Illiquid Securities

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.

811 thoughts on “Illiquid Securities”

  1. Congrats……to the person who snagged 130 CNTHO at $37.22 today!

    Looks like someone unloaded 2k shares at the market.

    1. Damn – I had from a previous order that partially filled a standing order in for less than 100 shares at a better price that got ignored. Ugh.

          1. I am embarrassed to say I wasn’t able to snag as good a deal as the rest of you. I landed 200 at 38.85

  2. CTA-B is trading at a price point which offers an approx 7% yield for a BBB rated preferred in an industry that differs from the majority available. I just snagged some with a yield a touch above 7%. The OCESP replacement plan is coming along.

    It would be hilarious to have this called at a 120! bucks per share in a couple of years and have the same enjoyable problem of replacing it. It is trading at 64ish. I have to say I have always wondered if that was a typo and it is really 102 for a call. I will have to read up. Either way I would be happy.

    1. fc, I got a little victory lap on this one. I have traded and cross traded with A over time for some small grinds, but was out until a few days ago and thought I was getting a deal at $67 when I reentered when it dropped…Oops, not so much but undeterred I bought today a couple hundred in lower $63s and 100 more at $64. The spread between this and A is really high at the moment. This preferred has been tossed around to a couple variations of the old DuPont over the recent years, so I am not holding my breath for a call.

      1. It is an oddball duo with chances to buy/sell. The low today for B was 63ish and the high 69ish. Not sure what is going on but I am tempted to slap an ask of 69 on these new shares. I just tend not to trade unless it is a large pay day. Maybe I should reconsider that. Either way I am accumulating B below 64 at this stage so selling will be difficult for me to do when I want more.

        As for a call.. who thought Ocean Spray would ever redeem a 4% preferred? Not I. One never knows. But yes, I agree with your sentiment. A call is very unlikely.

        1. well Grid not as good a deal, but yesterday I snagged a couple 100 of the CNLPL at 50.95

        2. I owned OCESP for years… a cost of about $14. Never thought it’d get redeemed and most likely would find a way to go bankrupt. It was a welcome sign to see it get redeemed. In agreement on the Corteva B…..foolishly cheap, especially after the run-up of a few years ago to $108- $109.

    1. Same. The question is that OCESP was a pretty safe 7% I was getting on the price paid for the shares so what do I replace it with? Use all the money and go into something with even less risk yet still generating more income or try to replace it with something around 7%. No idea at the moment. Trying to figure it out. Or just toss the cash in a >4% online savings account or money market until an opportunity comes up.

      Offhand I cannot think of a QDI preferred share that offers 7% with the same low risk profile as OCESP. Maybe CHS but I am already in that and not sure I want to make the position even larger. Many of the ills we discuss here, the high quality ones, have not quite routinely broken the 7% barrier where one can make a purchase at anytime.

        1. I cannot buy SLMNP in my accounts as it is expert market. I imagine if I switched brokers I “might” be able to as it seems it is somewhat special compared to others. Either way I already own some and since dark I am ok with what I have.

        1. Ken,

          Great minds think alike. Added another 100 shares today of it. I also concluded it was a decent purchase. I was thinking to add more but there is no rush to buy it all in one shot.

  3. Interest on my SJI bonds showed up today plus a couple more interest and dividends from end of qtr. Accounts are still down about 1-1/2% in value but its keeping my wife happy as long as income comes in and she can still plan her trips to see the gg kids and do her sister cruises.

  4. Got this back from Eversource today:

    Hello xxxxx
    This filing effectively reduced some additional disclosure requirements for the CL&P preferred shares that will no longer be required starting in 2024. Your preferred shares are still able to be publicly traded. Neither the CL&P nor the NSTAR Electric preferred shares will be going dark.

    The reduced disclosure requirements are related to management composition and compensation that is currently (and will continue to be) included in our annual proxy statement filing. There will be no impact on the ability to trade any of our preferred securities.

    Melissa Cameron
    Program Manager, Investor Relations
    Eversource Energy
    247 Station Drive, Westwood, MA 02090

    So…do we feel lucky? Well, do we? 😉

    1. Well, Harry, we got lucky this time! And I actually FELT unlucky, having just bought some NSARO before finding out about this.

