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.
KTBA: Does anyone know what broker will allow me to trade this?
Not Fidelity, Schwab or IB
7% CORTS seems a good buy
XFLT has been making private sales of a 5 yr convertible preferred 6.95% at a discount to par . Most recent sales are at 23.25.
This doesn’t make XFLT-A look so good. I didn’t bother to look at how the portfolio has been doing. Anyone care to opine?
AILIH ask $68.50 ~5.96%
Ex-dividend is 10/14
Thanks, Ken.
I was only able to get $68.92, but happy w that!
The current bid on SOCGP is $27.80 (5.40% current yield). The last ex-date for SOCGP was on 9/10.
If you own SOCGP and wanted to switch to another uncallable, WELPM is available for $110 (5.45%) and its ex-date is coming up on 10/11. So maybe a little bit of a chance to get a utility in a better jurisdiction and pick up an extra dividend.
Concerning MSEXP.
The letter showed up today with my PIN. This is the PIN i had to request from Broadridge by knowing my account number which I guessed.
I used the same PIN creation area to create my account which was a bit confusing. I was worried I would just end up creating a new PIN ruining the old but instead it showed a new screen where I could enter my PIN. I followed the remaining steps to create my account and log into the website.
I had two entries. 0 MSEXP shares and XX amount of MSEX shares which showed their current value. It has some other nifty features as well. I have never owned shares directly with a transfer agent before so this is new to me. Now my shares cannot be borrowed out to others!
The status of the MSEX shares are clearly labeled “restricted” if you dig into the website. I am unclear how dividends will be paid. I assume a check in the mail if I do not do anything like add a bank account. I see something about direct deposit and what not. I will have to read the directions if any.
So the timeline looks like this. My notice of conversion, that pdf file Ally asked me to fill out, had a date of 7/15/24. Under transactions for MSEXP I see 8/15 a line item called “outstanding” in the portal for 8/15/24. On 9/23/24 under MSEXP I see “cancelled”.
Now when I pick transactions for MSEX I see 9/23/24 for “outstanding” and share converted share amount. That timeline is pretty accurate from the original conversion letter saying it will take 45-90 days.
So that is about all I have to report for now. Just letting some time pass now as I will worry about the restricted thing 6 months or so after 7/15/24.
fc,
Note the trading on 9/25 , the arb spread was in the $45 range at the close.
Thanks, I have not gotten the PIN yet but when I called and asked for the number of shares I was given an accurate number.
I would not worry about the 6 months as the general counsel has been super helpful
MSEXP CONVERSION UPDATE:
Holding period is now 6 mos from conversion demand. This is an email from the general counsel at MSEX. I will advise what needs to be in the representation letter but Broadridge will be noticing holders:
Thank you for your continued patience as I have been working with Broadridge and our own outside counsel to drill down into your questions, make sure we are getting this right before we start our conversion process, and exploring whether we are able to accommodate all of your preferences especially whether you are able to avoid retaining a securities counsel on your end to have to write an opinion letter. You will be receiving a separate notification from Broadridge on this in the coming days but I wanted to respond to you directly as well.
So with respect to the Rule 144 holding period: the holding period is 6 months with the clock on that 6-month holding period starting to run from the date your conversion demand letter was received by Broadridge (as that is the earliest date where we can verify your ownership of the preferred shares).
That 6-month clock carries through the conversion to common stock, meaning that (strictly for example), if Broadridge received your first conversion demand letter on August 30, 2024, then the six month holding period starts on that date. Your preferred shares would be converted to common shares on October 14, 2024 (approximately 45 days from date of conversion demand), they would land as common shares with the restrictive legend on them, and I can then issue an Opinion of Counsel to remove those restrictive legends effective March 3, 2024 (the first business day following 6 months from August 30).
In order to remove the restrictive legends after that 6-month holding period, Broadridge will need 2 items when the time comes: (1) My Opinion of Counsel (which I can provide); and (2) a Shareholder Representation letter from you (which you need to provide and will accompany my Opinion to effectuate the removal of the restrictive legends).
In the event you wanted to make a case that the Rule 144 six-month holding period started earlier than the date the conversion demand letter was received, then in that case Broadridge will require your retaining your own securities counsel to obtain a legal opinion from that counsel. That Opinion would be submitted to Broadridge and I would be presented a copy of that Opinion to review and (if I thought necessary) object. So, for example, if you were to argue to me that you purchased the above-referenced preferred shares on August 1, 2024 (with the conversion demand letter received August 30, 2024), then in that circumstance you would be required to present an Opinion from your own securities counsel.
I hope the above makes sense to you and we are committed to making this process as seamless as we possibly can for you. Let us know if you have any additional questions along the way.
Regards,
Jay
as further update, this equates to about a 30% ROI using current prices as there’s still a seller of the MSEXP.
The synthetic short can be done at what amounts to a 2% interest earnings on the short side (I tested a 70 and 75 for March). So, you may be better off if you can earn on the short stock credit.
Excellent news.
Thanks for running that down LT.
SLMNP: What’s the value of the put?
So I set about trying to value the put, and it’s more complicated than plugging numbers into an options calculator because the put totally changes the risk character of the preferred from a long term rating to a short -term one to a hybrid….sort of , depending on the price used.
If you paid under 850, I’d argue for an F2 credit rating.
I ran the options pricing past a few math phd’s and they aren’t thinking about the security from a credit perspective.
So, I don’t know what value to assign.
I’m taking suggestions. it’s structured product!
I own SLMNP and most of my shares were bought fairly close to the put price.
Here’s how I think about it…if rates fall, I’ve got a noncallable issue without reinvestment risk. If rates rise, I can always exercise the put (assuming LYB doesn’t fold) and have the ability to capitalize on higher rates. Having limited downside certainly has value but I don’t have a precise number to assign to it. SLMNP provides options under different interest rate environments so it’s very unique in my opinion.
I saw shares moving today for $920-$940. I added a little more today at $920.
I look at it the same way as I bought most of it very close to the put price. I figure just enjoy the 7% yield and if long rates fall there will be a nice capital gain. If long rates go up then the preferred will probably hover around the put price which makes it the equivalent of liquid instrument paying 7%.
I don’t plan on buying any over the put price plus the accrued interest.
DW
Have you seen the notion that changes in tax laws pay eliminate qualified dividend treatment?
I don’t know what to consider here as I’d likely still want to own this if the divs were ord Y
Losing trader – they already eliminated special treatment for QDI in California.
Part of the “tax the rich” plan here in the peoples republic.
If you have enough money to own anything that pays a dividend, you are too rich and must be taxed…
Moving to Nevada? Lots of refugees here from Calif
Do you get a breeze from the ocean at night that cools the temperature down?
QDI is a Federal law.
How does that impact CA?
Are you expecting CA to give a lower rate based on the tax that the company pays to CA? (that is the reason for the federal law, to reduce the effects of double taxation)
CA isn’t alone in treating dividends at the state level as just another kind of income that is not given preferential status.
It is almost all states with an income tax.
Excuse my ignorance when you say “exercise my put” what do you mean? Is there a certain price that they will buy back your shares of SLMNP?
Owners of SLMNP can covert each share to $848.27 cash. It is uncallable by the company. It was a result of a A. Schulman being acquired by LYB.
“Following the Merger, the conversion rate became fixed at $848.27 of cash per share of Special Stock.”
Here is an FAQ on SLMNP:
https://www.lyondellbasell.com/4aed47/globalassets/investors/stock-information/faq-for-aps-shareholders—conversion-process.pdf
Thank you !
