CEF Gabelli Global Utility & Income Trust to Offer Puttable Preferred

Closed end fund (CEF) Gabelli Global Utility and Income Trust (AMEX:GLU) will be doing a rights offering for holders of their common shares which will include the right to purchase shares in the new Preferred Series B to be offered only through the rights offering.

Recall that Gabelli has a number of ‘puttable’ preferreds outstanding.  A puttable share may be ‘put’ (sold) back to the company for a set price  prior to certain dates which the company outlines in their prospectus.

We must caution that some of these offerings have some tricky ‘teaser’ interest rates that appears to be a better deal than it ends up being.

The new issue will have an initial interest rate of 7% for the 1st year after which the board will determine the new ‘reset rate’ which will be 200 basis points over the 10 year treasury (for instance today the rate would be 5.2%).  The reset rate will not be ever be lower than 4% nor more than 7%.  The puttable dates will be in December of 2021 and 2023.  After the puttable periods the shares will revert to be a regular perpetual preferred.

The liquidation preference of the new preferred will be $50/share and this is what the shares will be puttable to the company on the dates noted above.

The record date for the offering will be 11/12/2018.

The new preferred will trade on the AMEX, but it is likely to take a number of weeks before trading occurs.  The ticker will be GLU-B.

The official prospectus has not been published as of yet, but there is material available for those interested and it can be found here.

As we were making note of this new issue we found the initial series of puttable preferred issued by the CEF–GLU-A.  This issue just went by the last puttable period and now is trading at the reset rate of 5%.  Like the new issue the reset rate is 200 basis points over the 10 year treasury, but in no case will it be less than 3% or greater than 5%.

This is a chart of the older issue.  You can see after the last puttable period expired the price fell as it no longer had the $50 put to hold it up–we think some holders were sleeping.    It has a current yield of 5.39%

12 thoughts on “CEF Gabelli Global Utility & Income Trust to Offer Puttable Preferred”

    1. GLU-A opened at about $50.70 in November 2013 – a 1.4% premium

      I would imagine something similar with this offering

      1. Thats interesting. The GGO-A I have originally traded in the $50’s with a teaser of 8%–and it is a $40 puttable. It fell off a cliff after the teaser expired–I bought around $42 so it is just around 5% so I have an interest in this new issue once it comes out.

      2. Okay, this is very different than what I am used to. Your right to buy at $50 seems to be tied to ownership of common stock. I notice the common has jumped 4.92% today.

        “Each shareholder will receive one transferable right (the “Rights”) for each common share held on the record date, November 12, 2018”

        Three Rights plus $67.50 (the “Subscription Price”) will be required to purchase one additional common share and one Series B Preferred share (the “Primary Subscription”). The Subscription Price will be payable in cash. Rights may not be exercised to purchase only additional common shares or only Series B Preferred shares and shareholders must purchase an equal number of common shares and Series B Preferred shares.

        1. Steve–that is right. The company intends to list the preferreds so they can trade on their own. The rights for the preferred will trade as well–so not sure of how to go about that with etrade–will have to see how it works. The record date for common holders is 11/12/2018 so 1 could buy some shares and participate that way.

          1. The common stock discount to NAV is about -4%. In looking at Morningstar’s chart that is the low since late 2013. So you are paying up for the common stock (3 year average is -11%, the 6 month average is close to -8% ) compared to last 5 years. Might be better off to buy the preferred at market when it begins trading

            1. Steve, this is must me, but I knew about this a few days ago and its a pass for me. Now when GDL-C came out, all you had to do was own GDL-B the preferred. I had 200 shares of B and was able to buy 300 of C at $50 and flip out near $53. This one as you noted is extracting you to buy many commons just to buy some of the preferred. Not same issuance rules…They are forcing people to drum up support of the commons to get some of the preferred. I am not paying the ransom note. It may be a good purchase but it isnt the slam dunk buying the C was at $50 and not having to own or buy the common.

              1. I am not going to buy the common stock either. Its has jumped close to 5% already. So I will pass on the IPO at $50 and see if I can buy once trading on open market if the price is reasonable.

              2. Grid–thanks for your input–I knew you would have some experience with these–more than I do.

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