On this page folks should comment and write about illiquid securities–preferreds and baby bonds. By Illiquid I am talking about those issues that seldom trade–or only trade in very small volumes.
We have a lot of discussion on the site about these types of securities–normally $50 and $100/shares issues and the commenting gets scattered about–by using this page we can keep this topic more centralized.
A caution to all investors, but in particular those will little experience in illiquid securities. Tight limits must be used on all of these securities–if you don’t use limits you will butchered. Also while some of these issues have been outstanding for more than 50 years they can still be called–it happens and if you overpay (pay more than liquidation price) you may be setting yourself up for a loss. Always do your own due diligence–always double check the facts–everyone makes errors (certainly I do) and you need to know the facts.
Investors should know that illiquid securities will drop like a rock if there is a large move higher in interest rates. One of my current and long time holdings has been a $50/share issue from CEF Tricontinental (TY-P or TY-) with a 5% coupon–very high quality. This issue is now trading around $56, but in its life (issued in 1963) it has traded as low at $18/share–so there should be no doubt they can move sharply.
CoBank redemption history
CBKLP 6.125% fixed, first call 7/1/18, called 1/1/22
CBKPP 6.25% F-F, first call 10/1/22, called 10/1/22
It’s almost certain CKNQP will be called on 1/1/25
Hope so I just bought 200 shares looked underpriced. 12% APY div if called, 8+% for now if not called.
Sold an odd lot of NSARP (75 shares ) Held for 6 months. Bought at 68.50 sold for 72,50 Story of my life, it settled at 73.94 so I left money on the table. Harvested $4.00 share in capital gains and 2 dividends.
I had tried to add to my amount but my GTC orders never hit so I decided to let it go. This was a solid 6.2% for my YOC now someone has it for a 5.75% yield on their cost.
I’m in shock. My junk order for CKNQP filled at 99.25. I’m expecting a call on Jan 1, but if not 3-month Libor + 3.744%. If the notice requirement is 30 days, we should hear something around Dec 1.
The ask for UEPEP and CNLHN is good for 6.2% or better.
I could easily have missed it somewhere else in the prospectus but, unusually, I see no provision for any pre-announcement for any call on CKNQP in the area of the prospectus where you’d normally see it. All it says is, “We must notify the FCA before we redeem any of the Series H Preferred Stock.” They are, however, only callable “on the first day of January, April, July or October (or the next succeeding Business Day if such date is not a Business Day), beginning on January 1, 2025.”
Thank you, 2wr.
r2s,
Here is CoBank’s official notice that they will replace 3mL with 3mSOFR (+ the .26161% tenor adj). CKNQP is Series H:
“As a result of the Permanent Cessation, references to 3-month LIBOR in (1) the Series H Preferred Stock will be replaced with 3-month CME Term SOFR and a spread of 0.26161% when the dividend rate is reset effective January 1, 2025 …”
https://www.cobank.com/documents/7714906/7715425/CoBank-LIBOR-Discontinuation-Notice-for-Series-H-and-Series-I-Preferred-Stock.pdf/381b0165-9d9e-d0d0-fb9a-7766c7a3d59d?t=1711720655570
mbg, what yield does this come to? So many SOFR’s your reference is to commercial.
Charles, not sure which yield you’re referring to.
If I had to take a stab at it. 3 month CME SOFR is trading at 95.76. At $25 per basis point, this comes to 3.83%. Then add .26161 + 3.744 = 7.8%
Thanks Mr C
Fido has the Roth dripping shares instead of taking the dividend. Which is fine since we don’t plan on touching the Roth.
Thanks, Mr. Conservative.
I calculate the first floating coupon as:
1. The 3 month CME SOFR on Sep 27 = 4.59335% *
2. The tenor adjustment = 0.26161%
3. The floating spread = 3.744%
4.59335% + 0.26161% + 3.744% = 8.599% coupon for the 1st floating div.
* Floating date = 1/1/25. Prior div (final fixed coupon div) = 10/1/24.
I estimate the Determination Date for the 3mSOFR to be 1-2 days before the prior dividend’s pay date, which was Monday, 10/1/24 … so the day before that was Friday, 9/27/24.
I think that’s incorrect, mbg…. 1/1/25 = the starting date for when it floats, so the rate is not calculable until 12/30/24, possibly 12/27. That’s the relevant date to determine what 3 month SOFR Term will be. The first floating rate payment will not occur until 4/1/25 if it’s not called.
Don’t forget it’s 3 month TERM SOFR, a different animal….. The official place to find it is https://www.cmegroup.com/market-data/cme-group-benchmark-administration/term-sofr.html but for me cmegroup has made logging in such a hassle that it’s practically impossible to open….. If you watch Bloomberg television, it’s constantly posted all day long there in the changing column all the way to the right… Today it is 4.5138% .. Historical rate not including the most current day is posted at https://www.barchart.com/stocks/quotes/SOFERMM3.RT/interactive-chart
My observation on most LIBOR conversions to SOFR is to use the 3 Month Term SOFR.
Very possible, I am off base on this.
As of Tueday Nov. 19 … 3 Mo Term SOFR was at 4.520% then the .26bp add.
Mini sell-off in CKNQP
Ask at $100
If called 1/1/25, a nice YTC
Ex date ~12/16
Thank you Irish. I was able to get 100 shares a teeny bit below 31.5. Nice when that happens. I was thinking to buy a bit more but ask is already at 32.
CNTHP – reality has returned. A large seller showed up… 25,800 shares traded, VWAP $53.07, current bid back up to $53.53
One of the better yields in illiquid ute land — 6.19% at $53
This traded almost 1300 shares at $98 on 10/21
Very odd
Anybody know why it got a 50% haircut? IN October