Lots of Nervous Nellies in the House

It looks like todays stock selloff is not going to have the type of bounce back we have come to expect–it “feels” (a scientific term no doubt) a bit more serious.

With common stocks falling the 10 year treasury is down in the 2.41% area–in sympathy with stocks.

The spectre of the Chinese dumping treasuries is being raised by some–of course no one really knows whether there is any possibility of this happening. On one hand I think it could happen–but on the other hand if the Chinese started to sell treasuries yields would move higher–thus prices lower–it seems it would be shooting themselves in the foot if they drove prices lower. Additionally it is likely that the FED would step in at some point and buy. Who really knows what will happen?

Surveying our holdings today we are off 1/10th of 1% overall. The average price of a preferred today is off 5 cents–no panic, but there are plenty of issues off 1%–not many that are much lower (except some of the usual suspects such as the CBL issues).

It is our intention to simply wait and watch. I probably wouldn’t even buy “bargains” today – simply better to watch and see how things play out for a day or two.

109 thoughts on “Lots of Nervous Nellies in the House”

  1. Thanks to you Grid, I joined the SLMNP club today for $1023.50 a share. Much appreciated.

  2. Spire new Pfd.

    Spire Inc. is offering of its depositary shares (the “Depositary Shares”), each representing a 1/1,000th interest in a share of our
    % Series A Cumulative Redeemable Perpetual Preferred Stock, par value $25.00 per share, with a $25,000 liquidation preference per
    share (equivalent to $25.00 per Depositary Share) (the “Series A Preferred Stock”), deposited with Computershare Inc. and Computershare
    Trust Company, N.A., acting jointly, as depositary (the “Depositary”). The Depositary Shares are evidenced by depositary receipts. As a
    holder of Depositary Shares, you will be entitled to a proportional fractional interest in all rights and preferences of the Series A Preferred
    Stock (including dividend, voting, redemption and liquidation rights). You must exercise these rights through the Depositary.
    Dividends on the Series A Preferred Stock, when, as and if declared by our board of directors (the “Board”) or any duly authorized
    committee of the Board, will be payable on the liquidation preference amount, on a cumulative basis, quarterly in arrears on the 15th day of
    February, May, August and November of each year, commencing on August 15, 2019. Dividends will be payable out of amounts legally
    available for the payment of dividends at an annual rate equal to % of the $25,000 liquidation preference per share of Series A Preferred
    Stock (equivalent to $25.00 per Depositary Share). Dividends on the Series A Preferred Stock will accumulate daily and be cumulative from,
    and including, the date of original issuance of the Series A Preferred Stock.
    The shares of Series A Preferred Stock are perpetual and have no maturity date. We may, at our option, redeem the Series A Preferred
    • in whole, but not in part, at any time prior to August 15, 2024, within 120 days after the conclusion of any review or appeal process
    instituted by us following the occurrence of a “Ratings Event” (as defined herein), at a redemption price in cash equal to $25,500
    per share of Series A Preferred Stock (equivalent to $25.50 per Depositary Share); or
    • in whole or in part, from time to time, on or after August 15, 2024, at a redemption price in cash equal to $25,000 per share of
    Series A Preferred Stock (equivalent to $25.00 per Depositary Share),
    plus, in each case, all accumulated and unpaid dividends (whether or not declared) to, but excluding, such redemption date. See “Description
    of the Series A Preferred Stock—Optional Redemption.” If we redeem the Series A Preferred Stock, in whole or in part, the Depositary will
    redeem a proportionate number of Depositary Shares. Neither you, as a holder of Depositary Shares, nor the Depositary will have the right to
    require the redemption or repurchase of the Series A Preferred Stock or the Depositary Shares.
    The Series A Preferred Stock will not have voting rights, except as set forth under “Description of the Series A Preferred Stock—Voting
    Rights.” A holder of Depositary Shares will be entitled to direct the Depositary to vote in such circumstances. See “Description of the
    Depositary Shares—Voting of the Depositary Shares.”
    The Depositary Shares are a new issue of securities with no established trading market. We intend to apply to list the Depositary Shares
    on the New York Stock Exchange (the “NYSE”) and, if the application is approved, we expect trading in the Depositary Shares to begin
    within 30 days after the date that the Depositary Shares are first issued.
    Investing in the Depositary Shares and the underlying Series A Preferred Stock involves risks. Please read “Risk Factors”

