141 Preferreds and Baby Bonds That are Potentially Dangerous to Your Wealth-Updated

UPDATE–I have tweaked the spreadsheet removing some issues with redemption dates in the future with incorrect calculations on the YTW.

Below is a spreadsheet that lists 141 preferreds and baby bonds that are either currently redeemable or will be within a couple of months.

I have arranged these with the worst yield to worst on the top–potentially the most dangerous of them all.

I am not saying any of these in particular will be called now–but a high percentage of them could be–do you hold them?

The last time I published a list of these I used just investment grade issues–this list covers any and all $25/share issues no matter the rating.

Note that the yield to worst calculation is off by a small amount (less than 1/2%) as it doesn’t figure accrued dividends and interest in the calc.

You need Google Sheets to open this spreadsheet.

Here is the spreadsheet.

41 thoughts on “141 Preferreds and Baby Bonds That are Potentially Dangerous to Your Wealth-Updated”

  1. OK there’s the list. NBD….No Big Deal. Some places have a habit of not calling for whatever reason. Like Mer-K. If you own anything and its sub 2% YTC you have to ask yourself….What did Dirty Harry say? “Do you feel lucky”

    I will say I always advocate for swapping out low YTC sometimes I can’t get the order and it sits there over 26 for a long time. When it finally does get called most ended up collecting more in coupon then the amount of the premium at risk. Also they tend to hold up much better in markets like Dec 2018.

  2. Last year I bought CMO-E past call date(5/2018) on advice of Colorado Wealth Mgmt at $25.23 with 0.25 accumulated. I turned off drip for the last round. If it got called away and I forgot to sell, I wouldn’t be too bothered but happy to collect 7.5% currently.

  3. Thank you Tim. I have been silently reading and following your articles for some time now and I have profited many times from your articles……… The least I can do is to thank you for sharing your knowledge and experience..

  4. Wow. -15.12% YTC. Some people will buy anything. That’s why the brokerage firms try to block us from buying these securities.

    Avoid this whole problem by never paying a premium. Everything dips below $25 at some point. I have a complete portfolio of baby bonds and preferreds all purchased at $25 or less. Zero call risk.

    1. Andrew, You dont mark to market? It doesnt matter what you paid for them, its where they are trading out now if they are past call. Too me, if you bought them at $5 and they are trading at $26 past call now you have call loss risk.

  5. Thanks. Great effort. While I will use it as a preferred investor, I have to wonder what the common shareholders think. There are some issues on this list where the cost of refinancing, including the discount to the underwriter, is so large that it just doesn’t pay to refinance. But there are some issues where management of the companies are just wasting money. If I were a common shareholder, I would be angry that management isn’t controlling costs.

    1. Hello Roger. I agree with you. I wish there was some SEC-enforced fiduciary responsibility imposed on management such that investors can be protected from serious harm by managerial malfeasance. I get hammered every time I mention this, but I think my concern is valid. Investing for our future is not the same as gambling at the casino.

      1. One way to get an issue called is to write the directors of the company. But in most cases, I’m the one not wanting the call, so I write very few such letters.

        In fact, ignore this post!

      2. Jeff, do mean like maybe C-N, from Citi that paid out last year 8.48% interest on a Baa3 Moodys. Is well over a $2 billion issuance and presently trades $28.78 and long ago went past call? 🙂

        1. Grid – C-N was a TARP issue by the Feds if I recall. I have to believe there is something about it that makes it “uncallable”. Otherwise, it’s nuts. Have you got it figured?

          1. Bob, it is definitely callable. CEO was getting gigged about it two years ago in CC. And he said they had no present plans to call it back then. He was very evasive in his answer. The value of the tarp has long gone as rates have came down so far they could issue a perpetual preferred well under the tax advantaged yield that they currently pay. Plus tax rates have went down also. It may be worded as such that it cant be touched until yearly capital plans are issued to regulators though. There is no way I would touch this issue with 30 year dancing near all time lows now.

    2. Roger–yes there lots of stories behind some of these issues–while others are obvious and management isn’t getting the job done (i.e. Gabelli Utility Trust GUT-A–5.625%–callable since 2008).

