Chicken Soup for the Soul Entertainment Prices Preferred Issue

Tiny producer and distributor of on line and television programming Chicken Soup for the Soul Entertain (NASDAQ:CSSE) has priced a new cumulative preferred stock issue.

The $25 issue will carry a fixed coupon of 9.75% and will pay monthly dividends. The dividends will be cumulative and will be qualified to the extent the company is profitable–otherwise the dividends paid will be a non dividend distribution classified as a return of capital.

The new preferred issue has just begun trading under the ticker of CSSEP and is trading around $24.90.

The pricing term sheet can be found here.

While we have not done a thorough analysis of CSSE the 9.75% coupon and the $1.50 underwriting discount (about twice the normal discount) given to the underwriters goes a long way toward letting investors know this is a risky, lower quality issue.

We have no interest in purchasing any of this issue.

14 thoughts on “Chicken Soup for the Soul Entertainment Prices Preferred Issue”

  1. Nice reading of the fine print Andrew in the prospectus. Yeah, my guess is that they would convert this to common shares if goes beyond 2021.

  2. Well speaking of “chicken”, Tim….I finished selling off all my Entergy Ark preferreds today. I wasnt going to hang around if they didnt redeem issue. Anyways the longer they take to redeem the less return yield I would have received. Most of them I snagged $2 cap gain and the dividend also. Couple hundred of them I sold at price I bought and got the dividend. 100 shares of the lower yielding one I took a $2 loss to get rid of it, but got the plus $1 divi, so it wasnt bad. Overall some nice pocket change for a short hold.
    Getting back to my roots of buying more base load issues and forgetting about cap loss exposure. Snagged another 100 lot of WELPM and a decent slug of MTB-PR.

    1. Grid, I am long MTB.C and believe both preferreds MTB./MTB.C will both be called 11/15/18. The next EX date should be about 7/30 for $15.9375 plus the 45 days until call around $7.85. Nice short term walking around cash. Any thoughts on FPI.B? Wishing you profitable investing, Nomad

      1. I have been in and out of MTB-C before a few times. Sister MTB- hit this time, so its the one I have now. Personally, I think it will be called also, being they both are cumulative Tarp issues. So this is in essence “Time out” money and just hold until call. If I get lucky and it lasts past call like WFC-J still is, I will hold until it is redeemed.
        I only own a small couple hundred shares of FPI-B. To be honest I didnt do much research on it, other than it isnt a rock star reit. Kaptain Lou bought it and told me, and I basically said what the heck, I will buy a small taste myself.

        1. I believe the FPI.B 6% coupon has an interesting fail to redeem clause: On and after 9/30/2024, in lieu of the prior dividend rate, a dividend rate of 10.00% per annum will be paid on the initial liquidation preference per share of Series B Stock plus the FVA Amount, if any (see the prospectus for details).
          Tim, have you ever looked at this cumulative preferred?

          1. You will never get that 10% on the FBI preferred. They can force conversion to common stock starting in 2021.

          2. Hi Nomadicmist—yes I looked at it when it was originally issued and watched it go up to $28/share. I personally never assigned in my mind an FVA premium as I question whether that feature would be worth much at all.

            Now that it is down to 24.35 it is more interesting, but I would need about 7% to buy. I don’t like management (pittman) as I think he is a shyster. On the other hand I would have an interest in this preferred at a 7% current yield.

            I always like the penalty rates as normally it should make the security pricing act like a “term preferred” since it is highly likely to be called prior to the 2024 date.

    1. Nomadicmist–yes a huge ex day today and Spark tomorrow. Earnings around 8/4 for Spark I think–they better not screw this quarter up.

  3. Tim, my dates may not be accurate. I know it has filed for bankruptcy more than once. I believe it operates under a different ownership now, but the bottom line is this was a both a risky as well as a risque investment. Per Wikipedia:

    “The company filed for Chapter 11 bankruptcy in 2001. In 2003, it emerged from bankruptcy and was headquartered in Los Angeles. In 2006, it merged with New York City sleepwear manufacturer Movie Star and the headquarters was moved to New York.[10] In 2008, the company changed its name to Frederick’s of Hollywood Group Inc.[11] The company was traded on the American Stock Exchange under the ticker symbol FOHL, but in May 2014, the company was taken private by Harbinger Group and other investors.[12] Its headquarters remain in New York City.

    In 2015, the company closed its stores and again filed for Chapter 11 bankruptcy. Its brand and online operations were acquired by Authentic Brands Group. The company announced it would be online only, with possible future plans to create products for sale in department stores and other retail outlets”

    1. Don–just remember how “racey” Fredericks were way back–of course it didn’t hold a candle to the internet where you can get all teh fancy underwear you want (or don’t want).

  4. I have enjoyed a nice laugh from this particular issue. For some reason, CSSE’s much too cute corporate name (which, by itself, was strike one against the company before I looked at anything else) reminded me of another high risk preferred issue from a much more established “entertainment” company at the time when Frederick’s of Hollywood issued a 9% preferred back in 2012 (FOH went bankrupt in 2015). IMO this CSSE issue defines high risk. Maybe if it changed its corporate name to an aeven catchier and healthier moniker, “Garbanzo beans for the colon”, I might change my mind????

    1. Don–I wasn’t aware that Fredericks was around until 2015–I lost track of them at least 20 years ago. My guess is CSSE will change their name eventually.

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