The beauty of commenters–we have 1000’s of sets of eyes watching details of these types of things.
ESW3 posted the note below in comments responding to an item in the Monday Morning Kickoff
Tim, Stephen, all –
There are a number of interesting aspects about that HMLP-A delisting. First, HMLP-A wasn’t “officially” delisted until about 10 minutes ago with this certification filing: https://www.sec.gov/Archives/edgar/data/1603016/000110465923000010/tm2233598d1_1512g.htm
Second, I was told by a representative of the compliance department at OTC Markets.com that HMLP-A would move to the expert market immediately upon delisting. And sure as heck, here’s the new symbol – HMLPF. https://www.otcmarkets.com/stock/HMLPF/overview.
BUT: It looks like it listed as “Pink, Current”. So it should trade at most US brokerages, and the “expert” listing info I got from the compliance dep’t. at OTCM was wrong, at least for now.
Third, I am nearly 100% certain that the ICE Exchange-Listed Preferred & Hybrid Securities Index (Bloomberg ticker PHGY) has not yet removed HMLP-A from its January, 2023 constituent list. (As I write this, ICE is still showing the 12/31/2022 date for all of its benchmark indices.) The reason I am so confident in this projection is that PFF, which uses the ICE Index as its benchmark index, as of Friday December 30, 2022 still holds 533,169 shares of HMLP-A. PFF gets an early look at changes to the ICE Index – for example, they got rid of several hundred thousand shares of the Pennsylvania REIT (PEI-B, PEI-C etc. now trading on the OTC Markets as PRETL, PRETM, and PRETN) so I am equally confident that the PEI preferred shares have been removed from PHGY. (The January, 2023 PHGY constituent list will be updated later today, and I’ll try to remember to post it.)
Fourth and finally, I believe this means that HMLP-A will be removed from the PHGY constituent list effective on February 1, 2023. That’s when the “fun” will begin for HMLP-A – when PFF is forced to start selling its shares.
I understand they have been delisted but does that mean they will stop/suspend paying the dividend or maybe buy the shares at the reduced rate or even call the issue
Don, Paying the dividend is unrelated to delisting. Delisting in itself is generally nothing either. I own several of delisted shares. The question is if they go to experts market which makes it only sellable, not buyable to retail investors. And typically you will get “fleeced” pricing on expert market.
If an issue “goes dark” that means it is essentially a “private placed issue”. Private issues are pretty common. Trouble is those were intentionally acquired that way negotiated on their terms most often. If a retail investor has one go dark, it largely becomes something that cant be traded.
If an issue gets delisted, yes a company can redeem or offer a tender. But that decision is totally in their hands. It does happen.
DON – think Grid got the answer to you.
Thanks, Gridbird for answering my question but do they still have a legal obligation to pay the dividend unless they go into bankruptcy even if they suspend it. And wouldn’t they redeem it if interest rates fell back to almost zero again.
Don, yes the contractual terms are unaffected by delisting. But remember I just said contractual terms which is different than “legal obligation to pay” (as in quarterly like clockwork). You have to check prospectus. Remember each quarterly dividend must be declared by the Board of Directors. Its nothing automatic and it contingent upon their finances and concerns. And of course undeclared dividends will accrue. After that your getting into scenarios and situations which may or may not occur. But bottom line delistment is unrelated to payment or contractual terms of a preferred’s prospectus.
Gridbird, Thanks for the reply to Don. I also was curious. So, if I understand it preferreds if issued on terms for a cumulative basis and after a specified period the preferred holders may obtain seats on the board of directors remain in effect? I suppose the more practical concern is what recourse if the contractual terms are not enforced? I doubt a single individual would ever come out whole by litigation (due to the expense). TIA
Petosky, I havent bothered to read this one since I dont own, but typically at best (if any) most prospectus allow for 2 seated members or sometimes “observers”. Nothing to move the needle except maybe to remind them they are still accruing, ha. Some old utility preferred allow for taking majority number of board seats, but they are few…and never has been needed from what I have seen.
As far as this issue goes, its trading pink now. Company said they would provide financials on website. If they do what is need for OTC and follow through, the pain maybe largely over now price wise. Unless any late fund dumps disrupt pricing.
Gridbird. Many thanks. I was not asking for this particular security but rather the delisting consequences as a whole. If I understand the terms continue however, as preferreds are not obligated until the BOD authorizes the impact can be severe. I assume for baby bonds and bonds in general the legal obligation and default ramifications continue regardless of the delisting? TIA
Petosky, The problem that has occured with people unfamilar with process, everything gets lumped under the term “delisted” (untradeable, dividend suspended, low ball tender, bad pricing, etc.). Yes, it can wind up being some of that, but it could be none of that too. Take an issue I own, I recently bought, UEPEO.. It was delisted in 2007 by parent Ameren. Not once has a tender been made, has it been untradeable, nor has it missed a divi payment. And at its present 5.81% yield one can not say its price has suffered from being delisted and on the pink sheets. Heck SOCGP was delisted long ago and somebody paid $26.49 ($25 6% par) today for 2100 share block. A huge premium purchase today.
It largely boils down to the repuration and intent of a company when a delistment occurs, and whether it gets sent to expert market because company wont release financials. That are the major problems to ponder when an issue gets delisted. And when sellers dump it they are making a statement they dont want to get stuck with it. And depending on company and situation, that may be the very wise decision to do.
In the nobody’s perfect category, prolific SA author Brad Thomas recommended this one on July 26, 2019
Tim – thank you very much for highlighting my note from early this morning. It’s an honor.
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As suspected, Hoegh is still in the January, 2023 PHGY constituent list.
January 3, 2023 PHGY Constituent List
https://drive.google.com/file/d/1VH2GWamvKnXipwwRjtGDAppnBwn-XCxQ/view?usp=sharing
December 1, 2022 PHGY Constituent List (for comparison’s sake and weighting)
https://drive.google.com/file/d/1uibCbBEzHX8edptTZWxWV2dc2yKl6xco/view?usp=sharing
Highlights for January 3, 2023:
Remaining: Hoegh / HMLP-A preferred shares (officially delisted today and trading OTC pink, current; will be removed in February, 2023 since PHGY can only hold NYSE- and NASDAQ-listed shares)
Removed: Pennsylvania REIT preferred shares (moved to OTC markets mid-December, 2023; PFF selloff in progress)
Added: ATH / Athene Holdings 7.750%
Added: GTLS / Chart Industries Inc. 6.75%
Added: LNC / Lincoln National Corporation 9.0%
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Happy New Year, everyone!
ESW3—lots of folks see the comments, but in the interest of a wider dissemination sometimes I repost.
Housekeeping question: I am getting these notices but not the Monday Morning Kickoff and other post from earlier in the day. Also, the Home “button” is no longer showing. Am I doing something wrong?
Hi Paul–the ‘home button’ is kind of redundant so I think I removed it some time back – if you click on Innovative Income Investor in the top left corner you go back to the home page. Are you on Twitter or do you get my ‘feeds’. Occasionally I forget to punch the Twitter button which sends it to Twitter people.
Thanks Tim. That worked. I am not a Twitter.
ESW3, HMLP-A is not in my lane though had to say, that is some darn good research and seat-of-your pants reasoning and intel.