CEF Priority Income Fund Registers New Preferred Issue

Untraded CEF Priority Income Fund has registered another term preferred share offering . The Priority Income Fund is a holder of collateralized debt obligations (CLOs).

The new issue will be PRIF-F when it finally is priced and issued. Because of the known history of issuance of new term preferreds from the Priority Income Fund it could be a week or two before they price the issue.

Being a CEF the company must maintain at least a 200% asset coverage ratio and as of 6/30/2019 the company has a adjusted coverage ratio of approximately 350% (giving affect to the series E issued just 3 weeks ago).

The company currently has 5 term preferreds issues outstanding and they can be seen here.

The new registration statement can be found here.

Eugene was right on this one under the Reader Initiated Alerts earlier today.

22 thoughts on “CEF Priority Income Fund Registers New Preferred Issue”

  1. I sold PRIF-D 10-16. Avoid Series E. Bumped out OCCIP and some toppy long BBs too. Obviously, I think the short note rate will go up (prob CN5yr too!) I have more cash now than in about a year and fewer prefs overall percentage. Have been enjoying the fab Fall in Midwest outdoors as an offset to desk though!

  2. Looking for insight on Teekay Offshore 8.875% B. This month it has gone from $16.50 to $23.50 after Brookfield took it over. Many people originally thought it might be an orphan stock or that Brookfield might make an offer slightly above the $16.50 price at the time of the takeover. I currently own it at this price and don’t know what to do—sell or enjoy the 9+ % yield. Any insight or thoughts appreciated.

    1. Randy
      I am in the minority here, but I am still a little leery of the TOO preferreds. The entire market got pretty excited because the press release about the merger stated that the preferreds would remain outstanding. The market obviously read that as meaning that (a) TOO would maintain the NYSE listing, and (b) TOO would keep paying the dividends. If that’s correct, the credit risk is low, and its a great security.
      I just don’t believe Brookfield made the 2 commitments above. The merger agreement simply states: “Each Series A Preferred Unit, Series B Preferred Unit and Series E Preferred Unit issued and outstanding as of immediately prior to the Effective Time will be unaffected by the Merger and shall be unchanged and remain outstanding, and no consideration shall be delivered in respect thereof.” See 3.1.c.ii https://www.sec.gov/Archives/edgar/data/1001085/000110465919052631/a19-19297_1ex2.htm
      In my opinion, that was obvious from the start. I don’t see anything in that statement that requires Brookfield to maintain the listing. (The preferreds would still be outstanding. They would just trade on the gray market and be less liquid.) In addition, for most preferreds, we feel secure about getting a dividend because the common shareholders are expecting a dividend. In the case of TOO, I don’t think Brookfield has a cash flow problem. So they could always choose to defer the dividend on their common holdings and let the cash accumulate in the company where they own 100%. This issue is cumulative, so eventually dividends would have to be paid. But my question is, what prevents Brookfield from delisting the preferreds, suspending the dividend for a few quarters, and issuing a tender at a price below $25? Maybe they don’t want the hit to their reputation. But nothing in the merger agreement offers any protection. I have no insight into what they will do, but I do not believe the press release or merger agreement removed those risks.

      1. Roger—thanks for your thoughts. I sort of feel the same way. Just don’t understand why the preferreds have so dramatically gone higher on strong volume since Brookfield made the takeover complete. Obviously some investors feel they are safe, but who knows?

        1. Roger and Randy
          I just sold my TOO preferred for a small gain. I was also leery of holding as no assurances were truly made. Brookfield can still take all manner of legal steps to defer payments if they so wish….I was just so glad to be able to get out after holding a loser for so long. I will miss the 9% income, but will sleep better at night.

      2. Roger – I agree with your interpretation and analysis. I would add that Brookfield has, to my knowledge, no history of treating preferred shareholders shabbily after an acquisition and that the company has considerable reason not to do so.

        Brookfield is an enormous enterprise, with many dozens of preferred outstanding and goes into markets often to raise capital. The reputation is too important to risk over what is a small amount of money to them.

        I recall a sitaion maybe 5-6 years ago when a Brookfield bought a distressed company with an existing, non-paying, preferred and tendered for it at full redemption price as part of the acquisition.

  3. Is everybody expecting the debt markets to seize up so everybody is going to the well all at once to stock up on cash in order to pull the trigger on fire-sale priced investments later?

    It seems like that at some point, someone is going to get stuck with the check. (or be the proverbial canary where they get shut out of the debt market and the debt markets shut for everybody not A rated)
    The amount of debt just above junk status is at enormously high levels, which could lead to massive forced selling by funds as they fall that one or two statuses down.

    1. Don’t know about debt markets seizing up. That’s one of several black swans that could push this contrived market over the cliff. Yes I’m more cautious now. As a short term trader I’m never fully invested. But not much sitting in cash earning less than 2%. I put short term money in callable 5% preferreds trading slightly above par they move in a narrow range.

