A Few Sells and a Buy

While markets are a bit quiet as we end the year we are trying to grab a few end of year gains (all in IRA accounts) and get ready for the new year.

Yesterday I let go of a full position in the Gabelli Heathcare and Wellness Trust 5.76% perpetual preferred (GRX-A). I loved the 5.76% coupon on a strongly investment grade issue (Moodys A2), but it is living on borrowed time. The issue closed at $26.01 yesterday and has been callable since 8/20/2015. GRX does have a 5.875% issue outstanding which is now callable which may ‘protect’ the 5.76% issue, but more likely they would call both. This issue was a ‘base’ position–one which is a long term hold in the portfolio so I will be looking for another base position.

Additionally I tried to sell the new Medallion Bank 8% fixed to floating preferred (MBNKP). This new issue traded very weakly early on – down to the $24.40 area–2 weeks ago, but closed at $25.22 yesterday. I had an average cost of $24.58. My limit sell was obviously a bit greedy as only 88 shares were sold, but hopefully will get it done today. These shares were bought only as a flip–no intention to hold this junky issue too long.

I bought the Urstadt Biddle 5.875% perpetual preferred (UBP-K) yesterday, mainly as a dividend capture move. The issue had fallen a bit yesterday and goes ex dividend in 2-3 weeks. The combination of a short term fall (I hope) and a foreseeable ex dividend date for 37 cents made this particular issue attractive. This will have a target of 1.5% so may hold through ex date or will sell when my target is reached – maybe before ex date.

I tried (but didn’t get an execution) to grab a position in the GDL Fund cumulative, puttable issue (GDL-C) for a ‘base’ position, but didn’t get an execution. I am happy with a 4% position for a base issue and it would help replace the Kayne Anderson 3.50% Mandatory Redemption term preferred (KYN-F) which will be called in April.

While there aren’t any big selloff going on it appears to me that there are some individual issues being ‘sold’. These are not large volume issues, but it appears that the sells are likely individual investors, so one may be able to snag a bargain today somewhere.

29 thoughts on “A Few Sells and a Buy”

  1. Does anybody know when the next PFF rebalance is? I would think they would avoid the end of December when the volumes are much lighter.
    These were fairly interesting days this year.

    1. SteveA,
      The next PFF announcement (according to my records), should come out around 1/4/20. The last announcement was on 10/4/19.

    2. Tim
      This is a bit off center but any thoughts on BBN which is a build American bond fund. The yield is higher than IG bond funds and it would seem that the risk is lower which makes it seem fairly interesting as it has about 5.5% yield, covers payout and would seem to be fairly steady. If you have time would value your take as it seems to be a better deal right now than say PAI or BHK even though it is selling slightly above nav.
      Want to again thank you for creating such a great place to exchange ideas and learn. All the best to you and yours for the New Year. SC

      1. If looking at BBN you might look at GBAB, too. The universe of BABs is very small and the number of funds holding them is small as well.

        BBN is priced for perfection right now (100% rel discount at cefdata.com), whereas GBAB is not. cefdata.com is a good place for CEF research.

      2. How does a fund like BBN payout 5.5% when I can find only one taxable muni yielding over 4% (which by the way matures in 2114)? Is this really done with leverage or account tricks or a combination of both?

  2. I own LTSL and LTSF and would like to know if anyone has information on the status of these senior notes if the proposed merger of Labenburg Thallman with Advisor Group Holdings is approved

    1. They will remain outstanding. That is why they plummeted so hard when this was announced as acquiring company has weak financials themselves.
      At the Effective Time, the debt securities issued by the Company, including the 6.5% Senior Notes due 2027, the 7.0% Senior Notes due 2028, the 7.25% Senior Notes due 2028, and the 7.75% Senior Notes due 2029 (collectively, the “Debt Securities”), will remain outstanding as debt securities of the surviving corporation in the Merger.

      The Merger Agreement requires the Company, upon Advisor Group’s request, to use reasonable best efforts prior to closing to enable the surviving corporation in the Merger to delist and deregister the Debt Securities (to the extent listed or registered) and Preferred Shares as promptly as practicable after the Effective Time.

