AmTrust Financial Delisting Preferreds and Baby Bonds

AmTrust Financial, which completed an action to go private recently, has announced that they will delist their 7 issues of preferred shares as well as their 2 issues of baby bonds effective 2/7.

This does happen on occasion and most recently happened to us when Phoenix Companies (an insurer) was purchased by a private company and their shares were delisted. In the case of the Phoenix shares we simply sold our prior to the delisting. I believe there are some individuals on the website who continue to hold some of these shares and maybe they will chime in here.

Our concern with AmTrust, in which we hold no shares, is that they simply may not be trustworthy and being private they will forgo the normal financial reporting that they previously had to do.

Maybe this works out for preferred and baby bond holders–or maybe it doesn’t, but investors should be aware that this is happening.

The press release can be found here.

28 thoughts on “AmTrust Financial Delisting Preferreds and Baby Bonds”

  1. Guys, this is not over. Let’s fight. The more people write to SEC, the less likely they will get a way with this! The SEC submission process is quite simple, it will take you 10 minutes. The link for SEC submissions is here:
    https://www.sec.gov/tcr

    I also believe, that Sanders like Democrats will like to use this as a case study of Wall Street (Stone Point Capital) gaining profits at the expense of ordinary Americans. Stone Point Capital is acting like the evil of Wall Street.
    I still can not believe that this could happen in the US. Write to Sanders, write to Warren, write to your democratic politicians, ask them for help! They will like the story. Let’s make it public. If you do so, the below are the best supporting materials I could find on the web:

    https://www.valuewalk.com/2019/01/predatory-activities-amtrust-stone-point/

    https://www.barrons.com/articles/insurer-amtrust-to-delist-preferred-shares-51548273554

  2. just filed the below complaint to the SEC:
    Dear Sirs,

    I hold preferred shares of AmTrust Financial (“Amsturst“) series A-C.

    1. Despite its commitments to the contrary, Amtrust on 1/18 announced its decision to delist its preferred shares. I understand that there is a rule that prevents delisting if there are more than 300 shareholders. I owe all classes of AmTrust preferred shares through Interactive Brokers (IB) platform. I know five other people that own the same shares through IB. I want to encourage the SEC to look through IB and other similar platforms in assessing the number of affected shareholders. If you would treat all IB accounts as one account that would not reflect the reality and disadvantage the retail and institutional shareholders. I believe that SEC should request IB and all similar trading platforms to release data on a number of shareholders.

    2. Both AmTrust and its main shareholder Stone Point Capital recently declared that they would not delist the preferred shares. Despite that, they have done so and deleted the commitments from their websites.

    3. There is a suspicion that Barry Zyskind, who is at the management of both Amtrust and Maiden Holdings (Maiden) and has significant equity holdings in both companies attempts to push down prices of Amtrust capital structure for his financial gain. I heard at the market that while Mr. Zyskind is pushing down the prices of AmTrust capital structure, he might be buying those instruments into Maiden. Maiden holding has recently sold most insurance assets and might be investing in AmTrust financial instruments. Mr Zyskind as a CEO of Amtrust might be taking action to force down a price of the instruments and at the same time might be buying the same assets in Maiden or other vehicle controlled by his Karfunkel family. I believe that such activities may not be legal and I would encourage SEC to investigate the issue.

    Many retail shareholders own AmTrust preferred shares. Amtrust management´s action is aimed to gain at the expense of its shareholders. SEC role is to prevent such situations. I am writing to SEC for the support of minority shareholders against the predatory behaviour of AmTrust.

  3. A WF analyst mentioned in a note today that Amtrust can repurchase up to $350 million of their preferreds and book the difference between the buyback price and par value as a profit. Rather than quit paying dividends and worsen their reputation, it would make sense for them to take advantage of the low price to buy back now, and saving a huge amount of money on potential recalls. It also play to their hand to de-list and cause such a low price. Also keep in mind, going private as they did is likely not the final goal. Likely, they feel they bought the company cheap and will polish up for a future re-listing. Their private equity partners will want to exit at some point not too far down the road. Reputationally, they should want to go back to the public markets with no additional scaring caused from stopping preferred payments

  4. Let’s not forget that Stone Point has several other companies with outstanding and ongoing preferred capital financing needs. Any shenanigans with AFSI preferreds will negatively impact their ongoing financing abilities with many other companies – including normal debt financing needs. Also, the legal liability obligations of the preferred stock remain unchanged after delisting. They cannot pay out any dividends or equity ownership payouts unless preferred’s are being paid. Can anyone name even just one company that played shenanigans with non-cumulative preferreds outside of valid going concern issues?