    1. Spire Inc., with its principal office in St. Louis, Missouri, is a public utility holding company whose primary
      business is the safe and reliable delivery of natural gas service to more than 1.66 million residential, commercial
      and industrial customers across Missouri, Alabama and Mississippi. We have two key business segments: Gas
      Utility and Gas Marketing. The Gas Utility segment consists of five natural gas utilities: Spire Missouri East
      (serving St. Louis and eastern Missouri), Spire Missouri West (serving Kansas City and western Missouri), Spire
      Alabama Inc. (“Spire Alabama”) (serving central and northern Alabama, including Birmingham and
      Montgomery), Spire Gulf Inc. (serving southwestern Alabama, including Mobile) and Spire Mississippi Inc.
      (serving south-central Mississippi, including Hattiesburg). Spire’s subsidiary, Spire Missouri Inc. (“Spire
      Missouri”), comprises the Spire Missouri East and Spire Missouri West utilities. Our natural gas-related
      businesses include the following entities: Spire Marketing Inc. (“Marketing”), Spire STL Pipeline LLC
      (“Pipeline”) and Spire Storage West LLC (“Storage”). Marketing provides natural gas marketing services across
      the United States. Pipeline is constructing and planning the operation of a 65-mile FERC-regulated pipeline to
      deliver natural gas into eastern Missouri. Storage provides physical natural gas storage services and is
      strategically located near the Opal hub and interconnects with five interstate pipelines serving a wide range of
      natural gas markets throughout the Rockies and western United States.

    2. @George
      Suggest you include a symbol for the common stock, because there is more than one corp. named Spire- this one is ‘SR’ ; of course , we can search for data , but since the article was written, including the symbol is important; also , a link to the direct information would be helpful. I do appreciate your advising us. Thanks,

  3. BAC-W selling at ex-date today. Can be bought at par. Dual IG and QDI. First call is still 4months away, roughly.

    1. Call date is 9-9-2019. Trading at 25.40 today which is ex-div date. So you are paying 0.40 cents premium with a quarterly dividend of 0.41 cents.

      Doesn’t look like a buy to me. BAC has a history of calling in (last year) 6% + dividend issues

      1. As with most of the high quality 6% banking pfd’s, I am betting that it rockets back higher pretty quickly, for a good flip if one is worried about the call coming in on the 1st avail date. I bot more of it.

        Another pick is CNP-B, which is also at ex-date today. Short duration on this one until maturity and is QDI. Lost its IG rating, though, from what I see.

    2. Steve is correct, of course. The price you see is the XD price. Question becomes do you want to risk 41 cents to a call for a 41 cent quarterly dividend?

      Depends on the call risk. BAC-W is trading at a yield premium of about 80 bips to issues without the call risk. I would gladly take a n 80 bip premium!

      That said, this is enough of a premium to warrant a call. I see nothing about this issue that tells me BAC would be reluctant to call.

      1. Question is, if I want to flip out at $25.65, I’m not paying any premium and there is no obvious reason why it won’t get back to that level quickly. I’ll gladly pick up dimes and nickels while waiting for another repeat of 12/2018. Nothing wrong with that.

  4. Though many of us are years (decades) away from collection Social Security, I thought this was an interesting stat: The Social Security Trust Fund paid out $853.5 billion in 2018, more than the $831.0 billion the fund produced in total income. The 2018 deficit breaks a streak of 34 consecutive years (1984-2017) of “income exceeding cost.” As recently as 2009, the annual surplus was $134 billion (source: OASI Trust Fund).
    Sometimes the road less traveled is less traveled for a reason, Nomad

    1. Nomad – thanks for your frequent reminders on the true state of our economy and the looming unfunded liabilities coming in the not too distant future. I believe that I read that you also invest in coins, is this part of your strategy in case of a catastrophic economic event?

