Innovative Income Investor | Innovative Income Investor

B Riley Investment Comes Home to Roost

Today B Riley Financial (RILY) has posted today an ‘open letter’ to board members and shareholders of a company which they have lent money.

In this case RILY lent money to a crypto miner named Core Scientific (CORZ) who quit paying interest and principal on loans in late October and now has threatened bankruptcy. In typical RILY fashion RILY has offered incremental financing to keep them out of bankruptcy. RILY’s loan was only $42 million and they have offered another $72 million in new money.

I don’t claim to understand Core Scientific (or any crypto miner), but I do know that RILY has made significant loans to marginal company’s in the last couple of years (i.e. Babcock and Wilcox (BW), Arena Group (AREN) and others) and I mentioned this a few years ago on this site–I own no RILY securities, but I do worry about their finances as there is significant incestuous activity at play here.

Please make sure to do your deep due diligence on your B Riley investments (i.e. baby bonds). I know a few authors on SA push the baby bonds and they are likely ok–but just the same understand what you own.

The open letter is here.

Headlines of Interest

Below are some press releases from company’s with preferred stock and baby bonds outstanding.

Sachem Capital Corp. Announces Dividend of $0.13 Per Share

Brookfield Renewable Announces Renewal of Normal Course Issuer Bids

Scorpio Tankers Inc. Announces Update on Q4 2022 Events, Including Q4 2022 Daily TCE Revenues

The Hartford Declares Quarterly Dividend Of $375 Per Share Of Series G Preferred Stock

Lincoln Financial Group to Report Fourth Quarter Earnings

Applied UV Closes Deal to Provide Furnishings to Three Major U.S. Hotels and Condos

Harrow Announces Proposed Offering of $100 Million of Senior Notes Due 2027 and “BB” Rating from Egan-Jones

MFA Financial, Inc. Announces Dividend of $0.35 per Share

B. RILEY FINANCIAL ISSUES OPEN LETTER TO CORE SCIENTIFIC INVESTORS

Fed Stays Vigilant and Semi Hawkish

The Fed whacked the equity markets with the expected 50 basis point hike–but with follow up statements that they will remain vigilant and still have work to do–a hawkish tone. The S&P500 moved 2% lower at 1 p.m. central–and moved almost another point lower when Powell began to speak with a hawkish tone.

Interest rates (10 year treasury) are up 3-4 basis points–nothing too harmful.

All I can say at this point in time that those without patience in their investing are going to be disappointed–this game is going on through 2023. The next Fed meeting isn’t until January 31st/February 1st–so lots and lots of data to be scrutinized between now and then. No one can predict what we will see for a rate hike in February–assuming there is one.

For a month or two I am going to assume little upward movement in preferreds and baby bonds–just collect some fat dividends.

Harrow Health Selling New Baby Bonds

Pharmaceutical company Harrow Health (HROW) has announced a new baby bond offering.

They are offering $100,000,000 in senior notes maturing in 2027.

The company has a 8.625% baby bond outstanding already which can be seen here.

The preliminary prospectus can be read here.

It’s Always Something – Let’s Go!

Seems like every week we have 1-2 items of key importance – employment, inflation and interest rates. Markets live from news item to news item. Maybe in a year we will get back to fundamental investments stocks and bonds – what a silly thought. Right now with my personal lack of buys and sells it almost feels ‘normal’, although one is always looking over their shoulder to see what is about to bite them in the butt.

Yesterday was a kind of crazy day with the S&P500 trading in a giant sized range of about 3% points–before closing just 29 points above Monday (less than a 1% gain). Interest rates plunged on the softer (slightly) CPI news–but gave back some of the lower rates by the end of the day, but yet closed at 3.50%–where it remains this morning.

Today there will be no surprises as the Fed Funds rate will be raised by 50 basis points–as almost always the markets will be glued to Chair Powell’s news conference–hopefully he will be balanced – ‘inflation is trending down, but we must remain vigilant and data dependent’ etc.

I posted last night that golf company Drive Shack (DS) is delisting their securities (1 common share issue and 3 preferred issues). This company has been ‘on the ropes’ for a long time–years and years and there is ‘history’ so really this one is no surprise, but just the same if you are a preferred holder you are likely to take a further licking.

So with the futures signaling a quiet day let’s get this thing rolling!!