There has been a little talk in the comments on the oddball Gabelli preferred issues outstanding.
Of course being from Gabelli they are issued by 3 of their CEFs (closed end funds). Unlike the strongly rated preferreds from most of the Gabelli CEFs–all rated strong investment grade, these oddballs are not rated at all. Remember that the funds must maintain at least a leverage ratio of 200% so that provides some level of safety.
These are $50 and $40 issues which came to market as Puttable and Callable shares. Puttable means that during specified months investors are able to force the company to purchase their shares at the liquidation value (either $40 or $50 depending on the issue) plus accrued dividends.
This “put” feature puts a floor under the trading price of the security because of the knowledge that investors can “put” them back to the company.
I realize these shares are not for everyone and they are quite illiquid. Many days they don’t trade at all.
We have not ever tried to exercise a puttable share so we are not sure of the ease of doing this–maybe someone with experience could chime in with a comment.
Let’s look at the issues.
The GDL Fund 4% Series C Cumulative Puttable and Callable Preferred Shares (AMEX:GDL-C)
This oddball was issued 2/2018. The year 1 dividend was 4% and it has been reset to 4% for years 2 and 3. The issue can be put to the company at $50 (plus accrued dividends) in March of 2020 and again in March of 2022.
This issue has a mandatory redemption in 2025
The Gabelli Global Utility & Income Trust Series B Cumulative Puttable/Callable Preferred Shares (AMEX:GLU-B)
This oddball was issued in 11/2018 and is trading with a “teaser” coupon of 7% for the 1st year. Don’t be fooled–the rate will reset in the next 60 days or so and likely will be in the 4% area (the reset is 200 basis points over the 10 year treasury with a minimum of 4%).
The issue can be put to the company in 12/2021 and 12/2023 at $50 plus accrued dividends.
The Gabelli Global Utility & Income Trust Series A Cumulative Puttable/Callable Preferred Shares (AMEX:GLU-A)
This oddball was issued was back in 2013 with an initial coupon of 6%. Then the rate went to 3% for the next 2 years. The rate is now at 3.80% (200 basis points over the 10 year treasury at the time of reset).
The put dates have past and this issue now trades as a perpetual preferred.
Shares are trading in the $47.50 area for a current yield near 4%. Honestly we are surprised it is trading this high since without the put option it should trade more in the $40 range–we would not own this issue.
The Gabelli Go Anywhere Fund Series A 5% Cumulative, Puttable and Callable Preferred Shares (AMEX-GGO-A)
The is the last oddball and it was issued in 2016 as part of a combination share of 3 common shares and 1 preferred share. In 11/2016 the preferred shares started to trade and initially traded at $54 because of a ‘teaser’ 8% coupon. By mid year 2017 it was at $44-$45 as investors woke up to the teaser which was about to be reset to 5%.
The Gabelli Go Anywhere Fund is a really small, junky fund that has only $49 million in assets. It would not surprise me if this fund was merged into another fund or simply liquidated.
This is a $40 issue and the current coupon is 5%–the coupon remains at 5% for now which is based upon the reset which is 200 basis points plus the 10 year treasury OR a minimum of 5%–the coupon can not be above 7%
The shares are ‘puttable in 2019 and 2021. After the 2nd puttable date the issue will trade as a perpetual preferred.