I would say the put basically makes the preferred as safe as LYB’s unsecured bonds (at a minimum). That’s the value from a credit perspective.
But, wait there’s more. You also get value from a rate perspective because the put secures your investment against an outsized move higher in rates. To calculate the value of that feature, you have to calculate the probability that rates go so high that it’s worthwhile to exercise the put. There’s a way to calculate that probability using the bond volatility index (MOVE index) but I don’t know the formula. It’s related to the calculation used to determine “option adjusted spreads” for bonds.
LI – isn’t a simple calculation like that complicated when you have to include the vagueries of market pricing volatility because of SLMNP only trading on the Expert Market? Somehow, shouldn’t an attempt to make a calc like that have to compensate for that case? It sure makes it harder to feel confident about what SLMNP would be worth if there were no put feature. Don’t get me wrong – you may know SLMNP is one of my largest holdings and it is because of the value of the put to me… I just don’t try to quantify that value, but that’s just me..
Landlord,
I tried to respond to your question about borrowing through the options market but for some reason my messages do not get through on that thread.,
Perhaps it’s the link i tried to include, so it’s found by googling options education borrowing using spx. also you can look at boxtrades dot com
As far as SLMNP, it’s one of my larger holdings too. I asked an options market maker about the value of the put and ignoring the fact it changes the credit profile , the option isn’t worth much…a few dollars. However a call would be worth many hundreds of dollars
Anyone who thinks the put on SLMNP is only worth a few dollars must be analyzing it as a regularly trading, daily volume security well above its put price and NOT on the Expert Market.. To me as long as it’s on the Experts, the put is the major reason to own it…. No I can’t quantify the value by formula and my mentality is impacted by owning it at around the put price and not today’s price 100 points thru it, but I suspect all of our experiences dealing with Expert markets has been similar – there’s no reason to believe you can expect to get a fair price when you want to sell. BUT with the put, you KNOW what the worst price can be at any time under any interest rate environment… To me, that’s easily worth more than a few dollars….. In fact, as long as it’s on the Expert Market, I’d have zero interest in SLMNP if the put didn’t exist….
Thank you for that comment. I’m sure the put was worth a lot more when you bought the security at or near the put price. I agree it’s worth more than a few dollars, but my reason is it changes credit characteristics. The person who did the calc used the vol from MOVE, I believe.
Yes, illiquidity is an issue in expert market . Any thought they will get rid of this reg? I’d argue to keep it. Anything creating an obscure market for others is a boon to me.
Liquidity event for UEPEN (Union Electric, ie Ameren).
That is a 3.5% preferred. Even at 59 per share that is only 5.93%. Am I missing something here? You can get that type of deal all day long. Maybe not in a large quantity but very doable with Ameren preferred.
Sorry pig. I think I jumped the gun after I read your post. It was an alert for someone who might want 1000+ shares or something. I just got done checking the ills this morning and saw multiple choices that yielded slightly more and one could easily pick up hundreds. Not 1000s.
fc, no worries. Yes a rather lowish yield for that illiquid ute, but I think it trades lower permanently due to the rather high call price. Had run up into low 60’s but dipped below 60 this morning. As it turned out I did pick up a few hundred shares, and by the time I put the post out it looks to have gone back up a few bucks. certainly not a screaming deal, but a little to play with to start.
I happened to have just placed an order for 200 shares on UEPEN this morning one penny above the existing bid around 59.20, and got filled shortly after. Interestingly I then flipped a few of those shares at just under 63 shortly after.
It’s not a fantastic yield, but I sold a few things today that had run way up and was eager (maybe even too eager) to redeploy the funds.
The main issue I seem to have with the illiquids is partial fills. If you have an odd lot, it seems much harder to sell later. Many MM’s it seems won’t buy an odd lot even at the bid. They want a round 100 shares.
And if you’re selling 100 shares and you’re the best ask, the MM’s will seem to pick off one share, so now you’re left with an odd lot of 99 and it’s much harder to sell.
IBKR has an all or none option, but it doesn’t seem to allow it on OTC orders.
Some fun action in our pal MSEXP today with nearly 200 shares traded.
Makes sense since the arbitrage spread blew out again.
MSEXP:
MSEX general counsel is looking into the 1 year period with outside counsel. He will advise as I questioned why it’s not 6 mos . I will update
I believe the person with the MSEXP to sell has more to move as there’s a hidden offer at 680. It’s showing only 1 share and I’m getting push back when I ask . This is almost a 20% risk-free arb yield.
I think I am in the same boat as a few others here. I have a lot of money wrapped up in this MSEXP adventure. My latest news, which I reported here, was a W9 IRS tax form sent to me from Middlesex Water (which I mailed back the next day) and still no word with the proper information to create a Broadridge account. I think I am a dozen business days or more behind a few others. Until I get a better feeling of the timeline and an actual way to see my missing MSEXP shares I won’t be buying more. Imagine a brokerage account where your shares are removed and you have very little left saying you own diddly squat. Not the situation where I want to “add”.
I did not get a w-9. I did get a notice BR is withholding on my DRIP account
Have you called BR and asked for an account #
BTW I just called. I don’t have an account for the convert but I know it would not be in the drip I have.
I’ve asked nicely by email just now`. Good point .
I’ll be sending a nice gift to these guys at BR and the GC at MSEX
I have not tried to contact BR yet. Frankly I was just allowing the process to work. The only people I truly contacted a couple of times was Ally. Sure I emailed MSEX a few times but that was back in the discovery phase. Not the conversion phase.
So far things do seem to be moving along so I will allow another week or two to go by before reaching out. I am kind of expecting a letter to show up or something. Since I know I will be holding a year I have not really felt any pressure to make calls or email. Yet.
As always I will share any news I get immediately as I get it.
For those of you who have successfully transferred your shares to broadridge, my first step was to complete the conversion form sent by broadridge. I’d do that if you haven’t already. You may have to ask for it.
Also, it is possible to get a. Broadridge account number and online access to “see” your shares.
The shares you sent to BR are under an account starting with 1909-
I found out by asking one of the execs I’ve been emailing.
Funny that after the dash there are only 2 digits, with 1909 representing the $7 cum prfd, So, there are not that many holders as my number is in the teens.
Does this make us Series A investors?
Just to explain the steps I did in a very simple manner.
Call Ally and say I want to convert.
They sent me a pdf to fill out that basically said I want to convert X amount of shares of MSEXP. Yada yada. It was a single page. I also popped in a date for the conversion. I sent it back to Ally.
I got a call from Ally warning me that shares would be restricted for a year. I had to say YES I AGREE on a recorded line I would imagine.
I got a W9 in the mail from MSEX. I mailed it back. The letterhead was definitely MSEX but naturally Broadridge was involved as that who the letter goes back to.
Just now I brute forced my account number at Broadridge by using their link account/create account webpage thing. Losingtrader gave me enough of a hint to figure it out without calling and yes the digits after the 1909 is VERY LOW. 1908 is MSEX and 1909 is MSEXP. There are two other MSEX preferred that have numbers, fyi. I put in my information and I saw this pop up on the website:
“Your request has been submitted. The PIN delivery may take up to ten business days.”
The website also said when I did this any other PIN being sent to me is now “bad”. So I hope a letter was not already on the way because I just ruined it. But I should now get a letter within 10 biz days.
Should I have done that? No clue.. but I enjoyed doing it without calling.
sounds good
Yep, it’s a beautiful thing, and if I wasn’t chock full of the name already I’d be buying 🙂
ALLGF
Not preferred but it’s the remaining stub from a tender offer at 1.70.
