two convertibles, at
equity-sensitive price points in the 120’s and 130’s, were supposed to share in the new wealth better. Each
was supposed to rise between 5 and 5 ½ points, if you believe the Greeks. Of course, we all know what
believing the Greeks did to the Trojans.
Lam’s odyssey of premium contraction had an eventful week. The 1.25% gained just three points in absolute
price, or 2.24%. That’s only a bit better than one-third participation. The 0.5% did somewhat better (four
absolute points) This makes sense, as they’ve been consistently less ugly and are substantially closer to par.
Even so, the 1.25% held their second-place standing on the Ugly 20 list, while the 0.5% nearly dropped off
the list completely. How can this be?
Simple. The 1.25% held a huge lead over its nearest pursuer—more than three HARP(s) last week. (Don’t you
hate it when you have to decide whether or not to put an “s” at the end of something? Technically, the P
in HARP stands for Points, so we already have the plural. But ‘three HARP’ just didn’t look right.) Even after
losing more than 1 ¾ HARP(s), Lam 1.25% are still in second place by a decent margin. Meanwhile, the 0.5%
had been at the top of a big cluster of bonds between 9 and 9 ½ HARP(s). No longer.
Another noteworthy move: Helix Energy Solutions continues to slip from the top group toward the pack. Still
unquestionably ugly, the bond now has just over 10 HARP(s). But there doesn’t seem to be much appetite
for the paper—the stock is on the wrong side of momentum as energy prices fall and the bonds are on the
wrong side of value, and two wrongs don’t make a right. Last week Helix common fell only 13 cents—about
50 basis points—while the bonds declined by a full percentage point. That’s on the order of ¾ of a point
premium contraction going hand-in-hand with a HARP decline of 0.43. To bring this bond into line with the
general population in its price range, the bond would have to drop another 2-2 ½ HARP(s), which probably
translates into about 3 ½ points of premium contraction. The bond clearly has some properties the market
likes, so such a drop is relatively unlikely in the near future. Continued gradual decay seems more likely.
Priceline.com’s 0.35%, which have bled steadily since the latest bond was perpetrated by that repeat
offender, stabilized last week, actually gaining a fractional HARP from 9.09 to 9.35. This is also not
surprising—as the price gap has declined between the 0.35% and the new 0.90%, with investors generally
swapping into the below-par issue, the ability for more delta engagement had to appeal eventually. We
don’t care for any of the Priceline paper, but if we wanted to own the convertible for exposure to a stock
bounceback, we’d certainly have swapped out of the new into the old as well.
On the week, the average bond in the Ugly 20 saw its HARP decline by about .35. While Lam was the main
culprit, modest contraction abounded.
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Hillside Ugly 20 List (Prices as of September 20, 2014)
Convertible Price Stock Premium (%) Premium (pts) HARP
1 RPM International 2.25% 2020-12-15 115.50 47.49 28.9 25.90 13.53
2 Lam Research 1.25% 2018-05-15 136.75 75.95 13.2 15.95 11.97
3 SanDisk 0.5% 2020-10-15 122.75 101.12 11.8 12.96 10.47
4 On Semiconductor 2026-12-15 117.75 9.78 26.3 24.52 10.16
5 Helix Energy 3.25% 2032-03-15 125.25 24.85 26.2 26.00 10.06
6 CSG Systems 3% 2017-03-01 127.50 27.00 11.5 13.15 9.87
7 Priceline.com 0.35% 2020-06-15 113.75 1186.12 26.0 23.47 9.35
8 Alon USA Energy 3% 2018-09-15 123.00 15.28 19.1 19.73 9.19
9 Standard Pacific 1.25% 2032-08-01 117.25 8.00 18.4 18.22 9.10
10 Incyte Corp 0.38% 2018-11-15 120.00 49.32 26.0 24.76 9.07
11 Griffon 4% 2017-01-15 113.25 12.22 35.0 29.36 8.98
12 Incyte Corp 1.25% 2020-11-15 122.50 49.32 28.5 27.17 8.80
13 Ryland Group1.63% 2018-05-15 130.75 36.48 14.8 16.86 8.78
14 Workday Inc 0.75% 2018-07-15 126.25 89.05 18.1 19.35 8.74
15 Chart Inds 2% 2018-08-01 117.25 62.38 29.8 26.92 8.71
16 NVIDIA 1% 2018-12-01 111.75 19.08 18.1 17.13 8.71