      1. Hi Pete, thank you so much for your reply and question. You put the unfounded liabilities problem very succinctly and if I might add our governmental debts are real looming issues http://www.usdebtclock.org SOMEONE/SOMEDAY will have to pay these debts back, no?
        Yes, every month for over 25 years I have been a buyer of some sort of precious metal: gold, silver, platinum, palladium, rhodium and only sold once (I threw a $100+K party about 8 years ago), decided to pay for it with appreciated silver and got very lucky on the liquidation timing. I wait until one or many of the metal drops (like now with silver and platinum) and buy on the dip(s). There are many many reasons why, but my favorite is that metals have no counter-party risk and a hedge to the dollar. I certainly am not recommending precious metals to anyone reading this post. Each of us has to do our own deep due diligence before committing any of our capital.
        Because gold is honest money it is disliked by dishonest men, Nomad

        1. Thanks Nomad-
          Yes, one day there will be a reckoning of some sort. The current state of our national debt reminds me of the book “The Emperor’s New Clothes” where a child had to tell the townspeople the obvious fact that the emperor wasn’t wearing any clothes. I think I need some more precious metals in my real sock drawer. Keep the reminders coming. They are very sobering.

  5. Looks like a good one for my sock drawer. Thanks for the alert Grid! I went in for 20 at 1035.5. Glad 2wr ran out of money I think I was right behind him ha.

    1. Pete, Amy is the one you have to worry about…When she gets her mind made up on something, she can buy up the float! 🙂
      This was a huge volume trading day. It had only traded about 2500 shares the entire year. With two transactions out of that being 1000 shares a piece and a 100 share trade. So it traded in dribs and drabs more today alone than the entire year combined. And I doubt the liquidity gets much better over time as I suspect many didnt even know about the put or the issues new terms since being acquired. I know my 40 shares are off the market.

      1. Ha, yes I’ve been keeping a watch on her after her work on EBGEF. I bought into that one too thanks to you all. I studied up on SLMNP after you first mentioned it and was ready when I saw the first sale on my watchlist today. I’m slowly but surely catching on thanks to this site! I hope 2WhiteRoses is ok with a joke, they have been kind in responding to some of my newbie questions.

        1. Hey guys,

          I was originally going to buy 40 of the SLMNP but then I put some handcuffs on and went for 30. However, I think it was Camrock who mentioned the idea of trading in some IPWLK (I bought below par) for more SLMNP but I don’t want to be greedy so I think I’ll sit tight with my 30.

          Considering how tight I am with a buck, I do tend to go a little nuts when these safer issues present themselves. This is after spending the last four years in the shipping preferred sector which has been rather kind to me but I don’t want to push my luck.

          I’m becoming more of a little old lady like grid. I must say that it’s kind of fun watching the market drop 2% when my portfolio only drops 0.3% – 0.4%. I always feel like getting a bowl of popcorn.

      2. Gridbird thank you for highlighting SLMNP. A bond from a chemical company is a nice bit of diversification in the preferred area. I bought a good amount today at $1036.

        I am questioning the QDI tax rate and someone from LyondellBasell will be returning my call.
        The original prospectus says-
        “Distributions with respect to our convertible special stock and our common stock (other than certain stock distributions) will be taxable as dividend income when paid to the extent of our current and accumulated earnings and profits as determined for United States federal income tax purposes.” From page S-35.
        If anyone has more information please let me know.


        1. Hello Leslie! That is normal stuff. In fact a true preferred is supposed to be paid from profits or retained income from the company. So this means its QDI. If they would have to pay from cash flow it could be considered return of equity I think which is different. But I never own dump holes that dont earn profits or have plenty of retained income, so I wouldnt be sure there. I consider my preferreds to be old school…Meaning if they arent generating profits to cover the dividend, I dont want any part of it.
          For what the issue is, I think $1036 is a very fair price and what it normally has traded at when it traded which hasnt been often. Just dont over expose yourself in anything too much though. Always be cognizant of the risks…An singular company risk is one of them no matter how favorable the terms of the issue is.

          1. Another thank you for pointing this one out Grid – much appreciated – I’m in for 40 @ 1036.

          1. Meanwhile, someone bought a bunch of CNTHP for 57, the 52-wk high.

            I don’t really understand either action, but I opened the lockbox & traded some CNTHP for more SLMNP. In for a penny… –as they say.

            1. Camroc, I was the seller of CNTHP @ $57. I still have 75% of my position left, and am looking to buy back the shares at a lower price.

              SLMNP has come down a little from my buy point. I may add to my very small holding if this persists on Monday.


              1. Good for you IB ! I sold as well a portion (200) lower at 56.40 and immediately thereafter someone feasted on 50 shares at 58.65.

              2. IB – the mystery on CNTHP is why is hasn’t been redeemed as it appears ES could easily float a new issue for a 1% lower coupon.

