Gabelli Go Anywhere Trust “Put Option” Notice Received

There has been some talk on the site of how the “put option” works on a couple of the Gabelli CEF issues work.

We own a position in the Gabelli Go Anywhere Fund (GGO-A) which has ‘put’ options in 2019 and 2021.

The company put out the notice to investors last week–we received the notice electronically first and then yesterday we received a snail mail version.

This issue has a floor coupon of 5%–which is where it is now, based on a $40 liquidation value. The issue is trading at $41.49 today (we use this term loosely as there is damned little volume)–so a current yield around 4.8%.

The ‘put’ is can be exercised from now until 9/24/2019 at $40 plus accrued dividends. 1 has to call their broker (in this case Fido) to exercise the ‘put’.

In this case we will not exercise our ‘put’ which would lock in a loss of more than $1/share on our holdings. We then have 2 years to either dispose of the shares or exercise the option that comes around in 2021. Most likely we will dispose of the shares prior to the next put as shares will move down towards $40 as the next put date comes closer, but we have plenty of time to see what happens prior to this time.

After the second ‘put’ date arrives the issue converts to a perpetual preferred stock.

12 thoughts on “Gabelli Go Anywhere Trust “Put Option” Notice Received”

  1. Tim, thanks for posting this and good to finally know how this actually works. Glad they remind shareholders of the put. Will probably incur voluntary reorg fee with most brokers

    1. 730Cap–that is the first time with one of these so it is good for me to know how it works as well.

    2. Tim,
      Another puttable Gabelli issue is GDL-C, with some complicated features. I think there was a corporate action recently, and now is paying 4% (of $50 until march 2020), trades now at about $51; it is puttable on march 2020 and again in 2022 (paying somewhere between 4% and 6% between 2020 and 2022, most probably will be 4%) and finally expires (at an unknown rate beginning on 2022?) on 2025, or something like that, if I get it correctly.

      If you know more about this GDL-C, could you provide some comments on it, is the above description correct, do you own it and if not, is it a bad one, etc?

      Thx!

  2. Thanks, Tim… I, too, got my notice via email this morning…. To me, this put is an easy one to pass, but I have not yet done the actual YTM calculation using 9/27/2021 (the next put date) as maturity and 41.49 as price, but I will. The $40 par instead of $25 or $50 makes it necessary to do a little algebra to calculate ytm in the calculator I use, but I feel certain, the ytm will look very good vs 2 year alternatives….So given you state current yield our viewpoints may be a bit different but I’m certain we’re coming to the same conclusion.

    1. Tim, Forgive my ignorance, but I don’t get this: why would anybody want to exercise the put @ $40 (plus divs) when you can just sell at $41.5 (or higher) right now?

      Maybe this is a stupid question, but I guess (hope) some other readers may also wander. What am I missing?

      Thx!

      1. Fair question, not stupid at all… In this instance, you’re absolutely right that it would make more sense to just sell at the market, however, remember two things – 1. That put option was created so that in a situation where the reset rate was going to change, the GGO-A holder would have the option to sell it at par if they didn’t want to accept the changed coupon. it provides price stability for the holder no matter the interest rate environment…. 2. The second thing to remember is at the time of the next put option in ’21, the one that will be the last put option available, GGO-A turns into a different animal all together because it essentially becomes an immediately callable perpetual preferred instead of what can be considered a short term maturity preferred…. That can make a big difference and a possibility in a normal interest rate environment (unlike today’s environment) for GGO-A to drop in price dramatically is one were not to put them back…. That’s what happened with GLU-A. So it’s always important to keep the put dates in mind… It’s also good to know that Gabelli so conscientiously notifies shareholders well in advance of the put option dates.

        1. 2whiteroses,
          Thx for the reply. So it seems, in this case, that they are issuing the put just because they have to (by regulations?). Because we seem to like the 5% for 2 years, I guess we will just have to see what happens in 2021 and in the meantime enjoy the dividends.
          D

          1. D – Technically, they’re not “issuing” the put because as you suspect, it was a provision created in the original issuance prospectus. So yes, they have to… But this time around, it should be for all practical purposes an academic exercise…. Incidentally, I did the math for YTM at 41.49 and I think I came up with about 3.17% yield to the next put.. I claim oncoming senility so don’t quote me exactly but no matter it was certainly in the range that competes favorably with KYN-F and SPE-B for example and anything over 3% for a 2 year piece of paper of this quality seems to be an easy call to hold, not sell in the market….

            1. And BTW, I use “quality” in an absolute sense rather than how our good SA bud, Rida uses the word….

      2. daniel–thanks for the question. I see 2WR waded in on it. In addition to what 2WR added you need to remember there is almost NO liquidity in the issue. I had a sell in for months at 42 and it never executed. While the last trade was 41.xx there is no guarantee one can actually sell this illiquid for that price. Never a stupid question.

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