It’s value is 1.70 or less, likely much less.
Selling as high as 4.50 lately but expensive to short. This was delisted and immediately cut in half then the short squeeze began.
I know a trader whose firm charged him 50,000% to borrow and advised after he had shorted. He has no recourse as hes registered in the industry.
How big is the illiquid market? Pig Pile stumped the chumps last week when he bought BORTP on 9/12. It was the first trade since 3/31/23, so it makes the illiquid hall of fame. I decided to take a look at the overall market for prefs/babys/terms to see how illiquid the space is. Here are the stats:
Total issues listed= 1,044
Good= 639 (61.2%) traded on 9/13/24 and had 90day ave volume>2,500/day
Fail volume= 249 (23.9%) ave volume <2,500/day
Fail date= 22 (2.1%) did not trade on 9/13,
Fail date & volume= 100 (9.6%) did not trade on 9/13 AND had ave volume <2,500
Valid ticker, but no record of trades= 34 (3.3%)
The data argues what we suspected that the whole sector is relatively illiquid with ~40% of the issues failing either date and/or volume. There might be more needles in the haystack, but it is going to take some effort to find them.
I am listing the tickers of the various illiquid classes. There is not enough space to provide any more details. Format is 10 tickers per line in a CSV format
Fail volume only:
AERGP,AFFT,AFSIA,AFSIB,AFSIC,AFSIM,AFSIP,AGQPF,AHT-F,AHT-H
AHT-I,AILIH,AILIM,AILIN,AILIO,AILIP,AILLI,AILLM,AILLN,AILLO
AILLP,AIRTP,AMBKP,AMTPQ,ATCOL,AUVPQ,AWRY,BACRP,BAMGF,BAMKF
BANFP,BANGN,BCEXF,BDRPF,BDRXF,BECEF,BIESF,BKFAF,BMYMP,BORTP
BPOPM,BPOPO,BROXF,BRPSF,BXDIF,CCIA,CETXP,CKNQP,CMS-B,CNLHN
CNLHO,CNLHP,CNLPL,CNLPM,CNLTL,CNLTN,CNLTP,CNPWM,CNPWP,CNTHN
CNTHO,CNTHP,CNUTF,COMSP,COWPP,CPRHF,CRLKP,CTA-A,CTGSP,CTLPP
CUTLF,CYCCP,DMRRP,DNDPF,DPSIP,DRWKF,DSHKN,DSHKO,DSHKP,DSX-B
DVSPF,EAI,EBRGF,EFC-D,EHPTP,ENBNF,ENJ,ENNPF,EPORP,ERRAF
FAXRF,FAXXF,FCCTP,FCELB,FGFPP,FMCCJ,FMCCK,FMCCL,FMCCM,FMCCN
FMCCO,FMCCP,FMCCT,FNMAK,FNMAL,FNMFM,FORFF,FREGP,FREJN,FREJO
FREJP,FRFFF,FRFGF,FRFXF,FRFZF,FTRSF,FXFHF,GDL-C,GECCM,GECCO
GGT-E,GGT-G,GJO,GMBLP,GNT-A,GRWLF,GUT-C,HAWEL,HAWEM,HAWEN
HAWLI,HAWLL,HAWLM,HAWLN,HCIIP,HCXY,HENOF,HL-B,HSCM,HWM-
ICNP,IFZZF,IMPPP,INPAP,IPB,KTH,KTN,LEHKQ,LEHLQ,LEHNQ
LHHMQ,LLOBF,LTSAP,LXP-C,MAA-I,MBNKP,MHGUP,MITT-A,MNQFF,MNUFF
MSEXP,MSSEL,NEWEN,NMKBP,NMKCP,NMPRY,NMPWP,NPICF,NSARO,NSARP
NUSPQ,OCCIO,OCESP,OCFCP,OFSSH,OPP-B,OXLCO,OXSQG,PBNAF,PCG-B
PCG-C,PCG-D,PCG-G,PCG-H,PFXNZ,PLDGP,PNMXO,PPLAF,PPWLM,PPWLO
PRIF-D,PRIF-J,PRIF-K,PRIF-L,PSBXP,PSBYP,PSBZP,PXSAP,PYT,RC-C
RHE-A,RHEPB,RMPL-,RWRDP,SB-C,SBNCM,SCFLF,SENEL,SENEM,SKRUF
SKTPP,SLFIF,SLMNP,SNTUF,SOCGM,SOCGP,SOHOB,SOHON,SOHOO,SPE-C
SPG-J,SUVPF,SWKHL,TCANF,TDBCP,TDBKF,TEUCF,TFSA,TNCAF,TRPEF
TSLTF,TY-,UELMO,UEPCN,UEPCO,UEPCP,UEPEM,UEPEN,UEPEO,UEPEP
USB-A,VLKPF,VNORP,WELPM,WELPP,WFCNP,WHFCL,XELAP,XOMAP,
Fail date:
AATRL,AULT-D,BKAAF,CCNEP,CDNUF,CMRE-D,CSR-C,CTRVP,GLU-A,LFT-A
LGHMF,METCL,MINDP,PEB-E,PW-A,QCCP,RUFIF,SRG-A,TACPF,TZROP
WNGPF,YCBD-A
Fail date & volume:
ACP-A,AFFS,AHT-G,ASCS,ATGAF,ATGPF,BCEFF,BCEIF,BCEPF,BCPPF
BKAMF,BOLBP,BOPPF,BRENF,BRKFF,BROAF,BROPF,BRPYF,BURCP,CBCPQ
CDUTF,CNAUF,CNVEF,CPOIF,CPWPF,CWESF,DNDEF,EBRZF,ECCW,ECNNF
ENBFF,ENBGF,ENBHF,ENBMF,ENBOF,ENBRF,EQTNP,ESCSQ,FCCTO,FFHPF
FIISO,FNFPA,FNMFO,FRMEP,FXFLF,GECCI,GEGGL,GJP,GJR,GJS
GJT,GMPFF,GRWTF,GWLPF,HNNAZ,HTFB,IFTPF,INFFF,INTAF,INVUP
ITONF,JBK,KTBA,LAUCF,LTSF,LTSH,LTSK,LTSL,MCLPF,MDRRP
MNESP,MNLCF,MPLXP,NBCDF,NBKCF,NCRRP,NEFBP,NMPGY,PCG-E,PMBPF
PMMBF,PRIF-F,PRIF-G,PRIF-H,PRIF-I,PRLPQ,PVFPF,PWFNF,RBCPF,RYLBF
SBNCN,SLHPF,SMANP,SSRAP,STNDF,SUNFF,TCEYF,TRPPF,TRPRF,WHLRL
Valid ticker, but no trades shown:
AENPP,AGASF,BCAEF,BKEEF,BKFDF,BKFOF,BKFPF,BKFTF,BKOFF,BRCFF
BRIPF,BRPPF,DFNPF,EMICF,EMRJF,EPDU,EUKRF,FIISP,FTPSF,GELPP
LBLPF,MBHPF,PPLOF,PVILF,PWCCF,RBMCF,SLFQF,SNLIF,TCENF,TCNCF
TDOMF,TDOPF,TYOOF,WGRGF
Thanks Tex. I will take a look.
Can you recommend platforms or websites to screen for illiquid prefs?
Tex, great work!!!
Friday I picked up my favorite type of muni: Unrated improvement district bonds, in this case Rainbow Canyon I at Lake Las Vegas.
425208VQ5 5% of 2038 Bought 55k at avg 99.883 for a tax free yield just over 5.
I’m not sure if there are more for sale.