      Camroc, Much appreciated.

      a win for the Punks!

    2. Thanks for making noise at Eversource. One day they’ll wise up and get rid of all of the CL &P and NStar preferred. It is time.

      1. Mitch, I doubt it will happen. Several years ago when the preferreds appeared to be relative expensive cost of capital, Connecticut public service regulators stated in a rate filing case (preferreds are part of setting rates on ROE for company) CLP liked having the preferreds in their cap structure and had no intention of redeeming them. Now that they are relative cheap capital, though irrelevant, it seems less likely.

  5. Grid:

    So now we know why the Connecticut Light & Power issues sold off so much?



    Looks like the whole lot of them are being de-registered and going “dark”.

    I own only two of these God-awful illiquids and I got hit with events in the last week that will likely result in both of them headed to Expert Market.

    Just a cost of doing business in this sector of the preferred universe….but still sucks.

    1. The document that you mentioned had a release date of two weeks ago. So I doubt the sell off is related to that unless it happened in slow motion. I think the 10 year yield going up made more impact.

      1. fc:

        “Happening in slow motion” is the definition of how these stinky illiquid preferreds trade.

        But I shouldn’t complain. The HAWLI preferreds I was buying below $9 when a relentless seller showed up for weeks (and finally finished) all got sold at nice gains (back to $11 on the bid)…and it looks like a quarterly dividend will be received on Monday.

        The illiquids both giveth and they taketh away…..

        1. I am just saying the spike in rates matches up better then a document no one really reads on these preferred from the 1940s and on. Plus the sell off was counted in hundreds of shares. Not 1000s and 1000s like the “big dark event” a while back.

          1. Yeah. I don’t think Eversource will let these go dark.

            I like CNTHP here. getting close to par with a 6.5% yield.

    2. Timeline for Deregistration

      An issuer’s periodic reporting obligations under the Exchange Act will be suspended immediately upon its filing of a certification on Form 15 that it has less than 300 holders of record.13 Deregistration under Section 12(g) will become effective 90 days after filing the Form 15. The SEC has the authority to deny such a request for termination, but has rarely done so. The SEC will not accelerate the 90‑day period.

      Set forth below is a timeline outlining the significant procedural steps in a typical “going dark” transaction for a domestic listed company.

      Day 1:

      The company files written notice of intent to file a Form 25 with the stock exchange pursuant to Rule 12d2-2(c)(2)(ii), issues a press release and files a Form 8-K announcing that it is delisting and “going dark,” and the reasons therefore. This information should also be placed on the company Web site.

      Day 10

      The company files Form 25 with the stock exchange and announces the same.

      Day 11:

      The company stock continues trading or shortly thereafter begins trading in the Pink Sheets.

      Day 20:

      The company files a Form 15 to deregister its shares under the Exchange Act. The Form 15 may not be filed prior to the effective date of the Form 25 (ten days after filing).

      The company issues a press release announcing deregistration.

      Day 100:

      Section 12(b) deregistration becomes effective.

      Day 110:

      The 90‑day period after filing of Form 15 passes making effective the deregistration of the company’s stock under Exchange Act Section 12(g) and the suspension of reporting obligations under Section 15(d), if applicable.

      1. I dont particularly understand details or reasoning. The preferreds were delisted many many moons ago. Yet for some reason they continued to have separate SEC filings.
        After they deregister they could provide financials to OTC. Several dark companies do. Or they may not and they go dark.
        Interestingly Ameren delisted their Union Electric preferreds and delisted AND deregistered only this issue in 2007.*&sopt=symbol
        It quit trading I presume as I dont remember it. 3 years later this deregistered issue was redeemed by Ameren in 2010 after it was merged into what is now Ameren Illinois.

      1. I thought they were automatically piggy backed by other financials submitted unrelated to the preferred. Thus they will remain on the pink on the OTC. It is not like they were submitting anything to OTC currently.

        If what you think might happen.. will happen that will include other things like NSARO.

