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CEF Highland Opportunity and Income Fund Tenders for Common Using Preferred Shares

Closed end fund Highland Opportunity and Income Fund (HFRO) has announced they are tendering for up to $100 million in common shares using a new Series B preferred issue. Details of the new preferred issue have not been announced, but they state they will be structured similarly to the Series A (HFRO-A) which is currently outstanding.

The intent of the tender offer is to try to move the common share price higher–it trades at a very steep discount to net asset value.

HFRO-A has almost always traded weakly–while A1 rated by Moodys there appears to be little confidence in the management of Highland Opportunity and Income Fund. A large share of their investments are in funds run by Nexpoint–which also is the advisor to HFRO. This company seems to have way too many incestuous relationships to be taken real seriously.

The press release from the company can be read here.

Thanks to J for posting info in comments earlier today.

Weekly Kickoff

Last week was a winner for the S&P500–not by a giant amount but by 1.6% which was essentially the amount of loss in the previous week. Daily we had moves of this size, but we had a couple days last week that started with really big losses, but each time traders drove the index back higher. The index is much higher on the futures market this morning–so looks like we will party for at least a few hours.

The 10 year treasury yield was off by 2 basis points for the week–closing at 4.41%. During the week was saw the yield as low as 4.34% and as high as 4.49%. This morning rates are lower–it at the 4.37% level–but all know that this is pretty meaningless as to where the yield will go during the day and where the day ends. This week we have a key piece of data in the personal consumption expenditures inflation released on Wednesday –the is the big piece of data on he week. We have the FOMC minutes from the last meeting released on Tuesday. Of course on the Thursday we have the Thanksgiving holiday and so there is no economic news being released Thursday and again on Friday.

The Fed balance sheet took a giant sized move lower last week–down by $47 billion.

The average $25 preferred and baby bond fell by 7 cents last week. Investment grade issues fell by 12 cents, banks fell by 9 cents, mREIT preferreds fell hard by 26 cents and shippers were off by 6 cents. The big winner on the week were CEF preferreds took a 32 cent jump as the surprise call from Priority Income Fund took all of the PRIF preferreds higher.

Last week we had 4 new income issues price. This is the busiest week for new issues in the last year or so.

The pricing term sheet can be found here.

The pricing term sheet can be found here.

The pricing term sheet can be found here

The pricing term sheet can be read here.

Sometimes You Get a Surprise Bonus

Sometimes you get ugly surprises–once in a while you get a capital gain bonus. For holders of the Priority Income Fund 6.25% term preferred (PRIF-G) the surprise came in the form of a redemption notice. The redemption notice is for 12/23/2024 at $25/shares plus accrued dividends from 9/30/2024. This issue became redeemable 3/19/2023 and had a mandatory redemption date of 6/30/2026. Shares were trading around $24.30 yesterday and closed at $25.04 today.

It is somewhat unusual for a term preferred of this relatively modest coupon to be called early in this interest rates environment–but the issue is only 1.28 million shares so the $32 million cost to redeem is minor to a $1 billion CEF.

Priority Income has an active ‘at the money’ common share sale program which can readily generate cash for redemptions such as this one.

The good part for holders is they got a 3% pop on their shares and they have plenty of other PRIF term preferreds to chose from to invest their proceeds.

New Issues From Yesterday

Yesterday, while I was out taking care of some family medical issues, there were new issues announced.

Aspen Insurance announced a new 7% non cumulative perpetual preferred with proceeds to redeem their F-to F preferred (I assume the AHL-C issue) which is now a fixed rate issue with a coupon of 9.59%. We had some snoozers on this one as it was trading at $26.60 last month and new is at $25.43. Aspen is now owned by Apollo.

The preliminary prospectus is here. The pricing term document is here.

Ramaco Resources (METC) sold a new baby bond with a coupon of 8.375%. The pricing term sheet is here.

Thanks to J (as always), Peppino and others who made note of new issues in the Readers Alert Section–always the best place to get an immediate ‘heads up’ on new issues.