I am sure most of you are aware that insurer Enstar Group (ESGR) has announced a merger and will be going private.
My understanding of the deal is that the outstanding preferred shares of ESGR will be exchanged for similar new shares, but will not be listed for trading. The announcement is here.
The company has (2) 7% preferreds that are outstanding and they are tumbling. This is a case where readers should always check the Reader Initiated Alerts page for ‘breaking news’—folks on this site are very much in tune with what is going on–much quicker than I can be.
I held a small position in the 7% ESGRO issue which I exited at $23.83 earlier today. I took a 12 cent capital loss as I paid $23.95 for it, but held for a long time so it was a positive total return. Some quick folks were out at the market open at higher prices.
Shares have been falling all morning and folks will need to decide to hold or go ahead and sell. I suspect over time dividends will be just fine—but one never knows.
I have positions in AFFS and AFFT since 2018. Bought, Sold portions on run-ups to cost-average down – wash-rinse-repeat multiple times until the issues were pulled from retail trade. Still hold positions in both, keep open Sell GTCs. There are ongoing infrequent Tute trades.
>> All the while, continue to receive Distros from each.
Between my real cost-basis + distros they have more than paid for themselves and I view them more as an Annuity.
Also have the ESGR-Prefs. Done some limited Buy/Sell/Cost Averaging. Bought a small slug today. Still fell. Have another GTC for lower. Viewpoint is – as an Insurance-Co, still significant assets and cash-flow. ESGR-Prefs may be similar to the Amtrust Notes. Providing ongoing Distros at Hi-Y% / cost-basis.
If / when Market-$Prices recover upwards, have open Sell GTCs for portions of positions also.
Even-so, I limit total position sizes for these things, risk / exposure containment, relative to other holdings.
YMMV.
Steven
Very unpleasant situation. I think I will have a tall tequila on ice and lick my wounds
Sold 12000 shares today at more that $1,25 over the close. A disaster
FWIW, I wouldn’t touch Enstar with a 10 foot pole.
I owned some of their preferreds in about 2018 – then I watched them get into bed with the Karfunkel and Zyskind cabal that took AFSI private and pillaged Maiden Holdings about 5 years ago. That told me that the management team was not to be trusted.
If you followed the transaction flows, Enstar got shares in the AFSI go-private deal, then just happened to be the company chosen by Karfunkel and Zyskind to buy essentially all the productive assets from Maiden in a sweetheart deal, leaving Maiden shareholders with a seriously crippled company (and making a lot of money for Enstar).
There were some other related transactions between Enstar and cabal controlled companies (can’t recall details off the top of my head) that smelled bad and only profited Enstar and the Karfunkel and Zyskind cabal at the expense of shareholders.
I certainly remember MAIDEN, but this is more like AMTRUST. AMTRUST pays its dividend because they must, MAIDEN was always a sham and was truly meant to shaft investors and did.
Exactly private. That is why I never invested in Enstar. There was a foul odor in the air years ago, and then when the cloud faded away, the Karfunkels family was standing there alongside Zyskind. You just dont invest in that kind of hanky panky.
Dominic Silvester, CEO for over 20 years at Enstar Group stated “We believe this is the best next step for our shareholders”
Preferred shareholders that provided over $510 million in capital to Enstar in 2018 lost $73 million in value today, Monday, July 29, 2024.
Where would this company have been if preferred shareholders had not invested 510 million in 2018 to shore up this firm’s capital? I have two very large workers comp policies with Enstar operated insurers. It will be a cold day in hell if I ever renew with this company and look forward to informing others of this total disregard for those who have invested as preferred shareholders in Enstar. This reminds me of the Amtrust mistreatment of preferred shareholders (who I have never bought a workers comp policy again after the preferred shareholders suffered serious losses of value)
A very sad reminder of a few people’s greed vs a lot of losses to the great many who invest their hard earned dollars. Read the fine print of every prospectus when you invest or don’t invest is one of my lessons from this situation.
Crap. I have ESGRP in my wife’s taxable account. No problem if they keep paying the divvy wasn’t planning to sell it. But it makes me less likely to buy these small takeover targets ever again. Trade the big boys and the stable companies.