17 Salesforce.com 0.25% 2018-04-01 113.00 58.24 29.0 25.40 8.51
18 Take-Two Interactive 1% 2018-07-01 126.00 23.71 14.5 15.96 8.38
19 Rambus 1.13% 2018-08-15 124.75 12.92 16.5 17.67 8.28
20 Lam Research 0.5% 2016-05-15 129.75 75.95 7.3 8.83 8.18
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Amarin (AMRN): The Naked Gun Saga
3.5%, 2032/01/15 (Exchange) Kent Bailey, CFA and Bill Feingold
Price (Bond): $73.00
Stock: $1.30 Like Nordberg from The Naked Gun, bad things just seem to keep
YTP: 11.6%
happening to Amarin. Following the negative FDA Advisory Committee
Premium: 46%
HOCS-Overall: 67 vote regarding the expansion of the Vascepa label and the rescission of the
HOCS-Growth: 88 ANCHOR SPA last fall, Amarin has been rebuffed three times in its attempts
HOCS-Safety: 25 to reverse this decision. Add to that the assignment of “new product” status
HARP: N/A by the FDA, which confers only three years of exclusivity to Vascepa (versus
the hoped-for five years with a “new chemical entity” (NCE) designation),
As of September 19, 2014 combined with a steadily dwindling cash balance, and it’s been a brutally
difficult past year for Amarin and its stakeholders.
HOCS:
30 70 For a bit of background, Amarin received FDA approval in July 2012 for
(Problematic) (Excellent) Vascepa, a highly-purified form of EPA (fish oil-derived Omega-3), for
the treatment of severely elevated triglyceride levels (>500 mg/dL) based
50
on positive results from the Phase III MARINE study. AMRN completed
10 20 30 (Indifferent)
40 50 60 70 80 90
a second positive Phase III (ANCHOR) under an SPA (special protocol
assessment) agreement targeting mixed dyslipidemia (200-500 mg/dL)
Overall and filed for expansion of the Vascepa label earlier this year into this much
larger population (10x the size of MARINE). As part of the requirement
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for ANCHOR approval with the FDA, Amarin had to initiate and have
“substantially underway” a long-term cardiovascular events outcomes study,
REDUCE-IT, to determine whether lower triglyceride levels translate into
fewer heart attacks. Since the time the FDA signed off on the SPA, negative
Growth data from several other large outcomes studies with TG-lowering drugs
(unrelated to Vascepa) caused the agency to question its long-held policy of
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approving cardiovascular drugs based on improvements in such surrogate
markers. While the efficacy and safety of Vascepa went unquestioned, the
FDA steered the Adcom panel towards waiting for results from REDUCE-IT
before approving the expanded indication. After the negative panel vote,
Safety AMRN immediately cut half its staff, reducing the commercial sales force to
25
150 reps, as it will need to conserve cash to survive before the data reads out
in 2018.
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Period 2Q14 Debt Net Debt Interest Expense
FY2015E EBITDA -55 Analysis
AMRN Stock Price 09/17/14 $1.37 EBITDA Net EBITDA
Debt -55 Debt -55
Balance O/S Multiple O/S Multiple Coupon Cash Int
Cash/ST Investments 151
Sr Secured Debt
Biopharma Secured Debt 150 0.0
150 150 (2.7) (1) 0.0
Sr Unsecured
3.5% Cvt Sr Nts due 1/19/17 31 3.50% 1.1
3.5% Exch Cvt Sr Nts due 1/19/19 119 3.50% 4.2
150 300 (5.5) 150 (2.7) Total 5.3
Common Stock (Mkt.) 285 585 (10.6) 434 (7.9) Shares O/S 207.7
Source: Company filings; Hillside Estimates
Amarin raised $100 million in secured debt in December 2012 from Biopharma group that requires
$150m in total repayment by the final scheduled amortization payment in 2Q17. The debt is secured
by Vascepa and its associated patents. Amarin has the option to reduce the scheduled amortization
payments and carry forward the unpaid amounts into future periods on an interest-free basis if
Vascepa revenues do not meet certain thresholds. Given the lack of an expanded indication, it is
highly likely AMRN will not meet those thresholds and choose to defer payments, although the
amount of the allowed deferrals and the timing of repayment is as yet undisclosed.
