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A Reasonable Idea for Some Investors

For some investors it may be a reasonable idea to buy the Ready Capital 6.50% Senior Notes (RCP) due 2021. My idea is based upon the nice coupon and short maturity in April, 2021.

I mention this (and own it) because it is trading at $25.04-$25.06 and has 2 interest payments until maturity (January and April) for about 41 cents each.

Ready Capital (RC) actually has a 7% convertible note due in 2023 trading around $23.79 which has a better yield, but obviously is 2 1/2 years further out in maturity so has more risk built in.

Assuming financial markets don’t totally implode this seems like a good short term yielder.

Investors should do their due diligence to see if this might be right for you.

24 thoughts on “A Reasonable Idea for Some Investors”

  1. Thanks for the idea Tim, I was monitoring it and was able to pick up a position at 25.03 this morning. Cheers!

  2. This likely more risk than I prefer for now.

    Been slowly adding to UMH-D below par $24.7x. Decent 6.4-ish yield and has another higher coupon UMH-C too that would be likely called before the Ds.

    Also nibbling on WFCLL the new 4.7% Coupon and the older WFC-Z at just near $25s

  3. Rcp traded around $11 in the march’20 scare…now with an april’21 termination, it may hold better, unless something else much worse is happening to
    Ready cap., and thus the “bargain” price today, a little suspicious, isn’t it?

    1. Nothing to be skeptical about. All BDCs will be hit without a stimulus package. RCP is actually up because its more than folks here who are probably looking it as an issue of safety. Redemption isn’t at risk.

  4. NGHCO, RCP, MVCD, NLY-D, SCE-L is where I have been stashing cash for a little while now.

    1. NLY-D is one of my top holdings. Critics say there’s less upside but I don’t care. 7.5% fixed is an excellent return. If the market falls D will fall less than the other NLY issues.

      1. Martin, I lost your earlier post, but I also bought a few hundred more of SCCC today at $24.66 also. I am no fan of this type of company and its puny size. But, I cant help but think there will be a flip op come around exD time considering its paying more than 3 months on this first payout. Decisions have consequences and my punishment was also buying couple hundred CNTHN at $52.05 as an antidote for the poison I bought in SCCC.

        1. Grid – I just spit out my coffee when I realized you bought 7.75% yielding unsecured debt securities issued by tiny little microcap finance company SACH.

          Even I won’t put these in my “high-risk” bucket, and I love to roll the dice from time to time. The high-yield touts on Seeking Alpha have been pushing SCCB on their subscribers for years.

          So what kind of high risk loans does SACH have to make in order to make a decent return on the debt they issued at nearly 8%?

          1. I agree, Rob… This is just a relative value play. The older SACH baby bonds are trading higher.. SCCB is above par, and low yielding SACC is above $24. Underwriters accepted greenshoe after issue was sold out and are no doubt doling this out right now. They can sell in $24.60s and still make money dumping the greenshoe.
            Then people come first of December are going to see that overbloated first time 62 cent interest payment going exD in Dec and it should move up as the ownership of float will be stable by then.
            This is a greed flip based on relative value of the sister issues not a bet on the company. The funds are from the high risk bucket, not the widows and orphans bucket, ha.

    2. Update on the MVCD buyout from the Barings (who is buying them) earnings transcript on 11/10:
      “We still expect the shareholder meetings to approve the transaction to be held in December with a targeted closing date for the merger in mid to late December. ”

      So MVCD is basically called unless the deal falls through. Still a little meat on the bone if you are willing to take the risk. I don’t have a ton, but decided to keep it there since it is seems pretty safe the deal is going to close.

  5. Would mention a similar circumstance for the NGHC prefs that are nearing and past call since the Allstate takeover is not until early next year and prob gives a bit of latitude until a call by the Allstate once they are in control.

    1. The junior debt is trading higher but the pref trading close to par. Allstate won’t leave the preferred hanging and call them as soon as possible next year. Could be a good place to stash funds.