— Preferreds won’t go dark until mid-2025. 8% QDI may look good then. Divvy on the way soon. Just sayin’
— Many are dazed and puzzled over at The Other Website – anguished cries of “take-under” – why isn’t my Enstar common trading at 338? Good time to Google “time value of money” and plug 5% for 1 year into the $1 calculator from Dollar Tree.
Disclosure: proud owner of more dogs than the County animal shelter.
JMO. DYODD.
Bear, that’s a good one!
But it is a take-under. Acquisition price is below book value today and will be even more below BV in mid-2025.
It seems very likely that the only reason the BOD agreed to this price is that their stock/RSUs immediately vest. Bastards.
Landlord this could be a play on the price. They have a shop around period to find a higher price. If that happens and someone comes in at a higher price might bump up the common and the preferred
Unless an activist proactively offers a higher price, I doubt Enstar will be doing much shopping around or providing much data to prospective buyers. 30 days isn’t much time for someone to make a decision on a $5B+ purchase price.
That said, some enterprising lawyers could try and stop this abuse of shareholders.
Per IBKR there are 5 law firms filing suit. It is only day one.
typical. The formerly biggest shareholder rights law firm, Milburg Weiss, went down in a blaze of infamy a few years back with , I believe at least one principal going to prison.
These are what are known as “strike suits” and are unlikely to go anywhere .
I long for the years we had the now CT senator, Blumenthal as state AG. Dude used to file suit to stop every merger and ended up with zilch seemingly every time. Can’t win anything as AG? Run for Senate.
Lt 2 years ago would look on Yahoo and SA for company mergers then I would look to see which ambulance chasers were filing sour grapes lawsuit, go to their website for a list of companies they were sueing then find the companies on SA to get a feeling for what was the truth and then I would would flip them multiple times for.25 or 50 cents profit. Rinse, wash repeat
Interesting trading strategy. Were you buying because they were sued?
losingtrader, no because I was looking at odds of mergers going through and how long it was going to take. I only looked at these law firms to find lists of companies doing mergers. Most of these law firms never went from investigating to actually filing a suit and then even winning. It became obvious they were just fishing to see if anyone actually signed up. I wouldn’t be surprised that they even played buying or selling the stock based on investor reaction to their announcement.
I only looked at the lawyers to find lists. After I found potential candidates in merger talks, I would look at the charts to see if there was obvious high and low swings in the price. Just as a example, buyout offer was 1.50 and a lot of people sold out at 1.40 after it had run up from 1.20 then people get nervous it isn’t going to happen and more sell and it drops to 1.30 I would buy and let it go up a dime and sell at 1.40.
Rinse, wash repeat on several thousand shares and the dimes add up. The market was pretty stable in 2022? I was up 18% for the year. Last one I did was SPNT that I made any money on. Now, less into risks and more into just getting preferred’s at a good price and collecting dividends.
your mouth gods ears. I thought ESGRO, ESGRP were safest preferred in entire listed market,,, Then a : good corporate event occurs _ a takeover -the sock had quintupled in 5 years and preferreds are down big ,,, Unprecenteed….expected a redemption at 25
Buy now and buy later
I’m in at 21.50, half a full position, its a a tax-free annuity for me that my kids can get after I’m gone. Would have bought more but I also own a bunch of their bonds and don’t want to stick my neck out too far.
Does anyone have thoughts on whether the Enstar preferreds will end up like PRE-J? PRE-J was delisted recently but was assigned an OTC ticker symbol (PREJF) and never stopped trading.
Yes, I am still trading PREJF on E-Trade and Fidelity.
Confirmed I bought at Fidelity with the new ticker.
I am not sure that PRE-J is a permanent trade at PREJF, but only until their public financials stop being filed and their most recent 10-Q expires off.
The same will likely happen to Enstar’s preferreds.
So PartnerRe has several bonds outstanding. I believe these bonds trade OTC.
Does anyone know if there are financials that have to be filed as part of the bond issuances? Is that what is causing the OTC site to say “Piggyback Qualified – SEC Reporting” for PREJF?
https://www.otcmarkets.com/stock/PREJF/quote
Also, with PartnerRe being an insurance company, are we sure there isn’t a regulatory filing requirement that might be satisfying the OTC proprietary quote eligibility?