In May 2014, Amarin exchanged $119 million of its $150 million 3.5% convertible bonds puttable in
2017 for new 3.5% converts puttable in 2019, with holders receiving a much higher conversion ratio
on the new bonds. The clear rationale for this transaction was the need to move the bulk of the debt
maturity beyond the read out of REDUCE-IT, in the hopes that the company will be able to raise cash
on the back of positive results.
Sources & Uses 3Q14E 4Q14E 2015E 2016E 2017E 2018E 2019E
Beginning Cash 151 125 102 35 87 22 30
Revenue 15 18 103 145 188 245 318
Gross Profit 9 11 65 94 122 159 207
SG&A (21) (21) (85) (90) (100) (110) (120)
R&D (12) (11) (35) (35) (35) (10) (10)
EBITDA (24) (22) (55) (31) (13) 39 77
Cash Interest Expense (1) (1) (5) (5) (4) (4) (4)
Debt Repayment 0 0 (5) (10) (46) (25) (149)
New Financing 0 0 0 100 0 0 100
Capex 0 0 (2) (2) (2) (2) (2)
Change in Cash (25) (23) (67) 52 (65) 8 22
Ending Cash 125 102 35 87 22 30 52
Source: Company filings; Hillside Estimates
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Regardless of the convertible exchange and the deferral of the Biopharma amortization payments,
Amarin will need cash well before the final REDUCE-IT results are public. Several options exist.
The most appealing one is to reach cash flow breakeven through Vascepa growth in its approved
indication. To that end, Amarin entered a co-promotion agreement in the spring of 2014 with Kowa,
a Japanese pharmaceutical company, which added 250 reps to the Vascepa sales effort. Kowa takes
8% of total gross profit (which could increase to double digits if sales grow meaningfully) in exchange
for their efforts. Early returns are good, with prescriptions ticking up nicely throughout the summer.
Even assuming healthy growth as projected above, however, AMRN would still need a cash infusion
by 2016 at the latest.
Amarin could also pursue some sort of distressed financing, but would likely wait until 2016 because
of the potential catalyst of the REDUCE-IT interim analysis. At 60% of the number of major adverse
cardiac events needed to reach the final REDUCE-IT results, Amarin management will get an interim
look. If positive, this would obviously be a huge win for Amarin, but a recommendation to continue
the trial to final analysis is more likely.
Priced around 73, the exchanged converts offer very attractive optics with an 11.6% yield to the 2019
put and a 46% conversion premium. Also, the price implies only $260 million of value through the
converts. With an annualized run rate of $50 million based on 2Q sales, solid script growth, and the
optionality of REDUCE-IT, we believe there is significant value in Amarin bonds. However, given the
ongoing cash burn and the two-year wait for the next major catalyst, the situation will probably get
worse before it gets better and there will likely be a better entry point.
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New Issue: Violin Memory (VMEM)
4.25%, 2019/10/01
$105 million 4.25% of 2019
Price (Bond): $102.00
George Chuang and Bill Feingold
Stock: $4.55
YTM: 3.81%
Premium: 26.1% Company Overview
HOCS-Overall: 58
HOCS-Growth: 64 Violin Memory (VMEM) operates in the relatively young yet competitive
HOCS-Safety: 47 sector of flash based enterprise storage. Its Flash Memory Array technology
HARP: 1.35 systems are designed to significantly outperform its legacy hard-disk-based
competitors. VMEM went public in September 27, 2013 but its share price
As of September 19, 2014
lost 22% the first day. Ouch. After a quarterly announcement of wider-than-
expected losses at the end of November 2013, the share price dropped to
HOCS: about 1/3 of the IPO. Shortly after, the board of VMEM announced the hiring
30 70 of a turnaround CEO and several new hires to replace the original CEO and
(Problematic) (Excellent)
CTO.