                1. alpha8, yes the threat of a Call is always present with most of the “sock drawer issues I hold”.

                  Gridbird has an explanation for why some of these long past FC issues may not be called – he calls them ” ring fenced “. Since I am nowhere near Gird’s level of understanding or eloquence, I will leave it to him to provide this description.

                  Grid – the floor is yours ! ( applause )

                  1. Inspbudget, the ring fenced term is actually concerning the safety of the issue. CNL is ring fenced from parent Eversource. So in other words Eversource financial troubles cannot drag down CPL as their debts are not comingled. Since Eversource controls the CPL board, they could redeem these if they want to. There really isnt any reason why they exist. They are too tiny of specs in capital structure to matter. And too small to call and reissue. Many of these parents have in recent years retired all of these old series in swoop such as Entergys and Southern. This is largely why I am out of all of those. But they may never be redeemed. And at right price I would reenter, but that doesnt appear likely. As they just wont meaningfully drop.

                    1. Thanks grid. So ring fenced is really a financial situation that prevents Eversource from adversely affecting CPL.

                      Hopefully, the CLP preferreds continue to be allowed to live. As we had discussed in the past, they did not call them when interest rates were lower than at present, that might provide some reassurance.

                      I intend to hold, and flip as and when opportunities arise like as in today’s action. It will be a sad day in my Sock Drawer Community when these CLP issues finally say goodbye and take their leave of this cruel world.

            2. Camroc and 2WR, this is damn peculiar…..I went ahead and bought 20 more SLMNP at 1027.25 on golf course. Though I flipped in past before it got taken over, this thing dried up from December on. About 2500 shares traded in past 6 months. 2100 (two 1000 share blocks mind you) on Jan. 18. So basically 400 shares before I forced a trade through brokerage “hunting them down”. I never could get a transaction and the few trades that went off bypassed me and were below me in price.
              Every since I bought those 10 shares there has been an ask price. Not once other than a 1200 one share placeholder ask has ever been there until then. Ever since that transaction there has been an ask and its like the nuts have been shaken out of the tree with selling price falling. I have never experienced this before. I mean there were literally less than 10 transactions including the two big blocks for 6 months. Now they are available like a new underwriting issue.

              1. And did you get a Bill Murray 5 on that hole, Grid???? What a way to golf! I added at 1031 and 1027.50.

                1. I did cheat a little but it didnt help. Shot in the 70s Tuesday and won money, today I was a blood donor focusing on breaking tree branches with errant shots. Started playing on my brokerage account on my phone when I determined today was a lost cause.

  6. Just need for the panic to infect the fixed income market, so I can go shopping.

    It’s going to get worse before it gets better, is my bet.

    The absurdly low buy orders are in place.

  7. I can’t blame people for selling here – total market cap/gdp ratio is at about 140% which has only been seen once before… during the dot com bubble.

    Total market capitalization has doubled since the 2007 peak while GDP has only grown at half that.

    1. It’s pretty bubblicious here. Was waiting for one last hurrah before I hedged with an inverse etf. May still happen…

  8. Hi,
    Not a bad day in steady Eddie income land. I do have some high yield stuff, but still only down -.23% vs S&P -2.7%. Yeah for now.

    1. Actually my 1.5 Bitcoin kept me well into the green. So I guess I was hedged lol. 😃

  9. I’d appreciate any thoughts about adding some UMH-C today. It goes ex-dividend tomorrow. This is the preferred that was upsized to 4 million shares. Looking at trading history since the recent offering, it looks like about 2.5 million shares have traded. Should I be assuming that the underwriters still need to sell at least another 1.5 million shares? Or were shares placed privately without showing up as trades? Perhaps it is a dividend capture opportunity?

    1. I don’t know about UMH-C as I have not inspect the financials. Tim’s III rating is ‘C’, which is junk. The 200-day moving average is around 24.50, I be more interested if it got below that.

      1. mikeo, Are there ratings in one of the spreadsheets? I was not aware that Tim rated the securities?

    2. Hi roger – I just added to UMH-D. Same terms and ex-div date, a buck under par. 6.6% yield. Yield on the C is incrementally bigger but I love buying under par.

  10. I’m hoping someone panics out of some of my lockbox issues ~par as uncertainty mounts. Of course, I’d have to beat Gridbird to them. Not so easy to do, I have found.

