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Into the Home Stretch

Well hopefully folks are getting through the holiday period with their sanity. With our 6 grand kids ranging in age from 4 to 15 holidays are becoming less stressful as they are quite content to play with each other instead of requiring adult supervision (at least as much).

So with just 4 trading days left in 2019 I hope we maintain our gains–I really expect market movements will be pretty muted, whether it be stock prices or interest rates.

Last night I was adding more data and filing in a few blanks in the database when I came upon an issue I thought I would mention. This is for folks looking for a stable value issue–with a relatively short maturity date.

The issue is the GDL Fund $50/share preferred (GDL-C).

This issue is cumulative, puttable and callable. The coupon is set at 4% for 2019 and 2020, which will potentially be reset later in 2020 for the next 4 years.

Investors can ‘put’ shares back to the company in March, 2020 and March 2022 at $50 plus accrued dividends.

There is a mandatory redemption in 2025 at $50/share.

The issue is trading around $50.90 and as happens with these types of issues it is somewhat illiquid–trading only 600 shares a day.

Being a Gabelli CEF (closed end fund) the fund must maintain a 200% asset coverage ratio–as of 6/30/2019 coverage was at 237%. The fund holds level 1 assets (common stocks mostly) and quite honestly, the fund performance is pretty lousy, but I am not overly concerned about the fund performance as long as they maintain asset coverage.

The issue is not rated, but would likely be investment grade if they decided to rate it.

So this issue has a lot of good qualities–for me the 2025 mandatory redemption is perfect. The puttable period in 2022 and the mandatory redemption will help maintain shares in the $50 price area. Also the 4% coupon isn’t too bad for this type of issue.

The company can redeem shares starting in March, 2021–but I would be surprised if a 4% issue were called.

Current yield is 3.93% and yield to worst is just under the 3% area.

I am pondering a purchase since I have a rather large position (for me anyway) of over 1000 shares of the Kayne Anderson 3.50% (KYN-F) issue and with the mandatory redemption in 4/2020 I am looking for a place to stash some ‘safe’ money.

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