These are callable , generally at a small , declining (by years outstanding )premium , if individual parcel owners decide they want to pay off the portion of the debt assigned to their parcels. Calls are typically semi-annually.
SID/ LID debt runs with the land, so does not get wiped out in a tax sale or foreclosure.
The debt is much less risky once the development is well -along and the debt is assigned to individual parcel owners.
In the case of these bonds, looking at the 2023 financial disclosure
, more than half of the parcels now have an average value to debt of 50x , because homes have been constructed on those parcels. There is also a required reserve fund . (see district T-20 on page 11)
https://emma.msrb.org/P21770677-P21359355-P21796459.pdf
The original value to debt was approx 6x.
I bought a lot of this debt at nice discounts during the early part of Covid.
I’m also a selective buyer at issuance.
SLMNP
MSEXP
Regarding SLMNP, I see a small number of shares traded in the $922+ range.
By my calculation this is over 6.5 with accrued div as the security trades flat.
Given the free put, isn’t this one of the best yielding preferreds, with liquidity being the largest risk? I can’t see Lyondell going bankrupt again in the time it takes to put the stock for cash.
Re Middlesex, someone I know is stuck with too much of the preferred, thus we see a 100 lot offered at a really good arb spread approaching $100.
This individual thought (and still thinks) he will be able to sell the restricted stock in 3 months. Kind of childish to not do the proper due diligence.
I’ve got an email in to the General Counsel regarding the one-year waiting period to lift the restriction. He responded he was traveling and would provide a response next week. I’ll update this site but I’d bet there’s a valid reason for the one year. I’ve decided at the present spread I’ll just take a risk of owning some of the common at what amounts to a $7.50 discount
Comments?
Hi Losingtrader – Are you sure there is a 1 year required holding period for the converted shares? My understanding was that the restricted shares can be sold with the approval of middlesex, but no approval is needed if held for more than a year.
Middlesex told Broadridge 1 year. MSEX told me it’s 1 year from the date Broadridge provides your conversion demand.
I questioned this with MSEX in my email to the general counsel , and I cited the rules.
Thank you! One step at a time.. just glad I was able to get the shares to broadridge.
GC will get back with me next week. I will add more shares over $100 in the spread. I can do the synthetic short for a discount to the ITM amount, and then roll it, so my holding cost is really just the alternative use of funds for the long. I’m also net long MSEX after reading the 10-k. I wish I’d gotten long in the 40’s!
On the shares of MSEX I originally shorted when I thought I’d get the rebate, IB is charging .27%. I’ll trade out of that or move it to Fidelity, which won’t charge me a fee to short the stock. I really miss having a proprietary account with a clearing broker. I may have to open one.
I have about 20% of my position shorted, having trimmed some when it pulled back a couple weeks ago.
What are your top reasons for liking MSEX? I did see they are proposing to raise rates for their tidewater unit.
https://www.globenewswire.com/news-release/2024/08/30/2938716/0/en/Tidewater-Utilities-Files-for-Rate-Adjustment.html
51 years of consecutive div raises is all I got, coupled with no interest on the short . It’s certainly not the stellar dividend
I’m no lawyer, but it feels like a 6mo and not 12mo situation under 144 to me.
That was my read as well, but one thing that’s become obvious through this whole affair is that Middlesex really had to dust off the books to figure out how to treat this convertible since no one seemed to care for so many years.
Ah, you were looking at that lot of 100 MSEXP on Friday too. It was a nice arb spread at that price but I’m about as loaded up on this issue as I want to deal with so I think I’m done trading. Now I just wait.
As for me I wouldn’t want to be unhedged the underlying; MSEX seems overvalued where it trades now and if we see bad news on rates or inflation I’d expect it to head back down to the 50s. IBKR will get its 27 bps from me to avoid that risk.
Hey LT,
Maybe you dive a little bit deeper into SLMNP. I’ve been watching it for a short period now and have seen the few trades that are all over the place. What do you mean buy a “free put”?
Just the fact that you have seen that share prices are “all over the place” confirms what LT says about liquidity being the largest risk…. But that’s liquidity in the marketplace only that’s a problem because the “free put” always gives you a way to liquidate instantaneously no matter how many shares you own at a price you know will always be the same no matter what’s going on in the marketplace, provided that LYB remains a solid credit. You will ALWAYS be able to sell SLMNP at approx 8% current yield (848.27) and there’s value in that because it’s “free.” You don’t have to do anything to gain it, it’s in place in perpetuity.
In today’s market, it’s legitimate to feel that a plain vanilla perpetual LYB preferred credit would easily be worth lower than 6.50% current yield (923 on SLMNP), so the put does not enter into the pricing, but isn’t it nice you get it for free and your downside is dramatically limited vs any other perpetual preferred? And the fact that you can put SLMNP back for cash at any time means just like LT said, that it’s awfully tough to see Lyondell going bankrupt again in the time it takes to put the stock back for cash. And yes, LYB does have a bankrutcy way back in its ancient past, but that was for a much smaller less established company than it is now.
I think this (SLMNP) should trade like commercial paper, as a security rated F2
Thank you for expanding on your ideas. I dig the illiquids and I appreciate the effort and insight that some, like you two, have put into research.
You can sell it to the company at a fixed dollar because it is convertible into common of the original company. That value was fixed when the merger was done. It’s around 847 but someone will post the exact $ amount below
Ok, I’ll try and not make this a habit, but I’ve “snagged” 100 shares of BORTP (Bank of Botetourt) and I have not a clue what I’ve just bought. All I know is yield on purchase was ~6.5%, seems to not have many shares outstanding, and the common stock is doing good with consistent dividend raises every yr. Schwab says this is non-callable. Where is Grid? He usually eats these things for breakfast!!!
Sorry for double post, I originally put this in Bond Discussion for some reason.
Fido says:
243,659 shares outstanding
CUSIP 063907307
From the annual report:
2022 Preferred Stock Offering
Following a Series A Preferred Stock Rights Offering to common shareholders, on November 9, 2022, the Bank issued 243,659 shares of 7.00% noncumulative, convertible, perpetual preferred stock at $28.00 per share, or $6,822,452 in gross proceeds. Net proceeds from the offering were $6,642,261. The Bank intends to use the net proceeds from the offering to support future growth and for general corporate purposes.
The Series A Preferred Stock will pay a dividend of 7% per year, based on the initial subscription price of $28.00 per share. The dividends will be paid quarterly at the sole discretion of the Bank’s Board of Directors and are
noncumulative. During any dividend period in which Series A Preferred Stock is outstanding, unless full dividends for the most recently completed dividend period on all outstanding Series A Preferred Stock have been declared and paid, no dividend will be declared or paid on the Bank’s Common Stock.
The Series A Preferred Stock is nonvoting except with respect to any fundamental change in the terms of the preferred stock. These shares are convertible into Bank Common Stock no sooner than five years after delivery of the Series A.
Good info Maine.
Here’s the offering doc:
https://s28.q4cdn.com/360316914/files/doc_downloads/2022_rights_offering/Bank-of-Botetourt-Offering-Circular-2022-FINAL-for-website.pdf
Doesn’t this leave open the possibility the preferred price could be reduced by forcing conversion to common 1 for 1?
OFC I’m a losing trader so I’m fatalistic and it’s certain to happen , but only to the shares I might buy. Everyone else will be fine.