    2. NGHC preferreds were discussed back in July as this is what I have in my notes from then – NGHCO, N, AND P Section 5.18 Company Preferred Stock. (p 56) of https://www.sec.gov/Archives/edgar/data/1578735/000119312520189144/d934937dex21.htm
      (a) At Parent’s [PARENT = ALLSTATE]sole expense and subject to Parent’s reasonable cooperation therewith, the Company shall, as reasonably requested by Parent in writing, take all actions necessary to effect the redemption of any or all series of the Company Preferred Stock as of or immediately prior to the Effective Time (ON OR BEFORE 4/7/21, EXTENDABLE TP 7/7/21 to the extent redeemable by the Company on its terms at such time, including preparing and delivering all notices of conditional optional redemption in form and substance reasonably acceptable to Parent to effect the redemption pursuant to the requisite provisions of the applicable Certificate of Designations; provided, however, any notice of redemption shall be irrevocably conditional on the Closing occurring immediately following such redemption and the date of redemption shall be no earlier than the Closing Date; provided, further, that Parent shall provide, or cause to be provided, all funds required to effect such redemption or shall confirm the use of cash on hand at the Company to effect such redemption.

      1. 2WR,
        I have a bid in on NGHCO but it hasn’t hit even with the drop in the market this past week. I am not going to chase it.
        Thanks to everyone and this website for sharing. I may re-think it from all the comments here about AMTRUST and Maiden and ALLSTATE was never my favorite when it comes to insurance.
        3rd qtr. the economy has come back but who knows what the fourth qtr. will bring. I don’t have a crystal ball, but when I have customers from around Calif, Ut and other places asking how business is and in return telling me they are steady but not as busy as 3 months ago I am keeping some dry powder

    3. Anyone have any idea what all the litigation announcements are about with NGHC ? I see on TD the last 2 months has nothing but lawyers saying they have pending litigation? Bunch of ambulance chasers seems like

      1. No more litigation, the heir of the Karfunkel family and the son-in-law, Zyskind took the company private a while ago. The two baby bonds, AFFT amd AFFS both trading around $18, while all the non cumulative preferreds, AFSIC, AFSIM, AFSIN, AFSIP contain to trade in gray market without skipping any dividends or interest. Their British collaborator, Maiden Holdings, LTD apparently had no meaningful income of their own, has suspended ALL the non cumulative dividends on its two preferreds, MH-C and MH-D while the baby bond MHMC, for example were paid interest without skipping, like Gridbird says, higher on the ladder. I have never sold a share on NGHC, the best of Amtrust run by his son with small hiccups from one quarter to another but always below par because of the AMTRUST fiasco. I have sold them all because the take over by AllState. I could be wrong, many in SA believe that they all will be called early next year. There was an activist who threatened to take over Amtrust. I was stupid for NOT selling them. Then, I have very little real loss considering all the dividends I collected on Amtrust and still collecting. Amtrust is rated by AM Best insurance company as B or B+ and one notch higher for its baby bonds (my vague recollection). I thank AM Best for providing their rating. I believe the dividends are reasonably safe as Amtrust insurance policies were rated as A- in most regions.
        BTW, I decided to buy more SCCC but bought still a little too early on the second offering. My logic: baby bonds to BDC even from tiny SAR could be reasonably safe. Fidelity analysts rated SACH as bullish. Mortgage in Connecticut I thought could be safe, ASSUMING that it is the wealthy part of the NYC suburban homes. I do pair trades, SWANS vs. tons of shippers GLOP-A, B and C, GMLP (common: my worst mistake following two so called experts) and GMLPP, my largest holding of Safe Bulkers Inc. C and D (very safe as long as the most honest Greek brothers are alive and healthy), WWC-A, RLJ-A, intermediate risks: SITC-A, UBP-H (I consider these as de facto SWANS), regional bank preferreds.
        BTW, I just sold my ET (Energy Transfer) early this morning, dividend reduction coupled with tons of bad news. I deserve to lose money. Apparently they tried to run pipes on native American ancient land. I continue to hold their two preferreds, which actually went up today probably because the leverage of the parent is somewhat reduced due to the ridiculous Rida Morwa type of HUGE dividends.

        1. Johnkcal,
          Thanks for the feedback, and the honesty. I still remember the slogan “you’re in good hands” Allstate was one of the insurers in the Oakland fire who took years to pay out, think the state finally had to step in. With all the fires and hurricanes and people dropping their whole life policy’s from being out of work, I wonder how the insurance companies are doing. I had MHLD preferred for a while a few yrs. back was greedy for the dividend. Glad I got out in time.
          Same here with the shippers, but I only hold one KNOP am down a lot but hanging in because its a well run co. Oil is shaky right now. The frackers have a lot of debt overhang and they are not drilling so at some point which I think is already happening, the pipeline infrastructure which is overbuilt will have less oil to transport. So I hold nothing else related to oil. With lower demand even the refineries are shutting down. Natural gas may be safe in the future and pipelines from the gulf they can always reverse the flow for imported oil like it was 20yrs ago.

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