  5. Let’s not forget that Stone Point has several other companies with outstanding and ongoing preferred capital financing needs. Any shenanigans with AFSI preferreds will negatively impact their ongoing financing abilities with many other companies – including normal debt financing needs. Also, the legal liability obligations of the preferred stock remain unchanged after delisting. They cannot pay out any dividends or equity ownership payouts unless preferred’s are being paid. Can anyone name even just one company that played shenanigans with non-cumulative preferreds outside of valid going concern issues?

  6. I bought some notes years ago, during the 08/09 crisis for about $5/share. The company was delisted – taken private a few years before. Notes still traded for awhile on exchange. 8% yield, $2/yr. distros. Never, ever missed. Held the notes for years. At one time, $price increased to around $20 I think. sold a portion of position, rest of position around $0/basis. $Prices of notes fluctuated a lot for years, and bond desks demanded big distance between buy/sell. I still received $2/yr!
    Blackstone took the company private. Finally, well along in recovery years, cleaned it up for IPO. About 1 month before going public again, they called all of the notes at Par. Now a clean balance sheet. Company was Hilton Hotels.
    One of the best debt-issues I ever owned -:))

    My point>> I think there is also a major PE investor that helped take AmTrust private. If so, likelihood is they won’t sit with ‘patient money’ until 2055. So …. somewhere ‘down the line’ Amtrust will be cleaned and packaged for a liquidity transaction. That may also imply calls for notes?

    just IMHO …
    StevenG

    1. Im nervous by nature owning this stuff admittedly. But redeeming notes may or may not have anything to do with a good balance sheet. If the 7% is considered good rate to leave outstanding any new acquiring company would. When WEC Energy acquired Intergys, (an investment grade utility), they delisted the 6% baby bond of $400 million (IEH, Baa2 rating) and it remains outstanding and delisted.
      Mr. Lucky is right. They are not a trustful outfit. They just stated a couple months ago a twisted word lie trying to imply they would continue leaving the preferreds trading on exchange. They new damn well they werent. Im just riding a short wave of people needing out. I dont trust their reserves, their need for fresh capital, their inability to file timely annual statements, their financial resatements, 5 year shadow investigation by SEC, shenanigans with bought and controlled subsidiaires, etc. I wont be in these very long.

  7. No matter the discount, Amtrust and related companies have “shyster” written all over them. I think if you look up “Zyskind,” you will find the term scamster. If the bonds dropped to $1, i still wouldn’t buy. It is fun to gamble, but this is not worth pulling the slot handle for me. I “prefered” to sell my CHSCN for almost a $4 gain. I probably sold them back to the same people that gave them to me for $23/share. Fear of losing out and missing the boat is a great thing entering investors minds in the last week.

    A certain % of greed is now entering the market, so I am getting back into KYN, SSW, etc, term ending issues. I will keep some, like JBK that people gave me for $25/share. Others where I have only gained $1 or less in unrealized gains for the stock price, I’ll keep too.

  8. Baby Bond AFSS is looking pretty good here. 12% current yield till 2055, and can’t be suspended like the preferreds due to private owner shenanigans. I wouldn’t bet the farm on it, but not a bad way to add some spice to a portfolio with pretty good safety. And a nice capital gain at maturity, if any of us are still around to pick it up. It won’t be easy to unload these though, they will probably trade on the bond desk with even more opaque bid/ask spreads than the pink sheets.

    1. RJ, I just bought 200 more at 14.36. That gives me 600. If it tanks under $14 I may go 400 more. If it doesnt, I will sit. There probably is mostly get out before delisting stampede here from stakeholders who cant or wont hold delisted securities. This is a gambling stake though, and I suspect like Nomad suggested it will be a bumpy ride.

      1. Grid, AFSS closed at $14.08 but is going up strongly after hours, (up 6.6 % to $15.01 as I write).
        If bought, do they still appear among positions on the brokerage account and do they still pay the interest directly into the account after de-listing?

