If Ashford Hospitality Preferreds Were a Bargain Last Week–they are a Steal this Week

Last Thursday the Ashford Hospitality preferreds were marked down as the shares went ex-dividend–they drifted on Friday and today they are seeing kind of a big dump.

The AHT-G 7.375% issue is down 91 cents right at this moment on darned near 50,000 shares of volume–more than 3 times normal volume. The AHT-F 7.375% issue is off 86 cents on more normal volume. Both are trading in the $20.50-$21.00 area.

When you are dealing with a company that has lost the faith of the common share owners it is usually just a matter of time before the preferreds get hit hard. The common shares are now at $2.83. We have almost no doubt that over time—years—the preferreds will survive, but if I was (and I wouldn’t be) a holder I would be real concerned about the future. The ride could be very bumpy over the next couple of years if we hit a soft economy.

Additionally, I would be concerned with management taking the company private. The market cap on AHT is now a measly $289 million and the company has hinted, in a roundabout way, that maybe they will go private. No, they have not said it directly, but in their presentations they present possibilities of buying the common shares.

In their June presentation–which can be seen here–on page 12 they present some history, and hints.

Preferred Holders should be cautious. We are NOT predicting they go private, but something fishy is going on here. Even though dividends on the preferred are cumulative, there could be massive turbulence ahead.

Food for thought.

18 thoughts on “If Ashford Hospitality Preferreds Were a Bargain Last Week–they are a Steal this Week”

  1. Bank of America Corporation announced today that it will redeem 51,755 shares out of a total of 60,000 shares outstanding of its Fixed-to-Floating Rate Non-Cumulative Preferred Stock, Series V (the Series V Preferred Stock), and the corresponding depositary shares representing fractional interests in the Series V Preferred Stock (the Series V Depositary Shares) (CUSIP No. 060505EG5), on August 2, 2019.

    Of the total 1,500,000 Series V Depositary Shares outstanding, 1,293,875 Series V Depositary Shares, each representing a 1/25th interest in one share of the Series V Preferred Stock, will be redeemed on August 2, 2019 simultaneously with the redemption of the Series V Preferred Stock at a redemption price of $1,000 per depositary share, plus accrued and unpaid dividends for the current dividend period to but excluding the redemption date in an amount equal to $7.40760 per depositary share, for a total amount payable upon redemption of $1,007.40760 per depositary share. Such Series V Depositary Shares to be redeemed will be selected by lottery in accordance with the procedures of The Depository Trust Company (DTC). Dividends on the redeemed depositary shares will cease to accrue on the redemption date.

    The Series V Depositary Shares not selected for redemption will remain outstanding after the redemption date and will continue to accrue dividends as set forth in the certificate of designations governing the Series V Preferred Stock and the deposit agreement governing the Series V Depositary Shares, with regular dividends on such shares for the quarterly dividend period from and including June 17, 2019 to but excluding September 17, 2019, if declared, to be paid on September 17, 2019 to holders of record on September 1, 2019, in the customary manner..

    1. A4I, this was $1000 institutional issued 6/14 at 5.125%. The reset is 3 month libor + 3.387% so about 5.7% today. This is one reason I’m not crazy about resets, if it’s low they win and you lose, if it’s high they call and you lose. To add insult to injury they also seem to be able to wrangle a lower initial rate. If you buy resets under par only then maybe you can win in the end, otherwise nope.

      1. Hi P,
        Agree with what you said. Was just posting as a heads-up for anyone interested or if they owned. I love the BAC pfd’s as I own the B and Y flavors and have flipped in and out of others. Made pretty good money on the common also over the years.
        Taking a much bigger bet now on the COF pfd’s past and coming up on yield. Not as good w/re: to credit quality, but still QDI.

  2. SA author Rida Morwa issued a sell on AHT preferred which may have contributed to the downdraft. He has a lot of followers.

  3. Agree with your comments and I just sold all of my AHT preferred stock. This is becoming the CBL of lodging REIT stocks

    1. Thanks for the alert. I sold all my 832 shares of AHT-I, taking a net loss (off set by dividends since IPO circa Nov 2017) a little less than 10%. Bought more on CODI-B, following Richard Hill (SA writer). Sold my CODI commons taking some profit vs. earlier SELL at cap loss off set by dividends. CODI got BUY recommendation by some Barrons Mag writer (from what I heard). Trapping Value of SA also wrote a tongue in cheek article yesterday on AHT preferreds. Too much drama on my silly positions of TOO-E and DLNG-B (heard buy recommendations by Richard Lejeune [ just like Rida, he now says SELL). Tongue in cheek article by Rubicon Associates on DLNG-B (he apparently bought some too), i.e. basically “the Fat Lady has NOT sung”. DLNG has lots of long term contract but no money to pay their balloon debt. Lots of banks want to participate. No firm commitment yet. I went through several times reading Richard Hill’s Puerto Rican Banks (financials look ok on his study). Too much risk. Hurricane Season is just around the corner and PR had problem and probably will continue to have problem from federal money going forward. Aim to buy more NRXPP @ $25.37. Bad timing but still okay, probably better than buying JCAP common with owner CEO always want to quietly issue more stock to conquer the world, following Public Storage. eREITS are wacko these days, up when the general market is down, down when the equity market climbs. I do not want to buy any more BDC these days. Picked up 4 shares of SLMNP following Gridbird but I do not want to chase after them. 20 shares available at $1036 per share for this perpetual 6%, non callable QDI. I had 3 shares earlier and paid too much at $1040.99 without realizing that this one is not so loved (unlike SCE-L despite CA wild fire risks). SCE keeps on raising the rates and play all kind of games, e.g. charging more on peak hours, shut off air conditioning in peak hours etc. Edison International is not like PG and E, where the public utility commission is much tougher on the utilities. I may just leave the unfilled SLMNP for tomorrow. The new Sempra Energy, SREA, 5.75% note, is trading around 25.05. Not terribly attractive. You can get EPR-G around par 5.75% coupon. I still have some legacy positions on Amtrust preferreds. I believe that they will pay if they can pay the banks, like Zyskind said. I am not that cynical that A.M. Best will want them to skip the dividends so that the policy will remain whole. A.M. Best has been around for a very long time, I trust them. LOL.

