Added Tab to Baby Bonds List

Just a quick FYI–we added another ‘tab’ to the baby bond listing.

This tab brings up the list “By Maturity”. Many times when a baby bond is within 12-24 months of maturity the price will trade in a ever narrowing range–meaning maybe less volatility. Investors can own a decent issue while collecting a reasonable return without so much fear of a large downward more in price (although of course this is not a guarantee).

The new list is here.

Priority Income Fund Releases Slide Show

Non publicly traded closed end fund (CEF) which has 2 term preferreds currently outstanding, and is now trying to sell a new term preferred, has released a new “slide show”.

Priority Income has been difficult to do due diligence on in the past, but now they are trying to get more information out to investors. In our opinion information like this is long overdue–at least if they want folks excited to maybe buy their securities.

The slide show can be view here.

Arbor Realty Reports Excellent Earnings

Mortgage REIT Arbor Realty (NYSE:ABR) reported excellent earnings this morning.

The company reported true GAAP earnings of 47 cents/share (adjusted funds from operations–AFFO–was less stellar at 29 cents/share)–the company pays a 27 cent/share quarterly common dividend so their coverage is good. On top of the 27 cent regular dividend they declared a special of 15 cents/share.

After ‘reinventing’ themselves a few years ago this mREIT has turned in better and better results. The company operates in the commercial mortgage arena with loan originating, and mortgage services.

ABR has 3 higher yielding perpetual preferreds outstanding–which went ex-dividend yesterday.

ABR-A is a 8.25% perpetual, ABR-B is a 7.75% perpetual and ABR-C is a 8.50% issue.

The A and B issues are now redeemable which keeps their price relatively close to $25–the C issue becomes redeemable later this month.

The companies earnings announcement can be read here.

Retail Sales-Early Warning or “Fake News”

On Thursday we had retail sales released for the month of December and if taken at face value you could say the sales were down right lousy. Sales were announced falling by 1.2% in December–and more surprising was the fall of over 3.9% on internet sales.

Personally there is really little doubt in my mind that sales likely softened–with the wild trading in the stock markets during the month a decline in sales would be no great surprise.

On the other hand we are more likely to believe that while sales likely fell we believe they will be revised upward in the future.

So what does this mean to me? It is simply 1 data point out of literally hundreds that are published each month and we don’t react to 1 data point. BUT we do consider it a potential early warning and we have said time and time again that many companies that have issued income securities are “dicey” if we head toward recession. Many of the REITs are not strong–i.e. Ashford Hospitality with their debt/equity of almost 8. Additionally while it may be true that there have not been bankruptcies in the business development company (BDCs) arena most of these companies have been around for only 10-15 years and there is no doubt in my mind that the next recession will bring bankruptcies in this space.

For now we just watch–maybe just a little closer than before, to see what the follow up data in the next month brings. I will take no investment actions with this early, likely to be revised, data but I will be observing closely.

AmTrust Baby Bonds To Trade OTC

AmTrust Financial baby bonds will begin to trade on the OTC exchange in the next couple of days (of course just after we removed them from our baby bond listing).

The 7.50% subordinated notes will trade under the ticker AFFT.

The 7.25% subordinated notes will trade under the ticker AFFS.

Of course all of the perpetual preferreds are now trading on the OTC as well.

We would caution folks on buying/holding these shares. While those with experience in these types of items (delisted stocks) may understand the risk there is a huge difference being listed on the OTC market as compared to being on the NYSE. There are few-if any regulations on what companies must “file” in terms of financials to be listed on the OTC–it is the ‘wild west’ so to speak.

Long time readers will remember Glacier Water Services and their trust preferred shares–these shares were delisted from the NYSE because of the lack of public shareholders. Shares did just fine (actually great) and eventually the shares were redeemed at $25. BUT AMTRUST IS RUN BY SNAKES and you simply can’t trust them to file any financials whatsoever-in fact they have no plans to provide public financials.

Priority Income Fund to Try Again to Sell Term Preferred Issue

Closed end fund Priority Income Fund, (a non traded fund), will attempt again to sell a new term preferred issue. This issue will have a mandatory redemption in 2024.

As you may recall Priority tried to sell this issue back in November/December and with the turmoil in the marketplace they were unable to round up demand for the issue.

The company has 2 issues already outstanding.