        1. MFZ, yes, yes, and kind of yes….I will use my PFX as an example (which is a delisted baby bond)…I had to call bond desk to get the purchase. Baby bonds bought in the bond market are viewed as “equity linked notes”. After purchase it showed up in my stock section, not bond holdings. However there is no ticker symbol next to it like my other preferreds. It is labeled “Phoenix Companies Inc PFD SR Debt 7.45%” with my other preferreds.
          Being it is interest (like AFSS) there is no dividend declaration or announcement. The interest payment just shows up on time quarterly.
          Now the actual pricing is another matter. In one section it is just frozen in time on initial purchase price. In another section is shows the trailing value from a day behind. Tracking the daily movements in FINRA is problematic because many of the trades are wholesale inner bond desk trades.
          This is my experience from my brokerage account.

          1. Grid, good call. I believe this is a “get out at any price before delisting” panic. The baby bond interest can’t be deferred like a preferred stock. I would stick to the baby bonds here – all you are losing is some selling transparency and liquidity – and in some cases maybe the ability to use margin may be affected. Mr. Lucky, I don’t share your concerns about this group for the baby bonds; for the preferreds your concern is warranted – they could easily play games with those now that they are privately owned and the securities de-listed. But with the baby bonds, it’s either pay or default. Normally I preferred the preferreds, but in this case buying the baby bonds instead can mitigate the concerns of those worried about shenanigans.

            1. RJ, this price action is just delistment related and its stigma. Which is crazy as the this drop should have occured months ago if it was a worry. Whenever a company goes private this is SOP. You dont pay millions in regulatory filings and fees to satisfy non voting shareholders. I knew this was coming, but not the one day price drop. The stigma of delistment is more quality of bonds related than delistment after the shareholders rollover to new ones. Look at IEH, a delisted baby bond from Integrys that is 6% par 2073 maturity, callable 2023. It traded yesterday right at par $25, so that is no market discount purchase.

          2. Grid, my Phoenix is in my account with Merrill Edge with the original symbol PFX and says The Phoenix Company Inc; there use to be a CUSIP next to the name, but they removed it for some reason mid last year. Yes, the quarterly interest just shows up with no ex date. Also, it has been almost impossible for me to buy more at a decent price. I have tried many many times at Merrill/Vanguard and the spread or where I see the security trading is not what they claim they can buy it me at. I suggest anyone interested follow the trading numbers at http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C134867&symbol=PNX3814338

  9. Throw me in jail, I did it. I bought 400 shares of the baby bond AFSS at $14.50. Was kind of surprised it tanked as bad as preferreds today since there is more payment protections. Im surprised they tanked as much as they have like people were suprised they would delist. That was almost a given when they went private. Just a small ball gambling money trade, not buying to feed the orphans with the income. Over 12% interest was just too tempting not to throw a few bones at….For me only..

    1. I have Muleriders in to buy AFSS after I saw it got train wrecked. Fasten your seatbelts. It’s going to be a bumpy night! Wishing you profitable investing, Nomad

        1. Grid, I have multiple orders in and am hoping the bond get drilled lower again. I initially sipped from the dark pool of income black water at $14.16-14.22. Stay thirsty my friends, Nomad

          1. I guess the investors in this bond don’t mind taking on a little risk. However, this one is too risky for me. At this time I have a little cash to invest but want to stay pretty short-term, so I’ll probably pick up a few Kimco bonds that mature in Nov. 2022 with a YTM of about 3.7%.

            1. They just announced earnings of 11 cents a share today and 43 cents for the year. Not interested in preferred shenangians, but will wait for that 12% interest payment until it comes no more. PFX is still paying me so maybe the fact they are making money and own all common stock they will understand they have to pay me or they will be going down in flames with me on their common stock.