50 On August 27, 2014, VMEM announced a quarter with a net loss that was a
10 20 30 (Indifferent)
40 50 60 70 80 90 penny less than the consensus estimate (-$0.21). VMEM ended the quarter
with little more than $80 million in cash and equivalents, down approximately
Overall $7 million from the previous quarter. VMEM said that it expects to end the
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next quarter with $75 million in cash and announced a new $40 million credit
facility from Silicon Valley Bank.
Late last week, VMEM announced an offering of $95 million in convertible
senior notes subsequently upsized to $105 million plus a $15 million shoe.
Growth Use of proceeds will be working capital and paying down the current credit
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facility. The bond was priced with a 4.25% coupon and a 27.5% conversion
premium (conversion price of $5.62).
We are big believers of the flash based storage solution. Over the long
term, this technology will replace all disk-based enterprise server storage as
Safety prices per gigabyte decline rapidly. IDC, a leading industry research firm,
47 has estimated that this market will grow at a 58% CAGR between 2012-2016.
With its current stock price and technology leadership position, we believe
that VMEM is a potential acquisition target. Fusion.io was acquired by
SanDisk this summer for $1.1 billion. Something similar could happen with
VMEM. Recently VMEM sold its PCIe product division to Korea’s SK Hynix,
a global leader in flash production. It was rumored that there were several
other bidders, one of more of whom might be interested in acquiring the
entire company at some point.
Convertible comment
Violin Memory is one of those converts that may be difficult or impossible to
hedge but offers a clearly superior alternative to the common shares.
The bond has old-school pricing, with a 4.25% coupon you can sink your
teeth into and a premium in the mid-20’s. This is what new convertibles
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looked like when I started in the asset class over 20 years ago. Of course,
interest rates were a lot higher then, supply and demand were better
balanced, and gamma was still something you only heard about in frat
houses.
Borrow is reportedly difficult and expensive. That said, trading at only about
21 points premium, this is an old-school breakeven play, with five years
of coupon income (if all goes well) precisely recouping the initial outlay.
Ironically, breakeven has a bit more validity than it did when people used it,
since lower rates mean coupons down the road are worth nearly as much as
they are this year.
In short, the VMEM convertible makes sense for aggressive convertible
investors looking for a small name in a growing field, and it’s a slam dunk for
shareholders willing to give up some liquidity for a clearly superior way to
express a long view.
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Concur Technologies / SAP Deal – A Look From a
Hedged Perspective
Roman Terekhin, CFA
Earlier this month, we analyzed the potential outcome of the then rumored SAP’s bid for CNQR. Our
main conclusions were that hedged investors stood to lose the entire premium in the old 2.5% notes
and would be better off playing the merger through the 0.5% bonds even if maintaining the pre-deal
65% hedge.
We also guesstimated, as it turned out quite accurately, that the takeover premium should be
30% over the “pre-rumor” level of around $100 and that the bid would most likely be in cash. On
September 18th, SAP and CNQR announced an agreement whereby SAP would acquire all of CNQR
common stock paying $129 per share in cash, as well as assume debt. We are going to take a moment
to pat ourselves on the back here. Good. Now let’s see what happened to the bonds.
The 100% hedged positions in old bonds behaved as predicted leaking the entire premium as they
were deep in-the-money. As we mentioned in our original note, we understood why hedged investors
would have these bonds in their portfolios. The takeover risk that was taken was justified in our
opinion but unfortunately got realized.
Perhaps someday in the not-so-distant future the quant community will bring us a theoretical model
that will account for takeover risk explicitly. For now, however, some investors will probably choose to
stick to the time-honored tradition of ignoring this risk altogether. Others might carefully analyze each
industry and consolidation trends within it and relate those to takeover-protection language in each
bond. This is a very research-intensive approach whose fundamental analysis-based conclusions are
difficult to quantify in terms of premium risk. We learned that long ago and it has proven to be no easy
task again when we attempted this approach on these pages a few weeks back.
But back to CNQR. The new 0.5% performed somewhat worse than we expected, at least so far. Using
130.625 vs. $127.35, we get break-even on a 60% hedge and not the 65% that we originally assumed.