    1. Martin, I cashed in yesterday on them…What am I going to do with my 14 cent gain? Decisions, decisions….

      1. 14 cent gain is 10% APY. So what you do with it is Rinse and Repeat. I had a 7 cent gain and it sure beats Money Market rates. Though not a lot if you count the value of my time.

      2. I will continue to hold PRIF-E. True that PSEC is similar to AINV, one of the higher risk BDC’s (BDC common is deemed as the riskiest asset by Bruce Miller; then we all have to admit that ARCC is the best of BDC’s SO FAR). Years ago, I bought PBC (a preferred issued by PSEC), 6.875% note. For a while I regretted the purchase because market sentiment on PSEC despite DOUBLE IG rated note. Then I bought just a few shares more. Today, I must think of selling it based on YTC of 3.7%. I have 215 shares of TOO-E, bought on Richard Lejeune’s alert. However, I refuse to sell when he says sell. I bought it @ $24.453. With dividends collected since purchase date of 914/2018 in my IRA, I have no net loss. Obviously the market assume or ASSUMe that Brookfield will treat the preferreds as its own. There is no such commitment at all. TOO-E is the only stock keep on climbing almost every trading day. I thank Gridbird on his SLMNP. I just replaced my wife’s UNMA proceeds with 7 more shares of SLMNP at the seller’s ask, $1,023. Greedy incredible seller, he/she switched the price to $1,024. After 5 minutes, it got filled. Now with 11 ask vs 1 bid at $1,025. BTW, I love TDE, the best of Rich Hill and Gridbird. Loaded heavily with proceeds from sales.

        1. John, The TDE/TDJ was a great lower risk play when they sagged a month or so ago werent they. They are doing exactly as something past call should do…Creep up a bit nearly every day as they approach coming payment dates. It has been my biggest issue lately as a safety squeeze play….That level 2 trading screen shots are largely scams. They hide the true book that is out there. Still, I like looking at it some myself I will admit.

          1. Grid, thanks! It is extremely for me to tell whether Brookfield will redeem its preferreds. Theoretically the next dividend should come around first 5 days of so November. Then its aim was and still is to take TOO as part of its empire, presumably from a public company to private. In the case of Amtrust, I believe that Zyskind did a number of stupid things which back fired big time. I am now leaning toward selling my TOO-E soon and perhaps replace the proceeds with CTL very long bond. With CEO Storey determined to deleverage, buy CTL is speculative, baby bond has rallied to above par mostly. Its intermediate bond is no longer attractive. I will look into their long bond OR just buy more KRG eREIT. BTW, I do not believe that Brookfield is a crook. IMHO, it seems to be more fair and square than Blackstone, which pays dividends irregularly. But today, their renewable took a dive. I suppose 5% yield is way too low as compared to EPD or MMP. PEGI gapped up some more. Not interested to speculate at low 6% for this renewable either. BTW, I will pick up more of your SLMNP and change the bid to the seller. I suppose these folks are concerned with liquidity. Typically low value after the ex dividend date, then climbing just like TDE, MNR-C.

            1. TOO-E down quite a bit. I will hold to get the upcoming dividends. CTL long bond 40 year has been climbing. It is now slightly above par, getting 7.4+% yield to worst. Many in this greatest WEB is absolutely correct. Sold my 200 shares of BFS-E. Insane. Ditto for BPYXO, 6.35% all above $26 plus huge change. My new purchase on Brookfield, BEP, appears to be a huge mistake. Ditto for MAC, falling knives as if it is going to file for BK. MAC is a lazy Mall eREITS. They do not buy anything on their own except in partnership with others, e.g. PEI, plus more. Wildly recommended by so called SA experts. LOL. I bought another 8 shares of Gridbird’s SLMNP getting even lower at $1021. I am leaving a little more in cash in preparation of huge property tax bill in Dec plus lots of insurance bills to pay.

              1. BTW, AWP seems working after it reduced pro forma dividend just a tad. This was an awful pick by Rida et. al. Wrong timing in 2018. Then it started to came alive. I went back to pick up just 150 shares of UTF, Kiplinger’s Income Newsletter pick and at least one or more readers in this web. Cohen & Steers seem not so shabby when it is not overpriced. Kiplinger’s take: infrastructure has never really taken off. Then it should some day with bridges collapsing and etc.

              2. John, the selling isnt over yet it appears. I wonder if the guy selling would have been stuck without us buying, lol. I bought some more at 1021.50 today. I got 54, which is too many. But sitting 85 bps above what is largely being issued, Im not to worried bear term. This same cycle happened early last summer, then of course it dries up.

    2. Sold prif-b just now. Had a limit in at 25.11, didn’t fill. Changed to market order and filled at 25.18. Got .18 and a divvy out of the deal but yes. Too much activity here

  4. Looks like they are inflating the balance sheet as much as possible so Prospect can rake in Management fees.

    1. Yeah, in general I like term preferred, but I have stayed away from Priority because it is managed by the same clowns that run PSEC. Don’t trust them at all. Still at the right price, it may be a good buy; hopefully the leverage rules would keep them from messing it up too much.

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