          1. My layman’s understanding is that all of the CT Light & Power perpetual preferred issues will “go dark.” The parent (Eversource) no longer will file any financial statements pertaining to these CT issues. The issues remain “alive” (e.g. not liquidated) but they will not trade openly. Existing holdings will move to the “Expert Market” and there will be no active buy/sell. An individual owner can offer shares for sale via an explicit order of their broker. There will be no way to know historic pricing or if there are any active bids–hence the terminology “Dark.” Many issues incurred this fate a few years ago (as many will remember). What puzzles me about the CT issues is the number of “holders of record” shown in Form 15 is very low–well below the 300 threshhold for going dark. But individual accounts are grouped under a single broker so, for example, all Schwab accounts holding a CT issue are, collectively, considered a single broker. Income will continue to flow but share Owners will only have a crude estimate of value. And, as has been the case for other similar issues, values inevitably will decline. Liquidity will be compromised but not eliminated. Here’s a bit more about this type of filing (Grid, please correct any errors I’ve stated–you’re the guru on this stuff!):

            Section 12(g) deregistration is not automatic; the issuer has to take affirmative steps to get rid of its Section 12(g) registration.

            A domestic US company will generally do this by using Rule 12g-4, which provides for termination by filing a Form 15 certifying that the company either (i) has fewer than 300 record holders or (ii) has fewer than 500 record holders and less than $10 million in assets as of the last day of each of the company’s last three fiscal years. This is easy to establish in typical M&A scenarios, in which the target company becomes a wholly owned subsidiary of the acquiring company and hence has only one holder.
            Foreign private issuers proceed under Rule 12h-6 and Form 15F. The requirements of Rule 12h-6 and Form 15F are somewhat different than those of Rule 12g-4 and Form 15. We are going to focus on domestic filers for the moment, but if you would like to understand how this works for foreign private issuers, see the Latham FPI Guide.1
            Note that the Form 15 does not take effect immediately – under Rule 12g-4, the form takes effect 90 days after filing (or such shorter period as the SEC may determine). But unlike its cousin, Form 25, the act of filing the Form 15 immediately suspends the issuer’s SEC reporting obligation (see Rule 12g-4(b)). So, you do not need to file required periodic or current reports even though the Form 15 has not yet taken effect. See C&DI 144.02.

            1. Hmm. Wouldn’t these be down more if they were going dark? Also, why weren’t the new england electric issues listed? Just trying to get more info. Thanks.

              1. If you go to you will find the same document for NSARO/NSARP for example.

                If these are going dark I am trying to figure out what I am willing to pay for them. I imagine I would want > 7%. I might have to get some bids ready at 7.5% to start.

        1. That is my understanding too. They already have been delisted years ago. SBNCM and SBNCM and the common all “went dark” about 10 years ago getting under the 300 limit to have to file and still trade pink sheets. I just bought some at good prices and I am keeping. I know they will pay as ES needs the upstream. I really don’t know the purpose of this current filing. Who knows. Most odd…and unappreciated.

            1. It’s a high quality company. That isn’t the problem. Unfortunately there is precedent here…MSSEL… A high quality delisted preferred that NGG is the public parent of. And it went dark to experts market when that SEC ruling went in. Massachusetts Electric…It continues to pay like clockwork and declare divdends as it should.

            2. I suspect most havent read, but CLP have some pretty powerful protections. These would remain in effect, however that may not be meaningful if one does not want to own something that could go dark. One being to take majority control of the board if 4 divis are in arrears.
              Whenever dividends on any share of the Preferred Stock shall be in arrears in an amount equal to or exceeding full dividends for one year thereon, or whenever there shall have occurred some default in the observance of any of the provisions of these Sections, or some default on which action has been taken by the bondholders or the trustees of any indenture of mortgage or deed of trust of the Company, or whenever the Company shall have been declared bankrupt or a receiver of its property shall have been appointed (said conditions being herein called “events of default”), then the holders of the Preferred Stock shall be given notice of all stockholders’ meetings and shall have the right to elect the smallest number of directors necessary to constitute a majority of the Board of Directors of the Company and the exclusive right to amend the By-Laws to make such appropriate increase in the number of directorships as may be required to effect such election.
              …… Except with the consent of the holders of a majority of the Preferred Stock at the time outstanding, given in writing or by vote at a meeting duly called and held for the purpose, the Company shall not merge or consolidate with or into any other corporation or sell or otherwise dispose of all or substantially all of its assets (except by mortgage or pledge) unless such
              merger, consolidation, sale or other disposition, or the issuance or assumption of securities in the effectuation thereof shall have been ordered, approved or permitted by the appropriate regulatory commission.
              Unfortunately one provision is not voiding a delisting!
              A good read for those interested in such matters of the CLP preferreds. It references all the preferreds too.