      1. Thanks for your response,but please enlighten me as to why the preferred shares (LTS-A)which rank junior to the company’s senior debt, (LTSL,LTSF) are still maintaining par $25.00 value ,while the senior notes are not.
        Also what does your statement ” delist and deregister the Debt Securities (to the extent listed or registered) and Preferred Shares as promptly as practicable after the Effective Time” mean in terms currently owning these issues. will they become worthless or no longer able to sell?

        1. Etsfl, let me de-stress you a bit here. It was all in what was written in the prospectus. LTS-A the preferred had a “change of control” provision in them that the acquiring company must buy out the preferreds. Preferreds are susceptible to getting screwed over in acquisitions, so I suspect that is why it was written into prospectus being LTS was no financial stalwart at issuance.
          The baby bonds will be delisted so the private company doesnt have to pay SEC fees. They will be assigned new ticker symbols eventually and trade on the pink sheets. Dont worry they will trade. Heck I bet half my issues are pink sheets. But this wont happen until merger is complete assuming it happens.
          Now they could sell off again a bit when ticker changes as some entities cant or wont own pink sheets. But these issues are debt and still have that protection. No change of control provision is in these, but they do have maturities. This new company is not the best financial company in the world. They have a 10% or so bond outstanding themselves. So the LTS issues had to back up to compensate for that elevated risk. The word is out they will get delisted, but as I mentioned they could spill again when it officially goes into action, if the merger consummates.

    2. Etsfl, the story keeps getting crazier on the LTS acquisition…Now add Dr. Frost to the lawsuit pile trying to block the merger. That makes 6 lawsuits now against LTS on this…
      In a lawsuit filed earlier this month, Mr. Frost and a trust he controls contend that Ladenburg’s board’s decision to enter the merger fails to take into consideration obligations owed to them as noteholders of the company, according to a filing Thursday with the Securities and Exchange Commission.

      The lawsuit seeks monetary damages, a halt to the merger and the cancellation of the 2018 transaction in which Mr. Frost and his related trusts sold a substantial portion of their shares of common stock to Ladenburg, according to the filing.
      https://www.investmentnews.com/ladenburg-chairman-phillip-frost-lawsuit-stop-advisor-group-merger-175776

  3. Some times, the hardest trade is to walk away. I left CBB/B at a loss. Unlike some, I do not try to “hide” or not talk about losses. My thesis on CBB may have been wrong. Thanks to 2whiteroses for publishing S&P’s summary of the merger yesterday. They view CBB as being taken private. My view of a subsidiary is different. If the event they are correct, I have exited the position.

    When my investing thesis is wrong, legal issues popup, or accounting issues come to light, for me that is time to exit.

    Onwards to the next battle, have lots and lots of profits this year.

    1. I’m in that loss boat with you Steve. I jumped in too soon before most of the information was known and when it finally came to light (thank you 2WR) my buy premise was blown. Took my loss and exited yesterday.

    2. Steve, Job one is to invest in what you are comfortable owning. Always another battle somewhere. Its most likely a flipper still for me, but the fact it appears to be stabilizing above my purchase points I will hold near term. The best trade is the one that fits your needs. But I think you over read into S&P.
      Take a look at what Moodys wrote…
      ew York, December 23, 2019 — Moody’s Investors Service stated today that Cincinnati Bell Inc. (CBB) announced that it had signed a definitive merger agreement to be acquired by Brookfield Infrastructure (Brookfield). Management and Brookfield have not disclosed material considerations such as sources of financing, the company’s post-merger capitalization and organizational structure. If the company’s bonds remain outstanding post-closing, any ratings impact will be dependent on the credit profile of the borrower post-closing considering the ranking of CBB’s debt in the post-merger capital structure.
      Its the same info without the bravdo S&P wrote. Sometimes the businesses tip off the agencies on what is going to be done to make sure their credit ratings will be unaffected. S&P acts a bit miffed they got no advance info.

      1. And Grid you will do very well with holding this issue. You are a great flipper, I am quite poor at it. Where I am reasonable at flipping is buying a new issue like F/PRB and selling out. Soon I will take profits on AEL/A. When, when I find something else to buy in early Jan. 2020. If not, soon after.

