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A Potential 6.875% (annualized) on this Baby Bond

Earlier today I had seen a press release from CenturyLink which carried within it an announcement of a ‘call’ on some baby bonds. Gary had also mentioned this in the ‘reader initiated alert‘ section of the website.

The press release is here and the paragraph on the call is at the bottom.

The baby bonds they are calling are the Qwest 6.875% Notes (CTV). The company is calling just $200 million of the $500 million originally issued. The call happens on 6/29/2020 which is the ex-dividend date and should be made at $25.42 (+/-).

I jumped in right away for a part position to minimally capture the interest payment (42.97 cents) that will be made on 7/1/2020. I paid $25.07 and shares closed the day at $25.14.

So after this call $300 million in baby bonds remain outstanding (12 million shares).

Historically–and never a promise made–this should put a floor under the price right in the $25 area. The floor is maintained by the speculation that the balance of the issue will be called soon. Maybe it is called soon and maybe it isn’t, but the point is that the call risk will be minimal–if any.

This issue remains split investment grade–BBB- from S&P and Ba2 from Moodys.

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