  6. Thank You very much Tim for the nice list. I combed thru it and the only one that I own is the Dillards preferred. It has been callable since August of 2003. So the odds of them now calling it are quite slim. It wouldn’t bother me too much as I’ve owned it now for atleast 7 or 8 years.

      1. akj–this is a $1000 issue and you will lkely have to use the cusip to buy the issue from your broker.

      2. No ticker. In fact, there are two $1,000 pref issues from State Street that are not exchange traded. This is the one I bought:


        One needs to understand that these trade “clean”, which is to say accumulated dividends are NOT included in the price displayed. Accumulated divis gets calculated and added to the price when you buy.

        I will be posting something at Broker/Brokerage about them, and similarly situated issues.

    1. Yes Bob–there are ‘stories’ behind many of the issues that have not been called. I hold some past call dates, but in minor positions and once they go crazy (i.e. GUT-A)I am out.

      1. Yep, Tim. As grid has said many times it’s usually because the issue is held by insiders, it’s “grandfathered” under Dodd-Frank or some such, or it’s just too few in number to bother.

        Sometimes, if it’s the sole outstanding issue, an issuer will leave it out just to keep a presence in the market. Like CFR-A, until they called it.

  7. Tim,
    Great list! I am sure it is impossible to handle all the details, but I have a question regarding RILYH (now I am editing the message as I saw Old Fort’s comment, but I am not canceling it because of the last paragraphs I wrote):

    If redeemed, isn’t RILYH paying $25 + $0.75 (until May 2021), or am I misunderstanding something?
    If it is, then RILYH is not that dangerous to our health and maybe it should be labeled as “healthy”?

    Personally, I have sold and won’t buy any preferred with YTW worse than -3%, but I do own a dozen or so from your list in the -1% to -2% YTW.
    Taking a risk of holding something with a YTW of up to about -2%, hoping it won’t be redemeed is VERY different from those with much lower YTW.

    So, it would be SO interesting to hear from your readers why they won’t be selling those with say less than -3% YTW (like Gridbird’s comment on IPLDP – with a YTW of -2.8%).

    Thanks for all the work! This website is the best!

    1. dan–I took 7 issues out now that are in the future as the formula doesn’t handle those in the future (by 2-3 months) right–also with B Riley those are special circumstances–so I just removed it.

  8. RILYH shows a YTW of -6.04%. I’m guessing this doesn’t take into account the early call premiums?

    1. Old Fort–I took 7 issues out now that are in the future as the formula doesn’t handle those in the future (by a couple of months) right–also with B Riley those are special circumstances–so I just removed it.

  9. I currently own several on that list, and a few others who fit the list criteria but are not listed as they are illiquids.

    It is difficult to try to define a strategy for reducing risk from a past call, high yield, safe issue. No easy or straightforward way out.

    Usually try and hold until call, but if a high risk issue has been bought way above par, if dividends until 1st call allow me to breakeven, or provide a gain, the consideration for selling will be stronger.

    Some holdings, like AILLL & CNTHP will hit me hard if called. But based on what I know about their position in the cap stack, their size, ownership etc ( mostly thanks to Grid’s tuition ), I am willing to take the risk.

  10. It has been said in the past by some prominent preferred investors that DX-A and B will never be called. Heh heh.

    1. Jeff, that is too bad, because DX preferreds didn’t fit that label for me for never being called. They have a history of calling them. They are a small company. They have a very large short term debt, and coupled with falling rates. This is a perfect time for many bdc’s and mreits that are in the same category to recycle debt. This is becoming a great environment for some “non sound” financial companies to get some reprieve and recycle their high paying debt into cheaper debt.

      This will get interesting in the next 2 years if bad credit companies get loans for 2-3%. Hey… just look at what Greece had, and what rate they have now. :-). This is why you must look at the books of these companies, and not what their bond rates are. Some old school methods can’t be the only way to analyze companies and more.

      1. Mr. Lucky, Im not a prominent preferred investor so it wasnt me. Plus I dont even know what DX even is, ha. Lets dont bring up 2%-3% stuff anymore. Can you imagine a year from now us discussing the merits of a 3% just issued preferred? 🙁

  11. Thanks, Tim. Very helpful spreadsheet. It would be nice to share collective views on whether particular issues on the list will likely be called or not (and why), but I confess that I’m not sure exactly how to do that.