Yes, reading through the Circular, these are really more like buying 1 share of comon stock, with the exception that you are guaranteed a yield of 7% for 5 years, as opposed to the 2.5% yield reported on the common shares. This is not a good setup for someone wanting income and some guarantee of principal. Rather, you are at the mercy of the Board and the stock price. They could decide to convert 1-1 when the stock price is $18; if the stock price is higher, you cannot convert. So tails I lose, heads I break even.
Maine/Ken, thanks so much for the info!!!!
You know what’s missing from this issue (assuming I myself didn’t miss it)? There seems to be no definition of what a “Liquidation Preference” amount might be on this preferred…… Granted they’re non callable so if all continues to go well for this bank, it’s essentially irrelevant, but still, without a defined liquidation preference does a shareholder have any idea of what would happen if the Bank got acquired> The 7% rate is based on the issue price of $28, but I bet that’s not the implied liquidation preference amount.. In reading thru this one, it does seem to have been written with the idea of insiders owning a hefty portion of it right from the git go, so it does have that going for it… a definite curiosity.
2WR, good points. I intend to contact them and ask a few questions, will post here when I find out.
pig-
Botetourt is pronounced row-tow-root. Ask me anything!
HAWLL – 6.65% yield on ask by non professional calculation, not a recommendation. Just bought some myself.
HAWLM – 6.37% ” ”
HAWEM – 6.25% ” ”
CNLPL – 6.09% (above liquidation value)
Yield Hunter, last month the defendants in the Maui wildfire reached a settlement of all tort claims for $4.0 Bil. Hawaiian Electrics share is $1.99 Bil. It was rumored that HE insurance coverage was a max of $1.0 Bil. The settlement has yet to be approved by the courts. But, given this info, it appears that this may be a very risky play.
There was a seller of WELPM today at $103. I sold some of my shares of WELPP and CMS-B and picked up some. They went pretty fast though. Looks like they’re gone now.
Dick, I managed to pick up some of that as well
5.83% yield. That’s good for that issue. Nice pick up.
SOCGP has a bid of $27.38 right now (5.48% current) and it the ex-date just passed. I wish I had some of these to sell! LOL
Bid is up to $28.50 (5.26%)
I don’t want to really sell my 233 shares of SOCGP I got at 25ish.. but I guess I will toss an ask up there of 29. That would be about 5.17%. I should have no problem getting equivalent quality paying at least 5.75%. So lets see what happens. If it does not sell I really do not care. This preferred always goes for silly money historically. 6 months from now it will prob sell for 30+.
I was flipping SOCGP through the summer. Picked up about $15 a share over multiple flips (but not big volumes, sadly). Sometimes a dollar a day. Just nuts.
I still had a few left, so I put up with a “crazy” GTC at $28.50 thinking they might only go on a “spike”. Silly me. now I find myself all the way out again.
If I had seen the price running up today, I would probably have pulled them, but I will take my $3.x profit.
Back on the watch list.
Hawaii electrics above 6% ask yield. I got in on HAWEN but not a recommendation with the Maui wildfire situation not being fully resolved. At the moment I see ask yields at:
HAWEM: 6.45%
HAWLM: 6.37%
HAWLL: 6.25%
Sold some shares of UEPEP Friday, had a GTC bid out there just floating around. Maybe I should flip it and buy the UEPEO
CNLPL.
Bid/ask = 52.81 / 53.00
At 53.00 ask, I get 6.20% current yield (on 52.23 stripped price basis).
Goes ex 9/10 (next Tuesday)
Note: Liquidation value = 51.84, so negative YTC even on stripped price.
Hey MBG, do you have the prospectus for this one? I am wondering where you got that liquidation number. I’ve avoided this issue because I believed they could call it at $50 but perhaps I am wrong about that…
Review the annual report for Eversource Energy, ticker symbol ES. You can find the information there. Or, you can search ES on quantum online and select the link for all related securities.
Good call on the 10-K. I was surprised to find it there.
Yes, good call, NewtoThis. I see it there now.
YieldHunter, I got it on QOL. The prospectus isn’t there though, just the liquidation value number. I assume if anyone wants the prospectus, they could get it from the company’s IR Dept.
do you see anything wrong with this?
There are 200 MSEXP offered at 684.
Nobody is paying interest on the short of MSEX unless its over 100K
I can buy a synthetic 65 short for March 25 at 1.35 with msex at 63, getting the effect of the short credit priced into the options, then buy MSEX and tender,
If this goes a full year I should be able to roll it to Sept 2025.
The margin required for this should be the same as the short stock, but I’m getting the effect of a market rate on the synthetic short and dividends are priced into it.
So, there’s about $70 in the spread.
seems like it would be hard to execute the synthetic short with such low option volume and large bid/ask spreads.
I would hesitate. Actually trading it might be tough… those options have enormous spreads.
For what it’s worth my trade is just set up the simplest way: I shorted 12 shares of MSEX for every share of MSEXP I own. The fact that the MSEXP are now over at Broadridge means my theoretical max margin is lower than it otherwise would be. But now that things are finally in motion there’s not a lot for me to worry about. I’m not going to have to think about about rolling options. And MSEX is an incredibly easy borrow.
The funds I received from shorting MSEX are in stuff like SGOV.
O, where did you execute the short? IB showed me it’s impossible to lever the short credit to buy something. I was playing around with it in a separate IB account to see if I could use the short proceeds but I could not.
That’s y I’m losingtrader
LT – I see your point now on not being to utilize the cash proceeds from the short credit to reinvest. As I just posted, even if you could, most brokers will charge you margin interest in this scenario anyways, so it’s moot and in some cases, if you are dealing with higher risk underlying, you have to hold the cash as collateral vs. the net borrow shares.
If this was a 6 month hold, I would say it’s pretty good as ROI (short common/long preferred) would be well over 20%. But if you have to wait a year+ to ultimately get those long shares into the account to cover the short, not sure about that kind of risk time frame on a 10% return. I have been forced to cover in the past on issues where I thought it wouldn’t be a problem. Duration can really play a factor here.
Are there any other similar obscure convertibles similar to this one? Can’t believe we had years on this one.
LT,
Yes, this was at IBKR. No issues whatsoever in reinvesting the short sale proceeds. I do have portfolio margin enabled, not sure if that makes a difference.
O, are you sure you’re not really using margin from other securities?
I did do 5 of the March options at various prices. At any of those prices it
s better than not getting interest on the short
“The funds I received from shorting MSEX are in stuff like SGOV.”
Which broker are you using that allows you to do that? Some retailers will charge you margin interest if you are deploying the proceeds from the received cash credit on the borrowed shares into new long positions.
Someone must have saw your thread. Today there is volume of 5 contracts for long $65 put and and 5 contracts for short $65 call (march 2025)
I would play this as O. Chongusu mentioned. Short 12 shares of MSEX for every 1 share of long preferred. I’m looked through several sources and shares are readily available to borrow and at no carrying cost.
O. Chongusu – so what is your exit strategy? Are you just going to request conversion on the preferred that will ultimately cover your short? Quick back hand math shows a return of roughly 10.7% but would need to know the hold time on that.
I realize this is super thinly traded but if you dig back a few months, there were several multi thousand share volume days on the preferred and even one where someone bought nearly 5000 shares in the $90.
> O. Chongusu – so what is your exit strategy?
It’s nice and easy. Once the Rule 144 restriction falls off, DWAC the shares back to IBKR to cover the short.
Do you know when the capital gain needs to be realized on that? Let’s say you get your restricted common shares in 2024, and are long those at BR while short the unrestricted common at IB. Then in 2025 you get the share restriction dropped, and settle the short. In which year is the capital gain from the preferred purchase realized?
