We have seen some early redemptions recently that caused some investors some consternation as they got ‘caught’ holding issues that were trading way above liquidation preference ($25). In particular those holding the Gladstone Commercial 7.75% preferred (NASDAQ:GOODP) and the Gladstone Commercial 7.50% preferred (NASDAQ:GOODO) took quite a spanking as both issues were trading 8-10% above $25.
With this in mind we thought we would review current outstanding issues to see which ones were going to ‘put the hurt‘ on holders. We started by looking at just those issues (baby bonds and preferreds) that are investment grade. We were surprised that there are only 23 investment grade issues that are in the early redemption period (NOTE–we left off some low fixed coupon issues that are in the early redemption period–with fixed 3-4% coupons they trade much below $25). I guess thinking about it more it only makes sense that the top quality issuers are able to readily ‘refi’ issues when the financials make sense.
Below if you click the link you will find the current list of investment grade issues now in the early redemption period (actually a couple will become eligible for redemption on Monday). NOTE–the Yield to Worst doesn’t calculate accrued dividends or interest in this list so the CALL RISK is very minimal for most issues. What this list tells me is that there are 2 issues that I would NOT hold under any circumstance–these 2 issues from Assured Guaranty are trading at sky high premiums. These issues have been redeemable for over 10 years and investors seem to think they will never be called.
Additionally there are 2 issues from PS Business Parks that are at higher premiums than we would hold, but not at crazy levels.
Lastly the PPL Capital Fund issue is at a premium that is too high for us, although not crazy–we know that some readers have been playing this one off and on for quite some time.