        So, flipping has only worked for me with newer issues.

        1. Steve, I try not to do many of these dog and fleas flip as one day it will bite me if I start thinking its skill instead of luck. The only reason I got the $42 was I left a bid out with GF yelling at me and didnt have time to cancel it.
          Its mental accounting I know, but this purchase is in my high risk flip bucket stash. So this serves a different role than say buying something for safe income. And I keep it controlled. So I had to sell off some MBNKP to counter the CBB-B trade. If the issue goes below $44, it will smoke me out and I will sell it all to ensure a small gain including the $45.15 yesterday purchase.
          Then I own a bucket of say, “income plays with a possible flip option”. As an example today. I am experimenting with a new purchase having never owned PLYM-A. Wanted 400 at 26.05, but apparently will have to settle for 333. It usually trades more in 26.50 range. I was a bit surprised it hit. Certainly no reco as this is my initial voyage into this newer industrial reit.

    3. Steve, just to let you know, my pom pons arent very big for CBB-B either. I went ahead and sold my 200 shares today at $47 I bought yesterday at $46.15. I may get a nasty email trading unsettled funds. Oh well…But I am forced to keep the original shares until after new year as they are in taxable and I am done with adding more tax liabilities for the year. I wont be too far behind you on exiting this thing in total.

  4. I too am looking to replace KYN-F after April maturity. Even thought I already own shares of Gabelli (GGT-E) I’m looking at the newer issue GGT-G as a replacement. Investment grade plus an additional 1.50% over KYN-F.. just wish I was quicker when GGT-G was announced..

    any other thoughts for a KYN-F replacement?

    1. BlueClaw – To my way of thinking, there is no way that a plain vanilla perpetual preferred of any quality could be considered a good replacement for KYN-F. I think the appeal of KYN-F has been as a safe money market alternative that will earn better returns than MM but maintain the same safe, free from interest rate gyration principal protections… Replacing something that has a 2020 maturity with something else with no stated maturity at all is just never going to accomplish the same thing. It may provide a better return in this “never go down” environment we’re in, but it’s not a valid comparison to accomplish the same goal. The Gabelli issues with puts such as GLU-B and the aforementioned GDL-C work. I’m also using SPE-B with a 2021 maturity and same 3.50% coupon as an alternative. SPE-B has the added flavor of being convertible which might provide a little upside. Another thought but with a little more interest rate risk might be to consider some of the “pinned to par” type issues that have been discussed here recently as well…

      1. 2WR, I am curious about SPE-B. The shares of the common (SPE) are trading well below the $19 conversion price. What happens at maturity? Do you only get 1.3158 shares of the common or will it be adjusted to give you $25 worth of common if the shares are under $19?

        1. Zwei – If you go to their website https://specialopportunitiesfundinc.com/fund-net-asset-value/ you can see the current conversion rate. Right now it’s 1.689 and it changes to the better with each dividend payment paid on SPE. Thus it’s been improving throughout this year because of their instituting a monthly dividend policy… What I don’t know is whether or not this currently posted rate reflects the upcoming 12/31 .25169 dividend that’s for holders of record 12/19. Also dividend on SPE (NOT SPE-B) for 2020 will be set at increased rate of 7% of 12/31/19’s NAV to be paid monthly. I’m glad you asked what happens upon maturity because I’ll have to review that myself… I bot SPE-B originally strictly for the dividend so it getting into the money on conversion rights is just an added bonus but I’ll want to see what happens too. Each dividend paid on SPE will positively impact the conversion ratio and they update the going rate weekly on Fridays on their site.

          1. Thanks for the info, 2WR. In general, I avoid convertibles. I am going to investigate this one further as it may be appropriate for what I need right now.

      2. 2whiteroses, Thank you for bringing GLU-B to my attention. I recall Grid mentioning this awhile back and it has been on my watchlist (along with the many others) but lost sight of it. That very well may be a decent alternative.

  5. Tim….whats your expectations for 2020 for preferreds…..mine were up 10-15% excluding the dividend in 2019….what can possibly be left in that dept….thanks..

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