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%