I have MTM trader status
Theta,
You must have missed the fireworks on MSEXP a month or two ago. This forum probably bought up most of that 5K shares after they were resold by someone for a quick flip. Nobody knew of this situation. It was all so odd. Also people kept flipping those 5K shares the whole time as they rose in price.
I am going to guess most of the remaining float of approx 9K shares is basically being converted at this stage. 1000s and 1000s have been sent for conversion in the last 30-60 days.
If you want to read about it just keep going back in time on this ill page by reading older comments. Searching for MSEXP will find the posts.
Thanks fc. Will do. Appreciate the context. Definitely missed that one.
For those that check out this page for ideas, it turned out to be a major score and the greatest pref story ever for the buyers.. less so the seller, although good chance it was just an estate winding down, and they aren’t missing anything.
Bought a little AILLI at 85, slightly under my bid. After seeing others here buying illiquids recently at CY 6%, I decided that it makes sense for me if my under-6% coupon bonds are going to be called sooner or later.
I’ve been spoiled by >6% yields in bonds and preferred/BBs. With the strong possibility of yields headed lower, 6% for IG is nothing to sneeze at.
I think someone just paid a 1000 per share for 8 shares of SLMNP. I only noticed because my daily gain rocketed up quite a bit between refreshes just now. Not sure if this helps anyone. Just found it curious.
Saw that too…. Fat finger strikes! it is fun, though, to see a gigantic up day in the portfolio thanks to this… (-335) on the Dow? Pshaw…. I’m a genius for a day….
Gosh I sure hope this wasn’t one of us…………
I bet a few people ran off and checked their GTC orders just to make sure!
I checked mine, then put my shares up for $1,000.
I wish my wife was here so I could show her what I “made” today before the figures go back down ;o)
I am willing to buy at $855 but $1,000 is too much for me.
At 1000 for a 6% yield that is about the going rate for an ill of decent quality. This one also has a backstop too which makes it interesting.
FC – I was thinking the same thing. $1,000 for SLMNP is higher than recent trades, but it’s still a 6% uncallable at that price.
I don’t think I would sell my shares today for $1,000 each.
Maybe I should reconsider and up the price.
NewToThis2015 – You might think about what you would replace SLMNP with today if it sold for $1,000. I can’t think of a lot of great alternatives with better yield with the same risk profile.
It’d be tough to find anything with the same backstop as SLMNP but I don’t think I’d have many qualms about selling SLMNP AT 1000 to buy EBGEF at 22.83 with current yield of 7.492%. I would consider them relatively close in credit quality based on underlying ratings of both and granted EBGEF is a reset, you’re locked in until March ’29 before it resets. EBGEF = Enbridge but denominated in USD EBBGF is pretty much the same thing trading very close to the same price but EBGEF is locked in a bit longer. If reset today, EBGEF would go down from 6.683 to about 6.36
I would have to run the math but your suggestion is not a qualified dividend. I imagine for quite a few of us that would mean getting taxed at >= 24% from the fed instead of 15%. Let alone state taxes. I got excited for a moment with your suggestion but then have to rethink it when I saw it was not QDI.
I don’t pay 15% for QDI. Retire with much of your money in IRA/Roth.. Invest taxable money in Qualified dividends, go for long term capital gains, buy ibonds or market ETF’s that you can sell at your leisure. Zero tax unless you have several millions earning taxable income. Oh, and live in a state that doesn’t believe in state income tax.
2WR _ First thanks for all your valuable commentary! As for SLMNP I am very interested but a bit baffled by the conversion after the LYB takeover. QOL has this: by virtue of the Merger, cancelled and automatically converted into the right to receive (i) $42.00 in cash and (ii) one contractual contingent value right (each, a “CVR”), in each case, without any interest thereon and subject to any applicable withholding taxes (the “Merger Consideration”).
That does not help me.
Do you have a summary? As it sits now I like it, but I cannot judge the conversion if called, and maybe that would become likely….Thanks
Tizod – The company cannot call SLMNP. Holders of SLMNP can covert each share to $848.27 cash.
“Following the Merger, the conversion rate became fixed at $848.27 of cash per share of Special Stock.”
Here is an FAQ on SLMNP:
https://www.lyondellbasell.com/4aed47/globalassets/investors/stock-information/faq-for-aps-shareholders—conversion-process.pdf
Along with Dick’s post, here’s a Copy and Paste from my notes – maybe giving you some more color..
SLMNP – A. Schulman, 6.00% Cumulative Perpetual Convertible Special Stock Traditional Preferred CUSIP: 808194302
NONCALLABLE WITH PUT @ $802.674 PAR = $1000.00
[PUT ACTUALLY = $848.2742 according to TDA Corporate Actions – See notes]
Schulman, Inc., 6.00% Cumulative Perpetual Convertible Special Stock, liquidation preference $1,000 per share, not redeemable at the issuer’s option at any time, and with no stated maturity. Cumulative distributions of 6.00% per annum ($60.00 per annum or $15.00 per quarter) will be paid quarterly on 2/1, 5/1, 8/1 & 11/1 to holders of record on the record date that will be 1/15, 4/15, 7/15 & 10/15 respectively (NOTE: the ex-dividend date is one business day prior to the record date
[From S&P] In August 2018, LyondellBasell Industries N.V. announced the completion of its acquisition of A. Schulman Inc. for $2.25 billion.
We are raising our issuer credit rating on A. Schulman to ‘BBB+’, the
same as the issuer credit rating on LyondellBasell.
We are raising the senior unsecured issue-level ratings to ‘BBB+’. We are
withdrawing the ratings on the senior secured debt because it has been
paid down. THIS IMPLIES BBB- QUALITY RATING FOR PREFERRED. https://www.standardandpoors.com/en_US/web/guest/article/-/view/type/HTML/id/2091066
[FROM LYONDELLBASELL 2018 10K] https://www.sec.gov/Archives/edgar/data/1489393/000148939319000011/a2018q410k.htm#s40ED315E2DA913CBA6FA8CD3E9AB8B5C:
Redeemable Non-controlling Interests
Our redeemable non-controlling interests relate to shares of cumulative perpetual special stock (“A. Schulman Special Stock”) issued by our consolidated subsidiary, A. Schulman, Inc. (“A. Schulman”). Holders of A. Schulman Special Stock are entitled to receive cumulative dividends at the rate of 6% per share on the liquidation preference of $1,000 per share. A. Schulman Special Stock may be redeemed at any time at the discretion of the holders and is reported in the Consolidated Balance Sheets outside of permanent equity. P.77.
NOTE: THE PUT OPTION WAS CREATED UPON SCHULMAN BEING BOUGHT BY LYONDELL AND IT IS FOR PURPOSES OF HONORING THE ORIGINAL CONVERSION OPTION. GIVEN SCHULMAN’S ACQUISITION PRICE PAID ($42/SHARE), THE PUT OPTION WAS FOR THE EQUIVALENT OF THE PRICE PAID BY LYONDELL AT CLOSING X THE CONVERSION NUMBER OF 19.1113 SHARES FOR TOTAL OF $802.6746
6/12/2020 – See https://www.sec.gov/Archives/edgar/data/1489393/000119312518254058/d598622d8k.htm It might say out totals $848.14 NOT 802.6746
5/25/2022 – I checked with TDA Corporate Actions today and they are fully aware of the PUT capability and they know THE EXACT NUMBER TO BE $848.2742. Putting back thru TDA Corporate Actions would be no problem whatsoever.
AS PER FIDELITY: Latest update
09/14/2022 5:29 PM ET
Lyondellbasell Advanced Polymers Inc has announced an open conversion period on the Convertible Preferred stock.
