Going, Going, Gone – Old Entergy Preferreds

We noticed today that all old preferreds from utilities Entergy Mississippi and Entergy Arkansas have been redeemed as of Friday, 11/16/2018.

A reader had mentioned that he noticed an issue of his had been redeemed and while reviewing FINRA data today I see that a total of 7 $100 issues had been called.

The old issues many times require a premium to be paid to holders when redeemed.

The list we have of $50 and $100 issues can be seen here with the called issues.

We had written back in May that some of these would be redeemed as some 1st mortgage bonds were sold in order to call these old preferreds.

12 thoughts on “Going, Going, Gone – Old Entergy Preferreds”

  1. Dont get me sentimental, Tim. When you posted that your info made me over 3k easy money. I bought over 60k of those old bastards well under redemption price and some under par also. Held for a quick divi and flipped all near redemption price long ago. That was a great tip, Tim!

      1. I thank you now again, Tim for the tip….Uncle Sam will thank you soon, also come tax time…A short term capital gain, ugh, lol.

  2. Speaking of mortgage bonds and redemptions, think AILLL, among others.

    Often, all it takes is one question from a director, or one shareholder letter.

    1. Little known secret…AEE holding company actually owns 96% of one of the tradeable preferred floats. Owns, not retired… The AI preferreds are all bastard preferreds that were all deliberately renamed in 2010. They could have all been retired with office soda machine money when the various companies were bought in past 20 years. They are not even a blip on their capitalization, so effectively they serve little purpose.
      So yes it could happen…Many ute preferreds have been redeemed in past 3-5 years, some with par yields of under 4%. Its an anachronistic way of financing anymore with exception of only a couple utilities anymore.
      For several years there wasn’t an issue with this quality that could deliver safe plus 6% QDI. That is not the case now so one can go outside the utility area and find some very quality 6% issues. Admittedly because of this I have lightened my load a lot, but it still is my lead dog. I am fairly confident I can get out pretty clean with the rest even if a redemption was to occur as I know the key times and dates that when that possibility would occur…
      BTW, as far as rate filings go, the preferreds are viewed as one series…And as one series collectively they represent an under par sub 5% yield. In other words collectively, still cheap capital. My wager is, if one gets redeemed they all do at once.

      1. I agree on all-or-none. Personally, I’m taking the bet they stay outstanding.

        1. I hope you are correct Bob! CA. inverse condemnation aside, ute preferreds are about as dividend safe as they come, so my personal choice is to invest as much as possible in that segment when the opportunity to buy with acceptable yield arises. I would hate to lose my favorite issue.

      2. Hi Gridbird, thank you for your post. Can you please share “the key times and dates that when that possibility would occur (i.e., when announcement on the lights going out on AILLL)?” Were you referring to a certain time & date that a Call announcement would have to be made in relation to quarterly announced/released results ? Or is there something specific in prospectus? Thank you!

        1. Aarod, the Board of Directors would have to announce any redemption, or declaration of any preferred dividends. They meet like clock work on 4 dates a year and they roll year after year…For example say, the second thursday of the month. I forget off the top of my head but next meeting isnt until at least February so I will find it in January. The public announcement usually comes out around noon. The subsidiary board of directors are the ones that officially declare the dividends or would announce a redemption. The parent company actually does not. This is standard and most people are not even aware of this. But in actuality it is just a technicality …Because guess who owns the common stock of the subsidiary? The holding company…So guess who appoints the BOD’s of the subsidiary? Yep the holding company…In this specific situation yes as a preferred stock holder I do have votes as those shares are outstanding. But those public voting shares represent just a tiny fraction and are useless to prevent any action from holding company.

          1. I think probability of AILLL redemption would be low as the holding company has little motivation to terminate a nice, steady income stream from the sub. And they obviously know everything about the risk level of their sub – no unknowns or unanticipated disasters there.

            1. It seems that redemption should be the least of everybody’s worry anyway. Regardless of the quality, AILLL is a perpetual and will not be spared in a rising interest rates environment.

              1. That is true, Limit, (anything can happen) but the exposure to cap losses outside of temporary buy/sell imbalances wont be as much as one may seem. This was issued in 1993 at par 6.625% when 10 year was at 5%. Today it yields 6.27% with a 3.07% 10 year. I doubt you see major cap loss exposure unless one is assuming bigger rate hikes. Utility QDI preferreds (outside of PCG and EIX preferreds stressed from the fire liabilities) historically command high premiums in the market.

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