The PRIF-A issue has a coupon of 6.375% and trades today around $24.60 as it has dropped on the announcement of a new issue–it had been trading around $25. This issue has a mandatory redemption in 2025.

The PRIF-B issue has a coupon of 6.25% and trades today around $24.50 after dropping based on the new issue–it had been trading around $24.90. This issue has a mandatory redemption in 2023.

Priority, being a closed end fund, is required to maintain a 200% coverage ratio on their senior securities. The last time we calculated the coverage ratio they were at 900%.

Preliminary info on the new issue can be found here.

Oxford Lane Capital Releases Investor Presentation

Specialty finance company Oxford Lane Capital (NASDAQ:OXLC) has released a new investor presentation.

OXCL has 2 issues of monthly paying term preferred which we and others have owned over the years. OXLCO has a coupon of 7.50% while OXLCM has a coupon of 6.75%.

The presentation can be read here.

Oxford Lane Capital is an owner of collateralized loan obligations (CLO’s) and is organized as a closed end fund, thus subject to “leverage” limitations of having at least 200% coverage of senior securities.

New Fidus Investment Baby Bond Now Trading

The new 6% baby bond sold by Fidus Investment (NASDAQ:FDUS) has begun trading under the ticker FDUSZ. The issue has a maturity date in 2024.  Of course the issue is unrated (as is true of most BDC baby bond issues).

Shares started trading in the $24.75 area, but have raced up to the $25.06 area as of today (Tuesday).

Details of the issue can be seen here.

Continual Website Updates/Upgrades

We continue to work on updating and upgrading various items within the website. This always precludes us from as much participation in discussion etc. as we would like, but it is our preference to keep adding and improving.

On the “Preferreds” you will note that we have added “by Yield” to many of the listings which we note on the choices and more are to come.  These are set up so you can just toggle the tab on the top of the list to get either setting.

Just today we have added “By Yield” to the Baby Bond listing. Additionally, and honestly more important to us, is I have succeeded in speeding up the load of the Baby Bond list–it used to take maybe 5-7 seconds to load–now maybe it is 1-2 seconds.

Lastly we have been working for hours and hours to get the credit ratings added to at least 1 “Master Sheet” and we have completed entry and will be launching this page later this week.  I am proof reading the data each day–it is tough to check all 630 issues in both Moodys and Standard and Poors website.  Some have said why don’t you just go to QuantumOnline and get the info?  1st off we don’t like using someone else’s data and 2ndly we have found that much of their credit rating data is not up to date–it is a huge job for anyone to try to keep some of this data up to date.

Continued Quiet Trading in Preferreds and Baby Bonds

As we do on most days we just reviewed the “preferred stocks at near new lows” and “preferred stocks by share price loss” lists and both show that the day is pretty quiet in the income arena, although the average share has crept up around a dime.

We are more intrigued by other miscellaneous trading that is occurring in some areas we invest in. For instance, the IHIT and IHTA issues, Invesco 2023 Target Term Trusts and Invesco 2024 Target Term Trust) have been trading really strong and I know that many readers and ourselves have owned positions in these closed end funds (CEFS). We have just let go of most of our position in the IHTA issue (Invesco 2024 Target Term Trust)–we had paid $9.39 for this on 11/29 and being able to sell for almost a 35 cent profit seems reasonable given the spike in price in the last couple of days. It seems to us that many relatively conservative investments have risen too much in the last few weeks. Seems to be another free for all for yield since the FED has given the green light to a yield chase. The IHTA spike follows the silly spike sister fund IHIT had a couple week ago all the way to near $10.50.

Oh well we will happily book a gain here or there–not to be a trader, but just being opportunistic.

Guess They Wanted the Dividend Badly

Yesterday we had a good example of someone who was “asleep at the wheel” as someone bought just a little over 700 shares of the Kayne Anderson 3.50% Mandatory Redemption preferreds (KYN-F) at $25.36-$25.38. This was 30 cents above the last trades and the shares have traded between $24.95 and $25.15 all year.

The shares go ex-dividend for 7.3 cents on the 14th–a heavy price to pay to capture a 7.3 cent dividend.

Just a reminder to newer income security buyers (and sellers) that you must always use limit orders to buy or sell securities that are somewhat illiquid. If you don’t use limits you will pay a heavy price for entry to the income security arena.