  11. Picked up 10 more shares of SLMNP today at $1052. If it drops under 1030-35, I may add 10-20 more shares. An ask of 1075 came out late Friday and dropped to 1065 at end of day. First time I had seen an actual ask instead of a $1200 placeholder 1 share ask since last year. So I thought a few shares might shake loose today. My preference was 1030 or under, but with the terms it has, I can live with my prices since I worked 6 months to get them again.

    1. I got 3 shares at 1045 and 3 more at 1035. My first attempt at trading this security. Looks like I picked a good day. Thanks Grid.

      1. Tim, its not the cure for cancer, but it is a fine addition to a conservative portfolio when one needs QDI. Owner optional puts with a perpetual non callable status totally reverses the asymmetric risk that is the major negative to one owning a perpetual preferred.

        1. Yes, thanks. I re-call your description of this SLMNP when you purchased some at 1065 a week or so ago and I did some reading on it. I do run a fairly conservative portfolio and I’m always looking for quality QDI issues. This is definitely going to be a sock drawer issue for me.

          1. Tim, I just averaged down getting 19 more (dont know why I didnt get 20 I wanted) at 1035.50. I will probably sit here at 40. There was a 100 share ask out there Friday at 1075. These may be those 100 shares.

              1. I got my last stray 1035.50 share that wasnt filled also, Steve. I am definitely stopping at 40!

                1. Grid, my chart shows SLMNP hit a low of $600 back in January 2016. Any idea why and the financial improvements over the past three years? You may have covered this in over posts but is so I apparently have short term memory loss.

                  1. Hi Mikeo,

                    If I correctly remember what grid wrote, the $1000 put was recently added. It wasn’t there when this issue trade it $600.

                    Grid – do I have that correct?

                    1. See Tim’s post on 5/7 “income issues are holding up well” where grid posted important information on SLMNP including this discussing the new terms with the merger:

                      “When you have an issue with an investor par put, I doubt you would ever see $750. The trading on this issue changed immediately once the terms were announced last fall. I thought about going in during acquisition phase again (I have traded frequently in past) but never could get definitive terms of how this would effect the preferred. So by the time this occurred the securities went into deep freeze.”

                    2. That is my understanding too. Schulman was acquired in Aug 2018 and in LYB’s 10-K in Dec 2018 on Page 89 they wrote:

                      Our redeemable non-controlling interests relate to 124,347 shares of cumulative perpetual special stock issued by our consolidated subsidiary, A. Schulman, Inc. acquired in the acquisition. 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. These shares may be redeemed at any time at the discretion of the holders. In 2018, 8,973 shares of A. Schulman Special Stock were redeemed for approximately $9 million. As of December 31, 2018, 115,374 shares of A. Schulman Special Stock were outstanding.


                2. It looks like the seller may have baled after hours as 258 trade @ 1030, so maybe he’s done… I bot 8 @ 1035.50 as well – 8 because that’s all the cash I had at TDA and Fidelity wanted me to call my nanny in order to buy…. Looking defensively, I did some calculations vs holding to certain dates just in case the desire to put got strong. I figure you get 3% yield to put if you hold until 8/1/2020, 3.50% to 11/1/2020 and 4.10% if held to 5/1/2021. 5.79% current.

                    1. Mikeo, the gang did a hell of a job providing the info…Dumb trivia I can add.. 10 of those shares were me sneaking a sell order into myself when trading died down and 1032 was standing bid. I went ahead and captured my cap loss on my first 1065 trade last week. Since they are keepers I might as well lower the cost basis on those shares, ha.

                    2. Grid, re: your comment below

                      You are indeed King of fancy preferred footwork!

                    1. Bought and sold through different brokerage accounts….This isnt my first rodeo…:) I gave them over $100 more last year because I didnt want to dig back to claim one of my expenses. Im getting some of it back this year.

                1. Tim, this is the first time it has traded “honestly” this year. There hadnt been but maybe 500 shares that traded odd lots all year. And those sold $20 under my standing bids. Heck just out of frustration and curiosity, right before exD last month I put out a 5 share bid at $1080. It went totally ignored all day.