The bonds leaked close to an extra point that, frankly, we cannot quite account for.
At this point, it would appear that setting up either bond on a 100% hedge would create an option-
like payout: there would be a P/L neutral effect if the deal goes through and a substantial positive P/L
if it falls apart. (We purposely ignore carry here due to the high variability of financing terms that each
investor can get). Essentially, the trade could be to short the deal.
The stock market is pricing in a high probability of the acquisition going through, however. It looks
highly probable to us as well: the deal would put SAP firmly into the cloud space and provide great
cross-selling opportunities across its many existing customers. This can keep CNQR’s business
revenues on a steep upward trajectory for some time. From what we understand, there would be
fewer synergies with other larger tech companies. We are not legal experts and cannot assess possible
repercussions of investigations conducted by several law firms claiming SAP is paying an inadequate
valuation—these are typical with mergers. It is also difficult for us to envision all regulatory hurdles that
the deal might need to overcome. But in our opinion the chances of the deal going through are higher
than those of it falling apart. We would bet on that, just not through the converts.
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DHT Holdings, Inc.: The Season to
4.50%, 2019/10/01 Reap
Price (Bond): $107.00
Stock: $6.73 Jeffrey Alton, CFA and Bill Feingold
YTM: 2.99%
Premium: 29.2%
HOCS-Overall: 51 Company View
HOCS-Growth: 63
HOCS-Safety: 26 Like the old Byrds song “Turn, Turn, Turn,” Oslo-based DHT Holdings, Inc.
HARP: 1.31 (DHT) has spent the last few years planting and now hopes to reap the harvest
starting in 2015. Employing a strategy to invest during the current oil tanker
As of September 19, 2014 charter recession, the company has continued to increase its fleet through
the purchase of new ships, purchases in the second-hand market and most
HOCS: recently through the SAMCO acquisition announced two weeks ago. With
30 70 a larger fleet in place, the company now hopes to cash in as management
(Problematic) (Excellent) believes crude oil shipping demand could outweigh supply beginning in 2015
and stretching through at least 2016.
50
(Indifferent) Earlier this month, DHT announced the $317 million purchase of Singapore oil
tanker operator SAMCO Shipholding which owns seven very large crude oil
tankers (VLCC). The acquisition also includes Goodwood Ship Management
Overall
Pte., Ltd., a private ship management company, which manages the DHT
51 fleet. After the acquisition of SAMCO’s seven VLCCs, DHT will have an
operating fleet of 14 VLCCs, two Suezmaxes, and two Aframaxes. The
company has an additional six VLCCs under construction at Hyundai Shipyards
in South Korea. VLCCs are used for longer shipping runs, for example from
Saudi Arabia to the United States or China. Suezmaxes and Aframaxes make
Growth shorter runs such as from Russia to Europe.
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The oil tanker shipping market began to show more spunk than its dry bulk
cousin over the spring. Second quarter 2014 spot rates were 20 to 30% higher
than in the same period in 2013. The strengthening in tanker rates during
what is typically a weaker season for crude oil shipping lends credence to DHT
Safety management’s optimistic conviction. While 2014 is a good start, DHT sees
26 the market improving more robustly beginning next year and extending into
2016 as demand for oil climbs and the 2016 order book closes for shipyards at
manageable levels.
To position the company for an improving market, management has
gradually moved the fleet to the spot market from longer term charters. At
the end of Q2 2014, spot exposure was 61.3%, up from an average of 11%
in 2011. DHT’s leverage to an improving spot market is significant. Last year
management commented that a $10,000 increase in the spot market would
result in an increase of annual EBITDA of $28 million per year, or about $1.80
per share. Such an increase in spot VLCC charter rates is not a stretch, at least
from a historical perspective. Average spot rates for the first eight months of
2014 were just over $20,000, but spot rates were consistently about $30,000
from 2003 to 2010, climbing as high as $129,456 at the peak in 2008. Prior to
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the SAMCO acquisition, DHT estimated that breakeven charter rates for its
fleet were $13,000.
