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.
Picked up some CNLHO today at $36 (6.25%)
Nice add! I saw those but I’ve been adding to PREJF. The current ask is $17.20 (7.09% current yield)
Dick, what’s the story with PREJF? Perhaps I heard it wrong but last I heard they were going dark (The former PRE-J); or expert market 7.1% seems like it may be low if headed to expert market. If it stays OTC I think 7.1% acceptable and in fact I’d be interested.
It’s listed as pink current information by OTC.
PROPRIETARY QUOTE ELIGIBILITY
PQE Status – Yes
PQE Reason – Piggyback Qualified – SEC Reporting
Does anyone know why this one says it is “piggyback qualified”? Is it due to the fact that ParterRe has several bonds that trade OTC?
https://www.otcmarkets.com/stock/PREJF/overview
Dick just curious, what are the bonds?
Do you have the symbols?
70212JAA3 is one of them. There are some others that come up when you search by issuer on the FINRA site.
Thanks Dick
Bought two lots (one odd, one 100 shares) of GMLPF at $10.45…..put in limit orders of $10.60. Just an FYI, and it goes ex sometime around Aug 7th (cross posted in Reader’s Alerts).
GMLPF is a $25 par preferred with last OTC trade at 9.60 on a big volume today? What is it? Looks scary.
Regarding MSEXP, Broadridge says :
……..At this point Broadridge cannot debit DTC’s balance and credit the shares into an account on our records. DTC is actively working to reconcile their position and cancel their certificated position so the shares can be delivered electronically ……
So we wait.
Thanks again for posting these updates LT.
This is one of the weirdest stock situations I’ve been involved in.
Terra Capital has two senior notes maturing in 2026. TPTA yields around 26%, while TFSA only yields around 11%. Does anyone know why the yield differential is so large?
GS:
TPTA, a 6% note at today’s close of 17.81 pays 8.42% interest not 26%.
I was quoting yield to maturity, not current yield. These are notes maturing in 2026.
Obviously investors concerned they might not be able to redeem it. Trading around 12 recently.
Regardless, i would be skittish on both. They had a big default on an office loan in Georgia. They have another loan that is not up to snuff with interest payments as well. This is a small company, so that loss is huuge and impacted them for a good sized net loss for the year.
I would rather put the money on a black jack table. Or maybe on that wheel that goes round and round and dump it all on red.
Assuming both notes are equal in a default, you can go long TPTA and sell short TFSA and pick up the yield differential if there are no defaults. If there is a default, you are roughly break even. But I’m not sure if they are equal in a default situation.
Their fees are very large in the terra income fund 6 in proportion to the income. It also had a net income loss this year. The interest income dropped by a fair amount, and you have 1/2 of the income going to management fees. This is why it is lucrative to be an external manager. Yikes.
I see a 32% borrow rate at IB. Perhaps Fidelity is less.
When I made my living trading arbitrage , this is the type of thing that would interest me. The secret sauce is finding the lowest borrowing source. If the security has euro-style options you could borrow through the options market with a box trade. This doesn’t.
I recall we gave up trying to arbitage preferred stocks a year or so after the financial crisis due to gaming of the borrow system. It’s very simple to make a stock look easy to borrow, with a low rate, by transferring your paid up securities from a cash acct to a margin account.
We found that we’d establish a position in an easy to borrow preferred and a few days later it would become hard to borrow with a high rate because the lender would move the securities to a cash account forcing a buy-in
GS, I wouldn’t consider TPTA and TFSA illiquid preferred. Your post should have been in the REIT section. And no, I am not the Nanny police but I have been noticing a lot of posts lately that seem to be outside the forums Tim set up. It makes it hard to follow posts on illiquids and REITS when the posts start to get jumbled up.
I have asked this question too in the past. The baby bonds have the same risk profile. TPTA merged with TFSA back in 2022 and there should not be such a huge spread. I swapped my TFSA into TPTA to take advantage of the better YTM. Either TPTA will increase in price or TFSA should go down as maturity approaches.
I have reviewed the financials and watched the recent presentation on their website. I am comfortable with how the company is doing and expect these to be redeemed at par in 2026. They will likely issue new senior notes to cover the redemption.
Somebody dumped some HAWEL (1,200+ shares traded). Ask is 15.50 or 6.45% yield