              1. If any own NSTAR preferreds (the old Boston Edison Co.) they also have the same provision that preferred holders take majority control of the board after 6 missed payments.
                However, whenever dividends accrued on any shares of any series of the Cumulative Preferred Stock at the time outstanding shall equal or exceed an amount equivalent to six (6) full quarterly dividends thereon, holders of the Cumulative Preferred Stock shall have the right to be represented at and to receive notice of any meeting of the stockholders of the corporation held for the purpose of electing directors and the exclusive right, voting separately as a class, to elect the smallest number of directors which will constitute a majority of the total number of directors of the corporation constituting the full board as then last fixed by the stockholders; and the remaining directors shall be elected by the holders of the Common Stock and any other class of stock entitled to vote therefor.

                1. Thanks Grid!

                  I’ll push my luck and try to extract further info from you..

                  Any idea if management had ever commented on these Preferreds? Seems strange they wouldn’t have called some of the higher yielding coupons, especially during the days of low interest rates, and/or to simply clean up their balance sheet.

                  1. Some companies like preferred shares because it helps with keeping the debt to equity ratio lower compared to bonds. I think it is a 50/50 split for preferred. So they do have a purpose in a way. Not sure if the amounts of all preferred, for these older issues combined with the newer, even matter when totaled up though.

                  2. Maine, who knows. This came from left field as is. The real question is why any are around as collectively they represent less than 0.4% of their entire capital structure. CLP’s board of directors declare the preferred stock dividend. They are of course lackeys to Eversource. But they dont bring any press to themselves outside of declaring the dividends.
                    So I never hear anything. About 10 years ago CLP wanted to raise short term debt ceiling which required approval from preferred shareholders. Management lamented they couldnt find enough of the shareholders to get an approval to do it. All they had to do was redeem the paltry amounts and they could have done it. Yet they didnt.
                    Maybe 5 or so years ago during a state public service commission rate filing conference they stated they had no plans to redeem them and liked them in their capital structure. Nothing specific as to why was mentioned though from my reading if memory serves.
                    ….I noticed many noticed the SEC filing this morning. I didnt know anything until I got home from golfing this afternoon. Funny thing was I sold two issues at a quick 6% or so profit today, and repurchased some NSTAR today $2 cheaper than I sold them and after I had previously sold for $4 quick gain.
                    So I still have a modest amount of 4 different series. Im not worried so much to sell, but will probably need a nice price dump to entice me to get more.

              2. The redemptions of Indianapolis Power and Light preferred stocks last December 30, the June redemption of Narragensett Electric and the recent redemption of Ocean Spray suggest that redemption is still an objective for companies trying to clean up their balance sheets. So, despite the yield-related crash in OTC Market bids, the opportunity to add to Connecticut preferreds in the low $30s and Corteva preferreds approaching 7% would seem to be intelligent. The dividends are safe.

          1. These rarely trade Grid. I have a couple 100 at a cost giving me 7% so will continue to hold.

  6. On this website, which I enjoy, there is always chatter about the U.S. deficit and how the government is just kicking the can down the road and basically ignoring the problem.

    The U.S. demographics are the underlying cause of the problem. We have an aging population that is no longer economically productive. We don’t have enough young, economically productive people to pay the taxes needed to cover the retirement benefits that older people are receiving. Politicians are not going to reduce benefits (or increase taxes) that are needed to solve the problem. It would be political suicide and the vast majority of our esteemed politicians are not, shall we say, of a noble nature. Eventually, the shit will hit the fan when the cost of government borrowing becomes intolerable/unsustainable. It will be a chaotic situation.