Each Convertible Preferred Stock you own is convertible into 19.1113 shares of Shulman A Inc common stock, CUSIP 808194104. Holders who convert will receive a total of $848.2742 per preferred stock
($42.00 plus $2.386 ($1.477 distributed on 2/4/19 + $0.909 distributed on
04/01/19) in place of issuing the CVR per share).
Below is an example of the payment breakdown for holders who instruct one (1) preferred stock to be converted 1 Pfd share = 19.1113 common share * $42.00 = $802.6746 1 Pfd share = 19.1113 CVR * $2.386 = $45.5996
Total Cash Payment per Pfd share = $848.2742
Converting holders who instruct between record date and payable date will
forfeit their interest.
Thanks for the heads up I gleefully put on an order below $1000 but not expecting it to fill. I previously sold some at 850 to redeploy the money and take the tax loss
Is martin g Martin G?
Yes it’s Martin G who responded to a comment in the wrong place because he had a toddy with lunch,
I am thinking about bidding at a rate of 6.5 on this , because I consider the put to be extremely valuable.
Any sellers at around $925?
BTW are there still 100,000 outstanding?
Re – SLMNP Redeemable Non-controlling Interests
Our redeemable non-controlling interests relate to shares of cumulative perpetual special stock (“redeemable non-controlling interest stock”) issued by a consolidated subsidiary. As of June 30, 2024 and December 31, 2023, we had 113,059 and 113,075 shares of redeemable non-controlling interest stock outstanding, respectively. These shares may be redeemed at any time at the discretion of the holders.
In February and May 2024, we paid cash dividends of $15.00 per share to our redeemable non-controlling interest shareholders of record as of January 15, 2024 and April 15, 2024. These dividends totaled $3 million for each of the six months ended June 30, 2024 and 2023.
I have 100 shares of SLMNP at an average cost of around $850. I wish I had more but it is hard to acquire.
I don’t think I would sell my shares today for a yield of 6.5% but that may have more to do with my view of the overall health of the economy and future path of rates.
This sort of thing is why I have an open limit order to sell UEPEN at $100. Just in case a miracle happens. One investor’s overpriced purchase is another investor’s lucky gain.
Liquidity event for CNLPM, current yield 6.06%, BBB+, do not know stripped yield off-hand. Ex date in about a month.
I picked up some myself.
Thanks pig. I am unsure why but at this stage I find it a lot easier to just buy these Ills at >= 6% yield and call it a day versus hunting around for more yield. I bought some as well at 34.20ish. 1954 is a fine vintage.
fc, yes. Had a Bond mature yesterday, so had some cash to blow. It has been a very orderly march to sub 6% yield for our favorite illiquid Utes.
Dick Whitman/2WR; you all will be happy to know I’m back in EP-C for now. For lack of anything better, lol.
EP-C has been on set and forget with me for awhile – I’ve got enough that I shouldn’t be thinking of adding and I think it’s safe enough for me to ignore without being tempted to add more……What kind of YTM did you get?
PP – I think the stripped YTM on KTH at $28.56 (current ask) is around 6.35% so that may be another one to look at.
2WR, I don’t have my trusty spreadsheet right now but I paid ~$48 to get back in or very close to that. Not sure what YTM that was at.
Dick, Yes KTH has been a holding of mine for quite some time. Wan’t there a threat not too long ago of that going dark? Vaguely remember a few posts regarding that but cannot recall exactly the details.
This is the last response I got from Exelon’s IR on May 3, 2024:
“To clarify, the KTH securities, while they appear to pass through the economic benefits of the underlying PECO Trust securities, are actually issued by a third party that is not affiliated with PECO or Exelon. Therefore, the KTH listing is not affected by the delisting of the underlying PECO securities, which went into effect before today’s market open. The delisting had no impact on the registration or the economics of the PECO securities. “
Dick, Thanks for posting that, I’m certain you posted that before but appreciate your time looking it up again.
I added a few too. Thanks
Huzzah, my MSEXP has made its way out of the clutches of Interactive and into its new temporary home at Broadridge.
Thanks to everyone who shared their info with the group, particularly losingtrader and fc. I would’ve been stuck on the phone chasing things down for hours without you.
About MSEXP. Broadridge sent me a letter today asking for me to fill out a W-9 tax form. I filled it out, made a copy for myself, and will mail it back to them.
I would try to find the original thread on this topic but I am way too lazy for that due to how this forum is designed. A pain.
My shares have been transferred out of IBKR, still waiting on Schwab. Broadridge has been very helpful.
I bought some more AILLO today for an ask yield of 6.07%. Ex-Div date should be 1st or 2nd week of October. Not a recommendation though.
Can I buy SLMNP at Schwab?
You can have my shares I don’t want them but they are too hard to sell.
Martin just put a limit order for whatever you want. I am sure they will go especially at the put price plus whatever interest has accumulated which is about $5. I think you will easily find a buyer even at that price.
I have a new limit buy order open for a few when they become available. I think that’s okay to post, right?
I finally got some fills on SLMNP these past few days. I wonder if there was a fund selling at the end of the month. I am not sure why anyone would sell it for less than the non expiring put price.
Ooooooooooh I know! I know!! IGNORANCE….. There must be an occasional owner of SLMNP who hasn’t paid any attention to it in years, and/or maybe gave control of his account over to someone who knows less than Sgt. Schultz and cares even less. So they just send out a Sell and know that all will be taken care of with total efficiency because after all it’s going to go to “the expert market.”
I got some more assigned to me on the sell today as well at 841.50….. again executed thru a standing bid well above the execution price…. Thank you, Fidelity….. Wants some fun? Assume you just hold these until the next div date and then put them back after the div is paid to you…… What yield to call do you get?
BTW, I doubt this was a fund.. Afterall I think the total value of all traded this week is still around only $250,000 max.
Re SLMNP: does the CVR still exist or has that played out?
If by CVR you mean convertible, it no longer exists because the stock (A Schulman) that it was convertible into no longer exists….. To replace the convertibility aspect of the preferred, they created the put to allow shareholders the ability to convert at the dollar price equivalent of the value of Schulman at the time of the acquisition by LYB…. That’s the Cliffnote version. Absolute value of the put was adjusted upward slightly from the original conversion price.
SLMNP, per Quantum’s description, was convertible into stock plus a CVR (contingent value right). CVR’s sometimes trade separately, but usually have a limited life and are based on some type of earnings test. There have been a number of mergers where the market implied no value to the CVR but it later was worth a lot. This was likely determined many years back.
Separately, do you know why this preferred isn’t apparently on the LYB balance sheet? If I looked at the correct financials, and LYB assumed the obligation it would be somewhere in the capital structure on the statement. Is it possible they are paying but did not assume liability? Or am I not seeing something that’s there. I also don’t see any explanation of the put but I’ll go back a few years. It would have to be there in the year of the acquisition.
Here’s the CVR doc:https://www.sec.gov/Archives/edgar/data/1489393/000119312518046665/d536459dex101.htm
I haven’t read it yet
Here’s what Fidelity includes in the “corporate actions” part of my account for SLMNP:
Offer terms
Latest update
09/14/2022 5:29 PM ET
Lyondellbasell Advanced Polymers Inc has announced an open conversion period on the Convertible Preferred stock.
Each Convertible Preferred Stock you own is convertible into 19.1113 shares of Shulman A Inc common stock, CUSIP 808194104.