                    1. Lol, Amy…I kind of doing the loose math…Just about all the shares have been bought from people here…. Surely Im not leading the buffalo off the cliff…If I am, I am the one going to hit the ground hardest, ha!…But you are close behind. 🙂

                  1. The sad thing FIDO does not allow trading in this security (SLMNP) period; it considers it micro-cap !!!! I think they are going too far with their supposed protection of investors from “high risk” trades. It is not their job to determine what is high risk and what is not. Risk is relative and investors are responsible for their decisions.

                    1. MFZ, that is what happens when brokerages abdicate their brains in deference to computers that dont think. LYB has a market cap of almost 30 billion. I wonder if Fido considers Archer Daniels Midland of Ameren microcaps as LYB is bigger than they are.

                    2. MFZ – In calling to confirm what they told you (they did confirm but not for the micro cap reason), I was told something else I didn’t know about Fidelity – they said that all fixed/floating rate securities are “restricted, meaning you have to call in order to open an order…. I was asking about NI-B on my call.

                2. LYB is down 3+% today. Maybe that had something to do with it. I love Nervous Nellies…

                  1. Industrials getting pounded today…Dow Chemical is down over 4% and Boeing worse. Lyondell is world wide including US, but its main headquarters is in Rotterdam. US headquarters is near your neck of the woods, Camroc, in Houston. Due to your proximity you are in charge of making sure they keep their act together and pays us quarterly. 🙂

                    1. Grid,
                      Thanks for the tip. After doing my own DD decided to initiate position in SLMNP. To my surprise selling is relentless ( or dumping) as of 1:40 PM volume is 347. I was able to get 100 shares at 1036. Will wait to see if it drops more.

                    2. LimitYourRisk, I missed your post somehow. Wow, you really stepped up to the plate buying here. I feel better knowing you were satisfied with your own research before buying this amount.
                      I think it plugs nicely a niche in preferreds portfolio. Not only the terms but as another poster mentioned for its sector diversity.

                    3. Well, I finally became a junior member of the Tim MacPartland SLMNP Glee Club this morning.

                      My order for 10 shares hit at $1035.75. Into the sock drawer it goes!

                    4. Inspy, Tim hasnt expressed any opinions on this. He may want nothing to do with his named attached to this issue. 🙂

                    5. Yes – that is indeed true. How about I call it the Gridbird SLMNP Glee Club, then?

                      It was you who initially brought up SLMNP to this board’s attention, correct? So you should get the kudos.

                    6. Inspy, Lets wait 5 years and then decide if any Kudos or eggs thrown are warranted. This issue has great downside protections to go with market yield. I know you wont as you diversify very, very well. But it is a chemical segment issue, so its very business is more economic sensitive than most. A nice diversifier from the barrage of financials, but still should held in modest quantities.

                  2. Grid, at least you will cushion my fall….but I ain’t frettin’….

                    If we all fall off the cliff at least we will be in good company with each other.

                  3. 2whiteroses, Thanks for following up with FIDO on restricted trades. Here is the message I got when I tried to place an order to buy SLMNP:
                    “Error:(TC9052) Opening transactions for Pink Sheets (without information) are not permitted because of the risks associated with these securities and all Microcap securities”.
                    I think they are too restrictive to the point of making little sense.

                    1. SteveA – I’m split between FIDO and TDA. I stay with FIDO primarily because of free trades and they have the best bond platform that I’m aware of…. I do a lot in straight corporate bonds because my background is in bonds, so I appreciate their platform that allows bidding on bonds as opposed to being forced to buy offered side and I like that they act as agent… I’m with TDA because of ThinkOrSwim and now more and more as proven by SLMNP and EBGEF their non Nanny state approach to entering trades most of the time… I do not like how quickly they take called baby bonds and preferreds off their trading platform, and their much improved bond platform still is, uh, below par.

    2. Gridbird:
      What is the put price for SLMNP please?
      Is it ($42/sh merger price for common) x (19.1113 shares/preferred share conversion ratio) = $802.67?
      Have I misunderstood?