Disclosure that we own around 2,000 shares in this issue (and our returns sure looked good yesterday–certain to reverse today).

General Finance Release Earnings

Mobile storage company General Finance (NASDAQ:GFN) has released earnings today. We mention this because they have high yield offerings that we have potential interest in.

GFN has a 8.125% senior note maturing in 2021 trading under the ticker GFNSL which is trading in the $25 area. Further info is here.

Additionally GFN has a $100 perpetual preferred with a 9% coupon trading under ticker GDNCP which last changed hands at $101. Further info is here.

The earnings from GFN were satisfactory from a dividend safety perspective as revenue rose and there is reasonable free cash flow, but the company shows a GAAP loss.

Companies like General Finance are fairly dicey companies during difficult economic times, but are able to stay afloat when times are good. The company has a very large chuck of their business tied to oil and gas and thus this heavily influences revenues.

The balance sheet is pretty heavily leveraged–and this is the part that can kill this company in real tough times. Debt is 3X equity, which works during the good times–during a recession not so well.

The company press release is here.

Monday Morning Kickoff

Well another weekend is gone and it is time to get serious about what the week will bring us investors. Without even looking we know that we have a deadline coming for negotiations on spending bills, which includes border security–and this could be the biggest issue of the week.

Last week the DJIA traded in a relatively narrow band of 24,883 to 25,439 before closing at 25,106. The 10 year treasury traded as high as 2.73% before closing at the low of the week on Friday at 2.63% .

The average preferred stock ended the week at $24.03 which was a dime higher than the week before. There are currently 228 $25 preferreds selling at $25 or less which is virtually unchanged from last week as prices have now stabilized in the income arena to a large degree.

Last week we had some economic data released–but once again some was delayed as a hangover of the government shutdown. The PMI Services report came in equal to last month and the PMI Manufacuring report came in soft. Consumer credit, which we believe to be important along with consumer confidence, rose for the 1st time to over $4 trillion with a monthly gain of about $17 billion. This was slower than a $22 billion increase last month.

For this week we have JOLTS (job openings and labor turnover) on Tuesday. Last month this number had fallen under 7 million for the 1st time in a while with a reading of 6.9 million–I will watch for softening here. Wednesday we have the Consumer Price Index (CPI)–the market is expecting little movement with a +.1% expected (plus .2% expected in the core rate). Watch for anything ‘hotter’ than these numbers. Retail sales for December are announced Thursday. Friday brings Consumer Sentiment–watch this for hints to future consumer retrenchment.

Last week we had 3 new income issues announced. Cherry Hill Mortgage (NASDAQ:CHMI) announced a new fixed to floating rate preferred with an initial coupon of 8.25%. The issues is trading now on the OTC Grey market under the temporary ticker CRYIP and last crossed the ticker at $24.90.

Michigan utility CMS Energy (NYSE:CMS) sold a new baby bond issue with a fixed coupon of 5.875% and a maturity way out in 2079. This issue is investment grade. There is no Grey market trading in this issue and we are not aware of any trading as of yet.

Business development company Fidus Investment (NASDAQ:FDUS) has sold a new baby bond with a fixed rate of 6%. Being a baby bond there is no OTC Grey market trading and we are not aware of any trading occurring in this new issue. It appears this issue is teed up for trading Monday under ticker FDUSZ.

Teekay Offshore Partners Reports Earnings-Updated

We have reviewed the quarterly financials of TeeKay Offshore and we need to note a large chunk of revenue (and thus earnings) came from a settlement with Brazil oil company Petrobras. This amounts to about $96 million. This is a significant chunk of their improvement, but the balance of the quarter remains relatively strong–although there is much improvement yet to do and I believe Brookfield will bring some disciplined management to the company.

TeeKay Offshore Partners (NYSE:TOO) has reported earnings and they appear to be quite stellar.

We have not had the opportunity to review the release closely, but kind of the headlines numbers.

We had mentioned before that TeeKay Corp no longer controlled TOO and that Canadian asset manager Brookfield Business Partners had taken control of the company from TeeKay. If we recall Brookfield had plowed quite a chunk of change into the company and the balance sheet is being improved.

The press release can be seen here.

We are not advocating a purchase of the 3 preferred issues of the company (TOO-A, TOO-B and TOO-E), but they are all trading in the 11.5% current yield and there may be opportunity for investors with the ability to manage the risk of owning these issues.