    1. Wilson, a lot of it would be idle speculation for most. And the Suites are close to vest on these things and can even mislead intentions. And sometimes the opposite happens. CEO for Maiden said summer of 2018 that MH-A would be redeemed by the end of the year…OOOPPPs…Not only was it not redeemed it doesnt even pay its dividend now and trades at $7.27. Ouch, things happen.
      Tim has a great spreadsheet, but it just isnt possible to tee it up perfectly for us not to have to think.
      You have to take out the pencil and finish the math yourself. Take IPLDP which shows a YTW of minus 2.8%. But in realty it goes exD next week and is already accruing next dividend payment so its not really a minus 2.8%. Then there quirky things like MFINL. It becomes callable in April. But MFIN was just issuing more shares last fall through the ATM of MFINL. So logic would dictate they probably are waiting until 2021 maturity.
      I have a big load of IPLDP, but dont own nor am interested in MFINL.

      1. Grid, can you go read your E-R inbox? I sent you a PM. Wanted your advice on one of my holdings.


      2. Grid, Taking IPLDP, I agree it’s not minus 2.8%, but even including the divvy, it is still minus approx 1.6%. Seems we’ve gotten that far into the weeds that the lower potential loss is acceptable on the chance of a low positive outcome after a few more quarters. For anything other than a fortunate flip, this seems an uphill battle.

        1. Alpha did you also add back in the additional accrued penny or two also to lower it more? 😀 There is no chance of IPLDP being called before next dividend. And being that it just passed a rate case with it, I would suggest it would take years for any serious consideration unless Alliant somehow got acquired.
          I also think more in terms of last purchases which for me was 25.40s a few weeks ago and then a flip of half in 25.70s and repurchase of those at 25.59.
          So that admittedly also changes my thought process over a YTW at what it closed at yesterday since my cost basis is lower.

  12. Great spreadsheet…thanks for all the hard work that went into creating it. Very helpful.

    We do still own some of those near the top of the list and have had them for many years. Did finally unload the PUK- and PUK-A holdings a few weeks ago (they’d just gone soooo high), and recently swapped out of HBANN into HBANO to regain some call protection until 2021 (plus 3/8 higher div). But what to do with Assured Guaranty (two issues) & RenaissanceRE? Hate to give them up, but I’ve known they’re at risk!

    Wondering…RE: Sterling Bancorp (STL-A)…is that callable? My records show its call date is 10/15/22.

    Thanks again for ALL you do for this great site!

      1. Scott, just thoughts not answers. The 7.2% non replaceable trust debt is an effective equivalent of issuing a 5.25%…Borderline edge. But as OSBCP has just proved, it just redeemed its 7.75% trust debt and did not reissue as it wasnt needed. BANF could do this also….or not.
        But this is not perpetual long dated debt, it matures in 2034. So the uniqueness of this situation entails as the days go by it in effect becomes very high short term debt which is exactly backwards as higher yield should be longer duration not shorter.
        Being a regional bank maybe the ‘Boys have a sum in it themselves and like the interest payments, or maybe they dont. For me I have owned it quite often over the years but have always been wary of a redemption none the less. I always bought around $26 and sold over $27. Needless to say I am not in at this price. I take frequent over par past call risk trades, but for me personally it would have to sink under $27 and be inside next 30 day interest payment for me to reenter for a trade.

  13. Much appreciated, Tim!

    I think CORR-A belongs in this list:
    1/27/20 call date and negative YTC.
    25.20 close price vs. 25.035 ** (my estimate) redemption price as of today.
    ** 25.00 redemption price + 0.035 (7 days’ accrued div).


  14. Wow! That is quite the list. Thanks Tim. You did a magnificent job! Some may not have been redeemed yet due to low credit or deteriorating credit, i.e. difficult to sell new preferred, but many others may have a high probability of being redeemed this year. Prudent to avoid. Just my opinion.

  15. Tim, EP-C was my last issue on the list and a runaway bid bought the remaining position at $51.79 today. Some great names (memories) on the list. There may be still be trade opportunities, though as Bob (in DE) has said, “it’s a tough way to make a living”.

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