  10. Hi Tim,
    I subscribed to AmTrust’s alert, so that I did receive the notice last Friday. Before the market opened this morning, someone at Doug Le Du’s web asked the question. Doug basically quoted the press release from the Form 8K.
    “Each series of the Preferred Stock and the Subordinated Notes will continue to remain an outstanding obligation of AmTrust. The Company plans to continue paying quarterly dividends and interest on the Listed Securities consistent with its rights and obligations.” When one member asked about liquidity being limited and “prospectus”, Doug replied “Given the alternative available to AmTrust (per the Maiden Holdings meltdown), this privatization by AmTrust is great news for preferred shareholders as this could have very easily gone much worse.”
    I also made my post as follows:
    “Thanks so much for your input, Doug. Apparently, SA has a link on AFNL.
    https://seekingalpha.com/symbol/AFNL?s=afnl
    AFNL appears to be trading in the pink sheet. If you click the chart for 1 month, it is clear that Amstrust has been doing much better, consistent with the price of its ETDS. For that reason, after I sold my F preferreds at year end, I stubbornly held off selling my C and D preferreds. I registered with the Company’s website and received the news very promptly. So far, I have to trust Mr. Zyskind, CEO of Amtrust. With horrible reputation, as a result of combination of bad moves by the management (hiring an Israel private investigator to take retaliative measures against its enemies, whistle blower, SEC and FBI investigations. Coupled perhaps by the act of short sellers and enemies of Michael Karfunkel, who died in October 2018. There are at least 1 or more SA writers who were short sellers. Zyskind and the Karfunkel enterprise probably did the best thing, taking it private and hopefully business can sustain with their A.M. Best insurance rating maintained at A-.”
    like you have opined, very few people trust Amtrust in the investment community. I believe that, as Doug does, their British insurer, Maiden took the bullet and historically Maiden really has very little business of their own. I intend to hold my C and D shares, certainly not interested to sell at today’s price. In fact, all the ETDS came down along with the preferreds. The CEO did mention that the board chose voluntary delisting and de registering because there are only few shareholders of this private firm. The company is actually doing better. I searched SA and found LINK of the Company. Please click for 1 month.
    https://seekingalpha.com/symbol/AFNL?s=afnl
    However, when searching for the SYMBOL AFNL per se, there is no 10Q, Nonetheless, the filing so far seems transparent.

    1. Hi John…thanks for sharing that information. Am I correct in assuming that once these AmTrust preferred shares are de-listed it will no longer be possible for share holders to sell them?

      1. No, I suppose you still can sell them. My problem has been “who is buying these stocks?” Could be Amtrust themselves OR their enemies. Zyskind “speech” was consistent all along something like “as long as we can pay the bank debts, we plan to pay the preferred shareholders dividends.” Not that I want to trust Amtrust (pun intended), then there are plenty of SA writers who would write articles against an issue “recommended by their competitor.” For example, Michael Boyd, who is collaborating (as I found later) with J Mitzmyer plus a few more “wrote a very negative article recently on LXP” claiming that their late entry in commercial REITS was ill timed and their dividends were not covered or would be problematic.” Instead of posting a comment herewith at Tim’s WEBSETE or SI, I quickly sold off substantial holdings of LXP only to see that LXP is one of the few eREITS which held steady. I googled the disabilities of a company taking private, Got some info from Mortley fools:
        “What Happens to Delisted Shares? Here’s what you need to know about the reasons and effects of a stock being removed from its exchange.
        “Delisting” is generally used in a negative way, for when companies no longer meet the requirements to be listed on an exchange, and are removed either voluntarily or involuntarily. However, delisting technically just means the removal of a listed stock from its exchange, and there are a few reasons that can happen. Failure to meet exchange requirements As we mentioned, the term “delisting” is typically used in reference to a stock that no longer meets its exchange’s requirements and is subsequently removed. When listed on a major exchange, such as the Nasdaq or NYSE, companies and their stocks need to meet certain requirements. For example, among the Nasdaq’s continued listing requirements for the Nasdaq Global Market are: Share price of at least $1. At least 400 total shareholders. $10 million in stockholders’ equity or $50 million market value or $50 million of total assets and total revenue.
        In addition, companies are required to disclose material news promptly, file forms such as 10-Qs and 10-Ks in a timely manner, and meet several ongoing corporate governance requirements. Failure to meet any of the requirements can potentially cause the company’s stock to be delisted from the exchange. Once delisted, the company can still trade on the Over-the-Counter Bulletin Board (OTCBB),”
        I hope this info may be of some help to you.

      2. Citadel, delisted in and of itself is not a big thing to me. All those ultra safe old utility preferreds such as CNLPL and AILLL, etc are delisted. Its the who is doing the delisting and then lack of financial disclosures that make it more troublesome. The family who owns doesnt have the trust factor here either.
        Amtrust will have to disclose financials through the state insurance commission so they will be available…If you are one who can do that. Insurance accounting is above my pay grade.
        The baby bonds getting delisted could be more problematic…if they wind up on the bond desk. The several delisted baby bonds I track wound up not on OTC, but at the bond desk trading as equity linked notes. You will get beat up by the thieving bond desk traders on bid/ask spread and no pricing transparency.

  11. Thank you for this info. There have been a few preferreds whose status has changed to shaky recently, i.e., MHLD preferreds. Difficult to find info in a timely manner.

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