No bonds trade OTC except for some weird structured products and no financials are filed as a result.
Corporate bonds that trade with CUSIPs don’t trade OTC? Are you sure?
“Most corporate bonds are issued with maturities ranging from one to 30 years and trade in the over-the-counter (OTC) market.”
https://www.finra.org/investors/investing/investment-products/bonds#types
I was keeping bond markets where the trade is by bid separate from http://www.otcmarkets.com aka Pinksheets.
Back in January, I received the response below from Eversource regarding the OTC trading status of their preferreds. They referenced debt securities in their response. This made me ask about whether bonds might impact OTC trading status and whether this could be applicable to other securities like PREJF.
The Eversource subsidiary preferreds have the same OTC PQE status as PREJF at the moment. Both say “Piggyback Qualified – SEC Reporting”
If anyone is knowledgeable in this area, I’d really appreciate hearing your thoughts. Thanks in advance!
————————————————————————————
“We have been waiting to get confirmation from OTC regarding their decision to put CL&P and NSTAR Electric in the limited information tier and have finally heard back. Both CL&P and NSTAR Electric have ongoing reporting obligations under Section 13 of the Exchange Act due to debt securities that have been issued in registered transactions so OTC would be able to continue reviewing the Company filings again directly from the SEC system. As this understanding has just been communicated this afternoon I don’t know how long it will take for OTC to get rid of the Limited Information tab on all of the preferred issuances, but that will be done.”
NSTAR files on Edgar as Eversource Ticker symbol ES.
so their filings are all current.
https://www.sec.gov/Archives/edgar/data/23426/000007274124000010/es-20240331.htm
Did you read this sentence?
“Both CL&P and NSTAR Electric have ongoing reporting obligations under Section 13 of the Exchange Act due to debt securities that have been issued in registered transactions so OTC would be able to continue reviewing the Company filings again directly from the SEC system.”
Again, if anyone has anything helpful to add with regard to my question, it would be more than welcome.
did you look at the document I posted??
It is a prospectus for a BOND that is available to buy by the general public because it is REGISTERED.. aka, a prospectus was filed with the SEC
ESRG bonds seem a better deal than preferred . The 5.5 fixed reset is due to reset to 5 yr T plus 500 bps (from memory) in 2025 and is offered at 97.169.
These are sub debt of Enstar Finance, junk rated at issue.
I was told by a trader it’s Mnuchin’s group buying ESRG
Yes he and his boys make a ton. Preferred holders down 25 pct in two days after a “good” corporate event because new company doesnt want to pay exchange fees and is delisting the preferred from nyse
If you are referring to cusip 29360AAB6 the reset is 400 over 5r T on 1-15-27.
Agree as cusip avoids cumulative issue of pref
Vanguard shows no bid/ask, hence can’t be bought. Is that incorrect?
On 8/1 Fidelity had bid ask around 20.75 for ESGRO.
AMTRUST baby bonds trade on OTC
I guess the one thing stopping me from dumpster diving this for a small bite is that it is non-cumulative. I think I require that if the preferred will end up going dark. I mean I would definitely prefer it.
But if there are no longer ordinary shares, does it matter that the preferred isn’t cumulative?
Doesn’t the private company have some sort of shares that they might want to pay a dividend on at the expense of preferred shareholders? What is to stop them from doing that?
Don’t quote me on this but with all the machinations to be done before they complete this transaction I think Enstar will be set up as a wholly owned subsidiary. I would suspect that the structure will be such that a missed payment on the preferred of the Enstar sub will not directly impact the ability to pay divs on the parent’s common…. To set this up with all the wrinkles they have incorporated and not do so to include an out like that would seem pretty shoddy underwriting or investment banker work…
Re-reading what you wrote NewtoThis the probable answer to your question is “nothing.”
Would it at least impact the subsidiary’s ability to transfer cash to the parent? Would that constitute a “dividend” as such?
