Just Energy and CBL Properties Cut Preferred Dividends-Updated

It has been a tough time for investors in the preferred stock of Canadian energy reseller Just Energy (JE) and mall owner CBL Properties (CBL).

While the preferred shares have been under pressure for some time it was only yesterday that both company’s announced suspension of their preferred stock dividends.

Just Energy has just 1 preferred issue outstanding which can be seen here. The issue had been trading around $16-$17/share last week and plunged yesterday to $9.80/share on the suspension announcement.

For what it is worth these shares are cumulative–thus dividends will continue to accrue. Of course whether they are ever paid probably is kind of a long shot, but speculators can determine that for themselves.

The Just Energy announcement can be read here.

Of course CBL Properties preferred stock had already seen tough times and the announcement was expected by many. CBL has 2 outstanding preferreds which can be seen here.

UPDATE

These shares which were already depressed trading around $10–per Ptrader they are trading much lower this morning.

The CBL issues are cumulative so dividends continue to accrue–again, whether they will ever be paid may be dicey.

The CBL announcement can be read here.

While very conservative investors such as myself are unlikely to have any interest in these preferred shares an opportunity may present itself for more adventuresome folks–only time will tell.

20 thoughts on “Just Energy and CBL Properties Cut Preferred Dividends-Updated”

  1. Some poor guy has lost dough on JE-A and posted comment on JE-A from a positive article from a former hedge fund trader earlier this year. He made it sound like lolly pops and candy with JE-A. The comments brought up my old comments also.

    From May..
    Gridbird
    Comments5961 | Following
    @SW92122, There are no credit ratings I have found when researching in the past. But one doesnt need to be an expert to know this has B3-CCC+ written all over it.
    They just last fall took out a 5 year senior unsecured term facility loan for 8.75%. I doubt they paid that onerous amount for a senior unsecured short term loan to be charitable to Segard Credit.
    http://www.globenewswire.com/...
    Not expressing an opinion on the issue. It is what it is.
    09 May 2019, 07:50 AM Edit/Delete Rep

    Then in August, same article…
    Gridbird
    Comments5961 | Following
    @MelvinDumar, I agree. Its not for me to decide ones risk level, but I warned this was high risk when they were issuing 8% short term debt. These are crap outfit companies. Hi churn and apparently bad accountants paid on the cheap. If one can avoid all the landmimes, yep you get paid better. But one blow up can negate all of that.
    I tend to stay with outfits I trust, have a history of paying and wont screw me over.
    16 Aug 2019, 05:14 PM Edit/Delete

    This post isnt to pat myself on the back, just the opposite. I am a nobody who knows nothing about finances and corporate balance sheets. But my above comments show just by simple internet research you can find info indirectly that shows the relative safety of a yield…The writer in the article just sang the praises and didnt mention any of the above info I found by basic internet research. And he was a former professional hedge fund trader he said…You just cant make this stuff up, it would not be believable if it was.
    As Nomad says, and it cant be overstated, do your own due diligence. Its quite often not hard to smell a turd with basic research.

  2. Thanks for the post. I don’t think either company long term is going to make it.

    Just Energy: They started a strategic review back in July. Rates have been moving lower since then, if a company wanted to buy them, any company with good credit would have shown interest within the last 6 months. This company is full of controversy as well. Just take a look online, and they have a LONG history is dubious behavior.

    CBL: Activist. That’s pretty much all that needs to be said. Bill Ackman was an activist of JC Penny, and Carl Icahn of Blockbuster. When these guys gets involved, it’s best to step aside. I sold off my AT&T due to Paul Singer “being involved”.

    I think both companies are highly speculative at this point.

    1. I agree they are speculative – JE is a mess, but they are trying to clean themselves up for sale – the reason they haven’t sold themselves is because they have really had problems. In the end, I assess that JE does get bought, but that the preferred holders won’t be made whole – they will have to escape using the common conversion clause; chances of getting out at par are slim. People that bought near par and are “holding and hoping” to be made whole should not expect that. Buying now as a specualtion is a different risk/reward calculation though, the preferred is trading considerably less than the common conversion formula right now.

      1. Thanks for the comment. When you say problems, do you mean debt or things beyond ? Also, do you think it is a higher livelihood they sell themselves, or hobble along and try to survive ?

  3. The Just Energy issue probably won’t see preferred divvy’s ever restored, but they are trying to sell the company. On the event of a change of control, the preferred can be converted to common at an 8.6 to 1 ratio. With the common above 2 and the the preferred selling around 9, there is an interesting buyout speculation here. Not safe, not for income, just a potential buyout arbitrage. Of course, they might not make the buyout happen, so could as easily go to zero. This one is only for speculators with small position sizes and strong stomachs. On the other hand, CBL is toast…

  4. If you’re going to play CBL in any way, I’d suggest the bonds. That’s where the smart institutional money is taking their gamble. But this kind of distressed debt gaming is above my pay grade.