    There is a solution which I believe will ultimately occur. The U.S. will welcome immigration, especially of young people who can fill jobs AND pay taxes. Now, many jobs are paid off the books because the workers are illegal or non-documented, however you want to phrase it. Bottom line, the U.S. needs a young productive workforce. If we have an open, but somewhat controlled, immigration policy, we can at least attempt to keep the bad guys out and allow the good guys in. We need the latter because otherwise, the current benefits of social security and medicare will no longer be available.

    I recognize that most of the people on this website, including myself, enjoy the retirement benefits we receive, but would not be destitute if they would be sharply curtailed. However, this is not true for a very large segment of our population who live paycheck to paycheck. It does no good to say “they get what they deserve”. That may be so, but it does not solve the problem.

    Over the years, when a country’s economy collapses and there are too many have-nots, its government is over thrown either through the ballot box or violent revolution. I don’t think either of our political parties has the stomach (or will) to deal with the problem and face the political consequences. Easier immigration might be the only acceptable solution.

  7. My Ocean Spray, OCESP shares at Schwab have been listed at $0 for some time. As of today they are still shown at $0, but now have the following in the description “**CALLED** @PAR EFF: 10/17/2023”. I can’t find any information or announcement of the call. Are we really going to receive $25 per share on 10/17/2023?

    1. sman,

      Yes we are. If you were one of us who bought them right before they went dark for cheap it is quite the pay day. Another poster here gave us the news about two weeks ago.

      1. Thanks fc, sorry I missed that post but yes happy I joined in that buying spree…lucky occasionally.

        1. No need to apologize for missing a post. I just wanted to mention the other user broke the news. I am just parroting the information.

    1. Lol. I made a mistake and typed in 34 instead of 35 and it is gone. Thank you for the tip. Maybe next time. Someone snagged it. With the way things are going it is probably for the best I missed out.

      Lol again. who just took the CNLPM i was going to buy at 31?

      1. Cnltl is ex tomorrow and offered at 30: 6.33%.
        Yeah I’m accumulating too many of these this week!

      2. I got a couple hundred over 7% buying CNLPM… It was a sell off feast on some of these CLP issues and exD tomorrow too. I bought 3 different issues today.

  8. Does anybody understand why Duke’s preferred (DUK-A) is rated Ba1 by Moody’s? DUK is Baa2. I don’t understand why the preferred is below investment grade.

    1. Skinky,

      I think DUK might be Baa2 at one level but the preferred go a notch or two lower thus Ba1. So the senior secured might be A-Baa2. Senior unsecured a bit lower. Preferred a bit lower and so on.

      With that said I own some of DUK-A and buy on weakness/down days. It is a position I do not worry about.

      1. Thanks fc. I did a little more digging in the prospectus. Looks like DUK can defer dividend pmts only if they don’t pay interest on their subordinated debt–seems pretty unlikely this would occur.

        1. Skinky, this is SOP. Each issue is a different stack. One cant pay the next if it doesnt get paid… In general…
          1) Revolver/Secured/Unsecured, etc…
          then the deferrables in order of payment priority…
          A. The deferrable subordinated debt
          B. Preferred stock
          C. Common stock

      1. What! I didn’t realize we had a competitor for one of the oldest outstanding ute stocks out here

    1. I do not know the reason and for some reason nobody is dumping shares into my currently reasonable offers. Probably a one time thing here. Not really sure I want to add at 24 which is the current ask. I am more comfortable at 23 to 23.50. That low would have been a nice gift.

    2. Just wait until tax loss selling season hits in full force. There will be more dumps.

      1. You just never know about these things. As they are uncorrelated on a day to day basis to the liquids . They saved my arse big time in COVID. I was about maybe 70% in illiquids and while everything else was dropping 30-50% I noticed these weren’t moving at all. So I sold them and bought all the roached out liquids and rode them up in waves of trading. And then this past rate rise I sold them after the liquids told the future. I may be getting in on some early as who ultimately knows ….But the right ones are being bought at turn of the century prices and those are the ones I am now buying.

Leave a Reply

Your email address will not be published. Required fields are marked *