Eagle Point Credit Company (ECC) has posted their normal monthly review.
Of course we are always interested since the company has 3 baby bonds and 2 term preferred issues outstanding (which can be seen here).
The monthly overview can be seen here.
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4/19/2024
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Looking ahead to next week…ECCB becomes callable 10/21/21. The company has declared monthly dividends thru December, but does redemption of the issue (or a partial call) preclude them having to pay those declared dividends?
Citadel, if I read the prospectus correctly (https://www.sec.gov/Archives/edgar/data/1604174/000114420416127262/v450168_497.htm), the answer to your question is ‘no, they are required to pay accumulated dividends on the call’: “At any time after October 29, 2021, we may, at our sole option, redeem the outstanding shares of the Series B Term Preferred Stock at a redemption price per share equal to the Liquidation Preference plus accumulated but unpaid dividends, if any, to, but excluding, the Redemption Date.”
Thanks for the input Bur…that verbiage doesn’t say anything about paying declared future dividends, so its unlikely Eagle would include them in any redemption. I’ve decided to bite the bullet and sell my remaining ECCB shares with the expectation the company will call them at the first opportunity. The prospect of increasing portfolio cash going into earnings season is appealing, even if I miss a monthly dividend payment or two.
Thanks for this link Tim, it reminded me to pay closer attention to credit risk and quality. Nice to see the majority is first lien.
First Lien 97.9%
I hate to expose my ignorance, but can anyone please explain the difference between a term preferred and a baby bond? They seem equivalent to me. Does one rank higher?
Yup, JV – as you suspected… A baby bond’s a bond and a term preferred is a preferred… Therefore, though they are very similar in characteristics and most frequently act the same, the baby bond outranks the term preferred in the corporate stack so they won’t act the same in the worst case scenario.
Another difference…term preferreds can be monthly payers..I don’t think baby bonds can do that. Term preferred can also suspend payments without defaulting.
At the core, the main difference is one shows up on the balance sheet as debt (baby bond) and the other as stock holders equity.
Scott – as with any rule, there are always exceptions – not all preferreds are carried as equity – QRTEA is one example and I believe FPI-B was another.
Term dated preferreds are generally treated as liabilities, not capital on the balance sheet.
Tim, could you please share what are the metrics for those CLO CEFs such as ECC, OXLC that are important for the fixed income investor in their bonds and, preferreds
RiskFree–I will try to write something on it soon.