For the first six months of 2014, DHT had revenues of $43.9 million, up 13%
versus the same period in 2013. DHT had a net loss of $8.5 million in the
first half of 2014 versus a loss of $11.5 million in 2013. SAMCO realized
revenues of $42 million for the first six months of 2014, up 12.5% over
the first six months of 2013. SAMCO first half 2014 net profit was $10.1
million versus a loss of $2.9 million for the first half 2013. After the SAMCO
acquisition, DHT estimates that it will have cash of $118.7 million and $644.3
million in long-term liabilities. Total capital expenditures from 2014 through
2016 years are expected to total $532.9 million to be financed 50% through
cash and 50% through financing currently in place. In addition, total debt
repayment is estimated at $118.9 million from 2014 to 2016, meaning DHT
will probably be back to tap the capital markets during that time frame.
At a current price of $6.73, DHT equity has upside potential if charter spot
rates climb as expected. Current consensus earnings per share estimates are
($0.05) in 2014 and $0.36 in 2015. Estimated EV to EBITDA after the SAMCO
acquisition of 11.6 compares favorably with other market participants such as
Teekay Corporation (TK), which has a current EV to EBITDA ratio of 17.49.
Convertible View
This is an intriguing, and probably illiquid, bond. Price information is sketchy,
but we believe the bond would likely trade in the vicinity of 107 with the
stock at $6.73. We will use that a price point for the time being. We suspect
that the illiquidity and likely challenges in hedging (being a small foreign
company) contribute to the bond’s attractive optics.
Because of the company’s size, debt load and likely financing requirements,
this bond scores poorly for safety. On balance it gets a roughly average
score, but aggressive investors seeking exposure to the tanker business at
this point in the cycle will find much to like in the bond’s substantial 4.5%
coupon and moderate premium. That is, if they can find the bonds in the first
place, so convertible investors who keep bibles on their desk may have to
flip from Ecclesiastes to Matthew.
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Meet Our Associate
Sue Wu, Associate
At Hillside, Sue works across a variety of industries providing market research
and financial-statement interpretations.
Prior to Hillside, Sue worked at several entities in China as an accounting/
finance intern, through which she was exposed to financial analysis and
accounting procedures in real estate and commercial banks.
Sue is a member of the New York State Society of Certified Public
Accountants.
Education:
MBA in Public Accountancy, Fordham University
B.S. in Finance, Zhejiang University of Finance and Economics
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Disclaimer
Hillside Advisors LLC is a financial publisher, publishing information about markets, industries, sectors and investments in which it
believes subscribers may be interested. The information in this letter is not intended to be personalized recommendations to buy,
hold or sell investments. Hillside is not permitted to offer personalized trading or investment advice to subscribers. The information,
statements, views and opinions included in this publication are based on sources (both internal and external sources) considered to
be reliable, but no representation or warranty, express or implied, is made as to their accuracy, completeness or correctness. Such
information, statements, views and opinions are expressed as of the date of publication, are subject to change without further notice
and do not constitute a solicitation for the purchase or sale of any investment referenced in the publication.
Readers should do their own research before trading in any investments referenced herein. Investing in convertible bonds and related
securities, such as stocks, bonds and options, is speculative and may carry a high degree of risk. Readers may sustain significant losses
in these securities.
Advisors to Hillside serve as investment advisers to clients, including limited partnerships and other pooled investment vehicles. The
affiliates may give advice and take action with respect to their clients that differs from the information, statements, views and opinions
included in this publication. Nothing herein or in the subscription agreement shall limit or restrict the right of affiliates of Hillside to
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quent agreement between Hillside and subscribers or other readers shall limit or restrict advisors to or affiliates of Hillside from buying,
selling or trading securities or other investments for their own accounts or for the accounts of their clients. Advisors to or affiliates of
Hillside may at any time have, acquire, increase, decrease or dispose of the securities or other investments referenced in this publica-
tion. Hillside shall have no obligation to recommend securities or investments in this publication as result of its affiliates’ investment
activities for their own accounts or for the accounts of their clients. If you have received this communication in error, please notify us
immediately by electronic mail or telephone. This disclaimer applies to the beta version of Hybrid Vigor.
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