      _Ref: 424B5 dated April 27, 2015 for Schulman 6.00% perpetual convertible preferred, pages S29-30
      Recapitalizations, Reclassifications and Changes to the Terms of Our Common Stock

      In the case of:

      • any recapitalization, reclassification or change to the terms of our common stock (other than changes resulting from a subdivision or combination),

      • any consolidation, merger or combination involving us,

      • any sale, lease or other transfer to a third party of the consolidated assets of ours and our subsidiaries substantially as an entirety, or

      • any statutory share exchange,
      in each case, as a result of which our common stock is converted into, or exchanged for, stock, other securities, other property or assets (including cash or any combination thereof) (any such transaction or event, a “reorganization event”), then, at and after the effective time of the reorganization event, the right to convert each share of convertible special stock into shares of our common stock will be changed into a right to convert such share into the kind and amount of shares of stock, other securities or other property or assets (including cash or any combination thereof) that a holder of a number of shares of our common stock equal to the conversion rate immediately prior to such reorganization event would have owned or been entitled to receive upon such reorganization event (such stock, securities or other property or assets, “reference property”). In the event holders of our common stock have the opportunity to elect the form of consideration to be received in such reorganization event, the reference property into which the convertible special stock will be convertible will be deemed to be the weighted average of the types and amounts of consideration received by the holders of our common stock that affirmatively make such an election. The Certificate of Designation will provide that we may not become a party to any such reorganization event unless its terms are consistent with the foregoing. No adjustment to the conversion rate will be made for any reorganization event to the extent stock, securities or other property or assets become the reference property for the convertible special stock. Throughout this section, if our common stock has been replaced by reference property as a result of any such reorganization event, references to our common stock are intended to refer to such reference property.

      1. Dave – IN SLMNP’s case, you’re going too far back in history to discover the put. It was a new feature that was added upon LYB’s takeover of Schulman 8/21/18…. SLMNP par = 1000 and that’s the put price…. See https://www.sec.gov/Archives/edgar/data/1489393/000148939319000011/a2018q410k.htm#s40ED315E2DA913CBA6FA8CD3E9AB8B5C “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.”

        1. 2WR, Uhm you forgot the most important part of the discussion about SLMNP… Shame on you! …Here it is…. “At the acquisition date, the fair value was estimated using the Black Derman Toy binomial lattice technique.” 🙂

          1. Ahhhhhhh, yes….the Black Derman Toy binomial lattice technique. How could I forget to mention it? In fact, while you were out mowing the other day, I was applying the BDTBLT, as those of us in the know refer to it as, to determining the exact proper angle to prop my leg up in this recliner… I then also applied it to my decision to snag some GGO-A @ 40.999. Thanks for the alert.

            1. 2WR, I appreciate you filling in the missing details. I was assuming it was something like that, but wasnt certain. 🙂

              1. I thought it was to determine the correct angle to hold your glass while pouring a beer. Then reading through the comment section of this great site at the end of the day.

                1. Tim, I applied that technic last night with GF on deck with cucumber and mint vodka. First time…not bad…. I went in and bought 1000 more Spire at 25.55. Its too obvious how the end result will be following DUK-A and MINDP the way they traded out of the gate. That being said, they dont usually dart straight up and patience may save one some money showing restraint.
                  Unlike those 2, I will hold these as I run out of options to buy quickly. And by discipline, my personal ute preferred percentage must be over 50% and I fell below it. Todays purchases takes care of that problem, lol. Now I need to decide if I should sell something, move cash to cover, or go quickly pick up several tons of aluminum cans in area ditches to cover the trades.

                  1. Apples vs oranges? To me, pricing on SIPRY only confirms just how cheap the Enbridge preferreds are. Sure SIPRY is plain vanilla while EBGEF and EBBNF have the floats every 5 years feature, but EBGEF right now has 6.70% current yield and EBBNF has 6.40% current. It looks like the rating agencies consider ENB and SR to be comparable credit quality. Isn’t that an awfully wide spread?

                    1. I was going to say the same thing except I would have added Emera and Fortis also. A little more direct competitors I believe ERRAF and FTSRF

                    2. 2WR, I have the Enbridges also, so I like them. But these resets do not presently hold the price value of the fixed sisters. Plus a regulated ute will further increase the premium.
                      Market doesnt favorably view resets from the present spectre of lower 5 yr Tbill. But a lot of things can happen between now and reset. But the pricing of issues will trade day to day on sentiment as you well know.
                      So I kind of like keeping balance between call protected fixed, perpetual noncallables, and resets. If I can ever muster energy to get energy to get a taxable account set up at TD (Vanguard has cut me off), I want to get even more CDUTF if it ever brushes par again. It has the fixed 4.5% floor, plus a very good 3.5% floor for a Baa1 preferred. Resets in 2020 which isnt going to be good though, so I am not in any great hurry here.