      1. John, I always like your commentary so don’t stop to keep the board lively. Here’s mine. I skipped NLY but it’s finally getting a little traction after move to big board. I bought SREA and it’s been flat as a pancake but that’s OK with me. I bought big on TOO preferred went the lemmings went off the cliff. I know terrible idea, terrible company, bla bla bla but that’s OK with me. I slow flipped some and remainder up bigly now. I wish some famous goofball hack would write another panic article. I’d do it again. Most of my holdings are conservative. Almost everything I own is bright green today. For some reason I don’t know why but I’ll take it.

        1. P, thank you for your kind words.
          I forgot my wife has also some AHT-I. So I went back and sold AHT-I @$23.50 too. While I do realize that AHT Preferreds are not yet dead cat bounce, I kind of want to de-leverage as I have reached 76 and sooner will be 77. I still own quite a few risky positions which are working, thanks to Lord Xot plus the Divine perhaps, e.g. CAI-B and some CAI-A, all GLP-A, Triton A. I have under water without existential threat at this time IMHO, TNP-F and TNP-E. Plus NuStar preferreds (so so). And huge position of Safe Bulkers C and D (not worried at all, I trust the CEO and his brother totally, using their own private firm money to save the smallest Bulkers and now has GAAP tiny profit. Only risky: tariff ) plus JE-A and a little over 1,000 shares on SPKEP (Sparke Energy) fantastic bounce from last Q.
          BTW, I have to hand it to Tim, his full position on NRXPP rocked already. My 2 orders (separate account) in Fidelity bidding $25.40 failed. It is already $25.44. That is alright. I will probably keep the cash because I nearly forgot that cash balance dropped quite a bit, with huge estimated tax payments last month (our taxes got increased because huge State Tax, healthcare, charities are no longer deductible on the Federal tax, all limited to a ridiculous $10,000 per year, hence resulting in taking standard deductions. Plus State of CA does not recognize QDI. I forgot about 6/15/2019 auto withdrawal for the State, luckily made it with only $500+. BTW, I bought more JCAP common, founder Jernigan has been doing this since 2015, one of the picks from Richard Lejeune when I tried his PRO service.

          Depending on how the market react, I will try to find homes for the proceeds from IRA account. If nothing to buy, then MNR-C is a defacto SWAN IMHO, giving a CY around 6.3% with its 6.125% coupon, the only preferred left for MNR. MNR common is unloved by FIDO analysts, with very respectable debt to equity ratio plus tenants with good credit ratings. Unrated and the market apparently does not like MNR as much as BFS, same 6.125% coupon BFS-D almost at par, MNR-C catching up. I sold some MNR last year with net loss offset by dividends. Or just sit on cash waiting.

          1. John, I own a small amount of MNR-C, and my opinion is that the analysts and Street are cautious of MNR because the bulk of their revenue comes from one client, Fedex.

            In the past, Fedex was regarded as rock solid, but Amazon has been pushing hard into this space, and the level of nervousness increases as Amazon makes inroads into Fedex’s market.

            I agree MNR management seems quite capable, but if Fedex ever gets into trouble, MNR would also feel the adverse effects.

            For that reason, I do not intend to add to my position.

            1. Inspy, ironically Fed Ex revenues are only less than 2% total from Amazon. They dont really work together. MNR managements problem is their goofy infatuation with being a Rida Morwa yield dumpster diving wanna be reit fund. They lose money buying dump reits like WPG and CBL in their cash kitty..Stupid!

              1. Thanks, Gridbird, thanks P. Rida wrote articles either in his name or tons of hidden collaborators with Pendy “correcting” all the nay sayers. I looked at his FUN, amusement park with decent pro forma dividends. I have problem pulling the trigger. Too late to gamble (in this case perhaps not so risky) on buying more of the non callable XAN-C from XAN, small cap, decent looking chart and FIDO analysts bullish. Doug Le Du now promises FASTER alert in new issues (using 3 links). Some crazy buyout bank (actually mortgage company) SACH gives juicy note SCCB 7% closed at $25.35, SACH pays more than 10% pro forma dividend. I will not waste anybody’s time, because this one is early fetus or infant of AHT IMHO. It is obvious that they use the preferreds as hidden debt, following the teachings of Gridbird. I took a peek at their Q-1. No thank you. This so called bank makes Rich Hill’s Puerto Rican banks looking almost like BAC. MNR-C is not perfect but unlikely to fail. Not bad dividend these days IMHO.

                1. John, I own MNR-C too just recently reentered. The company is fine, the junk stock picking stuff is less than 10% of their cap. The family owns UMH also and does the same thing there with there mediocre stock picking skills.

                2. I bought SCCB (Sachem Baby Bond), looks good to me. To each their own, I don’t mind taking calculated risks.

  4. Hi Tim,
    If management decides that they take the company private do they have to buy back the all the prefs. at 25$ before they can go private? (since they have so many variants)

    1. Pecunia—I would have to read the prospectus to know for sure, but all I know of is that if there is a change in control preferred holders have the right to convert their preferred to common shares.

      The point of my article was that it could get very messy.

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