Holders who convert will receive a total of $848.2742 per preferred stock
($42.00 plus $2.386 ($1.477 distributed on 2/4/19 + $0.909 distributed on
04/01/19) in place of issuing the CVR per share).
Below is an example of the payment breakdown for holders who instruct one (1) preferred stock to be converted
1 Pfd share = 19.1113 common share * $42.00 = $802.6746
1 Pfd share = 19.1113 CVR * $2.386 = $45.5996
Total Cash Payment per Pfd share = $848.2742
Converting holders who instruct between record date and payable date will
forfeit their interest.
Here’s the letter I received from LYB’s investor relations last year:
December 7, 2023
Dear Shareholder:
You are receiving this letter because you hold 6.00% cumulative perpetual convertible special stock (the “Special Stock”) of LyondellBasell Advanced Polymers Inc. (formerly known as A. Schulman, Inc.) (“Schulman”). As previously announced, Schulman merged with a subsidiary of LyondellBasell Industries N.V. (“LYB”) in 2018 (the “Merger”). After consummation of the Merger, the Special Stock remains outstanding, however, Schulman is now a part of LYB’s Advanced Polymer Solutions segment and no longer a stand-alone publicly-traded company. Information for LYB’s Advanced Polymer Solutions segment is publicly available on the LYB investor webpage at lyb.com/en/investors and the U.S. Securities and Exchange Commission’s website at sec.gov/edgar. The CUSIP for the Special Stock is 67054E202.
The terms of the Special Stock continue to allow you to convert your Special Stock into cash at a price of $848.27 per share of Special Stock. If you would like to convert your Special Stock into cash, please contact your broker.
You can find additional information relevant to the Special Stock by visiting LYB’s investor webpage, including frequently asked questions under Stock Information (Legacy Investor Information). You or your broker can also reach out to Clayton Huff at LYB if you have any additional questions at clayton.huff@lyb.com or +1 (713) 309-3151.
Regards,
David R. Kinney
Vice President, Investor Relations
Here is an FAQ on SLMNP:
https://www.lyondellbasell.com/4aed47/globalassets/investors/stock-information/faq-for-aps-shareholders—conversion-process.pdf
SLMNP is described in the most recent LYB annual statement:
Redeemable Non-controlling Interests
Our redeemable non-controlling interests relate to shares of cumulative perpetual special stock (“redeemable non-controlling interest stock”) issued by our consolidated subsidiary, formerly known as A. Schulman, Inc. (“A. Schulman”). Holders of redeemable non-controlling interest stock are entitled to receive cumulative dividends at the rate of 6% per share and the liquidation preference of $1,000 per share. Redeemable non-controlling interest stock may be redeemed at any time at the discretion of the holders and is reported in the Consolidated Balance Sheets outside of permanent equity. Dividends on these shares are deducted from or added to the amount of Income (loss) attributable to the Company shareholders if and when declared by the Company.
https://www.sec.gov/ix?doc=/Archives/edgar/data/1489393/000148939324000012/lyb-20231231.htm
Dick,
You are a wealth of information and have given me a wonderful birthday present on this, my 65th “birfday” as my younger friends say.
Come to think of it, they aren’t so young anymore when they had to scrub their facebook page for prospective employers at least 15 years ago.
( I was going to search for info this morning but Dick provided it)
On point, given the stock is convertible into cash, you guys got a great purchase! Congratulations! Your shares have a great yield and should be largely unaffected if rates skyrocket as you can just put them.
I’d put most of my portfolio in this if I could. It has inflation protection.
Dick’s unraveled the cliffnotes version. The CVR amount is included in the put price as it is now. Thanks, Dick
i purchased a 100 shares over 4 years ago in the low interest rates era. I am well under water. With a market cap of 32 B, with revenue > 40 B, net income > 1 B, I am fine with holding for many years to come. I think it is in the bottom sock drawer last time I checked.
If investors are not 100% confident the price floor will last forever they may sell for a few cents less. We’ve seen enough nonsense with other dark and stormy issues. Or if in a hurry to sell they might not hold out for top dollar.
A few cents lower, yes, but a few points lower is unjustifiable…The put is exercisable at any time…. LYB just doesn’t pay any accumulated but unpaid dividends on preferreds put back.
I was also able to pick up a few shares today in my Fidelity account.
I got several fills at $841 on this in the past 3 or 4 weeks. The more I get the more I want. It may be my favorite fixed income unit. My one concern is if I ever have to sell it. The “Expert” market seems to suck for sellers. It is fantastic to have the $848 floor price. Also, if rates drop significantly will the Experts continue to sell at $841 ish. It may be hard to realize an obvious capital gain.
For now, I will take this gift and worry about selling in 10 or 20 years, if I am still around!! Great discussion on this oddball.
But that’s the key to this one – you never have to sell it in the expert market…. You can always put it back. You won’t get accumulated div but you can do it.. I learned that the hard way two years ago. As long as you believe in LYB as a good credit, I consider this to be a money market fund alternative but instead of it being valued at $1 it’s valued at 848.27 and earning 7.07%. What if you had the opportunity to buy a MM under its $1 value? What would you do? That’s what I do with SLMNP.
Is it a difficult procedure to exercise the SLMNP put back to the company?
What needs to be done to make this happen?
Thanks
Good point
I have accounts at Fido and Schwab (via TDAmeritrade). I’ve not checked at Schwab since getting Schwabbed, but when checking with the Corporate Actions Dept of both, I found FIdo and TDA had the standing instructions already in place so no problem putting back…. if you don’t already own it, the problem is buying it because very few brokers allow we ignorant sluts to be buyers on the expert market… Obviously I can’t speak for other brokers but it should be easy to find out at each.
Thanks, 2WR. I have an account at Fidelity, and they do allow new purchases of SLMNP.
No immediate intention to put the shares back, but will continue to accumulate in small quantity whenever I can.
Good to know their Corporate Actions team has standing instructions in place.
MSEXP @ Interactive: SUCCESS with DWAC transfer . I had to email my home address to Robert Brasen @ Broadridge.
Excellent, glad to hear something worked after all this time. I’m on the road today and will try my luck with this on Tuesday.
No way!!! So you were in contact with him via email, and he said to provide your name and address, and then he’d take in the delivery from IB’s DWAC? Any other details we need on this in order to try it next week?
I heard the same from IBKR today. Will keep you posted.
I had to push for this, strongly requested that IBKR back office call broadridge.
Nice work. Sounds like the handful of us continuing to badger both IB and BR made both sides give a little and find a resolution. Squeaky wheel gets the grease.
He had me give him my address
Can someone explain PRIF/ PK yield being so far above other PRIF preferreds?
Comments on the fund and these preferreds in general would be very helpful
losingtrader,
-K is the only one that is a perpetual. The others (D, F, G, H, I, J, L) are term preferreds. The term preferreds carry less risk. Therefore, -K should have a higher yield.
When I compare their yields using each one’s ASK price, the -K has the 2nd lowest yield, not the highest yield. Can’t explain that one. What prices did you use in your comparison – last trade, bid, ask? With wide spreads, the price one selects can make a big difference in the yield.
Ii was looking at tim’s old list of cef preferred. It seemed like this had a high yield
I see it now, too.
I just realized – I calculate a different yield on PRIF/PK than I do on the PRIF term preferreds.
PRIF /PK: Yield = current yield (stripped price basis).
The term pfds: Yield = yield to maturity (stripped price basis).
Looks like Tim calculates all the PRIF preferreds on the same basis – CURRENT YIELD.
any opinion on the safety of these PRIF’s?
A recent discussion here.
https://innovativeincomeinvestor.com/bought-this-term-preferred/