  5. The CBL cuts could be seen from a mile away. For an education, look at the company website. Management and the board are inbred, conflicted, overcompensated, and have 5 times as many “senior” officers as it should.

    They took on 2 activist board members recently and those board members are pretty much calling the shots now. The decision to eliminate the dividends was clearly theirs, not the founding family’s.

    If you’re a hedge fund kind of investor this might be an opp for you. But unless you can stand a 100% capital loss and can baby-sit this 24/7 it’s not a place to be.

    1. I wonder what the exit strategy is for the activists. Probably drive down the common price so they scoop some up for pennies and then gain control of the Board. I’ve got my popcorn out for this one. 🙂

      1. The activists probably made the right decision for the interests of the common shareholder. While the activists might be more skilled than the founding family, the question now is whether there is any equity to be preserved in the company, even by the smartest real estate professional. I don’t pretend to know enough about the company to answer. But given the price drop, I would expect the activists to buy more if they really believe they can save the company.

        1. Yes, I’d expect the activists to buy more if they haven’t whipped management into submission on their strategy. Since the beginning, the activist wanted to liquidate the company which is the smart move and long term will preserve the greatest value. In a liquidation, even at a 12% cap rate, the bonds are money good and the preferreds could even get some (even after accounting for professional fees). At a 15% cap rate, bonds would be impaired but you could still make money buying them at the right price. The key is to liquidate the company rather than throwing good money after bad with these stupid redevelopments. However, the founding family is too emotionally attached and frankly has no reason to do what’s best for bondholders (their only fiduciary duty is to common stockholders). The activist has to twist their arm into submission to win this one. Very risky.

          A lot more REITs probably end up in liquidation than bankruptcy. The corporate structure favors liquidation.

      2. I don’t often praise “activist” investors (and I won’t start!) but if there was ever a time for it this is it.

        CBL lists 37 executive and senior officers, with revenues under a billion.
        Among their 8 executive officers, they count a chairman, a CEO (not the same person), a president (not the same person), an EVP of Operations, an EVP of Management, ANOTHER EVP of Management, and a EVP & CIO.

        I’ve seen far more complicated companies, with many, many times the revenue, with fewer “senior” personnel. It’s past the point of silly with CBL

        If the Winthrop (activist) people go by the playbook, they will be looking to defease the preferred (wipe it out), do a cram-down on the debt, and leave as much for the common as they can (maybe).

        More likely, I speculate, they may also seek to be a capital provider to CBL, in exchange for a preferred position in the capital stack when they do take CBK into BK or otherwise sell or liquidate the company.

        Facts are that Winthrop is doing this for its benefit, the founding family agreed to Winthrop’s participation to salvage something for themselves, the debt holders have some inherent rights, and nobody is there for the preferred.

        CBL has no need to pay common dividends. They have no income in need of distribution. There is no need to pay a preferred dividend (in order to pay the common) a reason often cited for the safety of REIT preferred.

        REIT preferred are safe. Until they aren’t. Preferred is a bad place to be in this kind of situation.

        1. Bob, I agree…People typically buy preferreds for “safer” (I would suggest the term should be a reasonable chance for reliable income stream instead) income. And many companies are pleased to offer this product for their benefit to sell to income buyers. But when push comes to shove, preferred holders become the bastard red headed step child with no support from anyone typically. Then one has to dig into prospectus to see if protection is offered there. Now, long ago in a far away land preferreds used to be the master of their domain. Many preferreds last century gave preferred holders the right to take over the board after 4 non payments.
          Many of these preferreds exist in illiquid form…The Indianapolis Power and Light preferreds, CTPPO, CTGSP, and such of that ilk still trade infrequently and have that protection. Not anymore…Companies figured out they can issue preferreds with out such demanding protections.

    1. But….But…. I saw numerous articles on Seeking Alpha that these were great investments..

      ,,,Couldn’t resist.

      1. RB, wasn’t this a “The more it drops the more I buy” article on SA? That is why I have repeatedly called for FULL DISCLOSURE on SA of their “professional” writers. Show everyone their buy, sell and hold recommendations and exactly how much and the dates these “professionals” actual have bought or sold in accounts they control..
        . In Latin we say, Te futueo et caballum tuum
        Nomad

        1. Lots of luck on that, Nomad. When I offered that suggestion to the HDO bunch on a SA post the “reply” from grid’s favorite person (pendy) was, more or less, that their disclosures met SA requirements.

          What a weasel.

          I do wish the SEC would look into their trading activities.

          1. Stephen, Te futueo et caballum tuum translates to: Screw you, and the horse you rode in on. This is intended to those “professional” authors that lie and deceive those that are too trusting on SA (you know who you are)…
            Nomad

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