I just want something to keep them more honest. Cumulative tends to do that. Otherwise just stop paying it until you are ready to distribute cash to the private stock owners in whatever form that may be.
hey fc,
look at how the holders of maiden holdings preferreds were treated and I think you will see how Enstar preferred holders will likely be treated by Enstar management. with a “questionable” management team, “cumulative” can help keep them honest.
The Enstar management team is in bed with the Amtrust cabal that pillaged Maiden. IIRC, Maiden just stopped paying its preferreds, then eventually retired them at a fraction of redemption value (lots of sleazy machinations to get there).
Based on the Maiden experience, I personally think Enstar will just stop paying the non-cumulative shares and will eventually retire them at pennies on the dollar (like Amtrust cabal did with Maiden preferreds).
Just my thinking – I have never worked with Enstar management directly and I have no access to any internal data. I just saw how they and their “friends” destroyed maiden shareholders and see no reason they won’t “rinse and repeat” with Enstar holders.
They are being bought by a insurance run-off firm. It’s hard to imagine they don’t cease payments.
I took the loss and bailed out. Had enough of this nonsense. only 200 shares I’m spread out in this sector to avoid a bigger loss.
This conversation throughout this whole thread has made me realize I do not want a piece of this drama either. Folks wiser then I are wary therefore that means I should not be touching it with a ten foot pole.
Got out of it today, should have cut losses earlier and now it seems to be in a tailspin.
Keep a small/moderate allocation to any individual script, even solid ones can trip. I know this is like preaching to the choir but thought I will nevertheless mention for my own good 🙂
thanks for the info on management
Private, It seems you are assuming present management stays. Muncheon and team normally have their own group of folks running investments. I have no idea who will be in management. Are you assuming or is the information public that current management team stays.
This ENSTAR makes me nervous for ARGO-A I know div. being paid now but this financial engineering makes me view ARGO with greater risk.
Good thought to review ARGO given this, but I would think the risks are not the same…. I’d think Brookfield would be considered a much stronger parent, even if you consider simply Brookfield Re… Then again, they do have a past of having let some of their acquisitions die without support….
I’m glad you reminded me…. Long time ago (2017) I bot a position in ARGD, the note, as opposed to a preferred. I baled in April ’22 at 22.75 but kept 100 shares and promptly forgot about I owned them…. Reviewing now, I see that ARGD maintains a BBB- rating while the preferreds are unrated. A little apples to oranges comparison in a way but ARGO-A 7% RESETTABLE trades at a slight discount to par to give a current of 7.03% but the note, which is 6.50% due 2042 trades at 22.11 for a current yield of 7.35% AND a YTM of 7.78%…. That seems to say the note is cheap doesn’t it? Granted ARGO-A is trading in anticipation of a call on first reset date of 9/15/05 due to its reset parameters of +6.71 plus 5 year Treas rate, but still that spread seems to favor the note by a lot doesn’t it? I haven’t looked at this situation in a long time so value opinion of others who follow it..
esgro/pff pair trading at 3yr low ..esgro was a consistent outperformer up until today indicating market views sale as a big credit negative
Not as a credit negative so much as a liquidity. They will be delisted.
Yes. My huge, once upon a time considered safe, when Warren Buffett discontinued Berkshire with now delisted PREJF. So, I dumped my 355 shares of ERG -O. As I recall, Gridbird has nice things to say about Jeremy LaKosh,
Jeremy considered the BWBBP as safe, running his numbers. Since BWB does not pay dividend, I run simple price chart: BWB vs CCNE, which does pay dividend. Voila, CCNE is better. So, I bought 200 shares of CCNEP with its upcoming dividend soon getting 8%. For my retirement account I picked up just a few years of BWBBP. In life, I believe BALANCED approach. No one has the PERFECT answer. Just try to get some income for my wife and daughter who buy Organic food delivered. Jaime D, CEO of Chase, believe there is headwinds, JPM was buying small bank shares, to minimize surprises like New York City etc. Thank you, Tim and Gridbird My email address has been change. WIll appreciate learning how do I get Seeking Alpha send me their articles. Thank you all.
John, Your idea of CCNEP is interesting. Very small bank at about 534 million market cap, but is in areas with decent sized population. Will watch to see how it does.