                    3. CDUTF???????????? Boy, you can really find ’em, Grid….lol. Your description of it, though, doesn’t seem to make sense. With it trading around $20, what’s par? And what’s with the 2 floors? 3.5 floor%, 4.5%, what? I also see they, like ENB have a ton of preferreds to choose from……

                    4. 2WR, That is the USD conversion price. Its true Canadian price has jumped back up again near $25.70 or so. So its trading well above par, despite its low present yield. The 4.5% floor is off par. These are called minimum floor reset preferreds, an offshoot of the straight reset preferred and gaining popularity. They guard against TBill cratering to 0% ish like Europe. The 4.5% is absolute minimum payment yield. This provision kicks in if the 3.5% kicker plus 5 yr Canadian Tbill in combination do meet the 4.5% floor.
                      Canadian Utilities LTD is the crown jewel of ute safety credit wise in Canada. And of course the yield of their preferreds mirror that thought also, unfortunately.

                    5. 2WR, you will get paid in USD. But you have to trim 25% off that to adjust for currency differential. I am referring to TSX quoted dividend. If you look under CDUTF that will be USD payment. Right at 83 cents USD. And that means about a 4.2% ish yield at present price. It resets in 2020. If it reset then on todays CAD 5 yr yield it would be 3.69% kicker plus 1.55% Tbill or 5.24% ish on par.

                    6. 2WR:
                      I interpret CDUTF to be in Canadian Dollars unless it says otherwise. Here is the link to the prospectus.

                      Initial dividend rate = $4.5% of $25 Canadian par = $1.125/share Canadian $.
                      = 0.83699/sh US Dollar based on current Canadian to US Dollar exchange rate
                      (source: bloomberg)
                      0.83699/sh less 13% Canadian withholding tax = 0.64729/sh after Canadian withholding tax . The current yield based on todays US close is 3.365% after withholding and 3.86% before withholding.
                      The Canadian withholding is refundable if purchased in a taxable account. There is a foreign withholding credit allowed on your Form 1040 up to $300 without completing an IRS Form 1116. Recovery of the withholding tax in a federally tax-exempt account (or an exemption to Canadian withholding), such as a taxable IRA account, is problematic at best.
                      A more accurate yield, of course, will depend upon the currency conversion rate at the time of payment.
                      The reset dividend rate in December 2020 will depend upon the 5 year Canadian Government rate at that time plus, as Gridbird says, a spread of 3.69%. The new rate will be based on $25 par.
                      Does this help?
                      – Dave

                    7. Any thoughts or comments on the following please???

                      “These securities have not been and will not be registered under the Securities Act of 1933 of the United States of America. These securities may not be offered, sold or delivered in the United States and this prospectus supplement does not constitute an offer to sell or a solicitation of an offer to buy any of these securities within the United States.” (Source: CDUTF prospectus)

                    8. Dave, all that means is these securities are not being registered on any US exchanges. Thus they are not obligated to follow customary SEC guidelines. The F in CDUTF stands for “Foreign”. So it is truly a foreign security. This issue subject the Canada securities laws, not US laws. If you check prospectus from other Canadian big boy preferreds such as Enbridge issues, it says the same thing.

                    9. 2WR:
                      One other thing. As Gridbird says, if the current dividend rate of $1.125 (Canadian $) was reset today at todays 5 year Canadian Government rate of $1.546% + a spread of 3.69% would = a reset rate of approximately $1.309/sh (Canadian $) which wold be about 5.24% on par before currency conversion and before Canadian tax withholding . Converting to USD: would be = USD $0.9740 an increase of approximately 16% in annual dividends. What the reset rate would be in December 2020 and whether or not that would result in a capital gain is, of course, speculative.

                    10. Thank you again Gridbird. The main point is that there are apparently no restrictions or limitations on buying/selling/trading Canadian registered securities in the US. All is well.
                      – Dave

                    11. Dave, I have no deep knowledge, but essentially any foreign security can be assigned a ticker to trade OTC or OTCBB. Amy who posts here, raised hell to her Schwab international broker and next thing you know FINRA was assigning EBGEF as a trading ticker.

                  2. I think my brain’s limiting my willingness to go esoteric in this case, at least for now…… I like the Enbridge issues because I don’t have to wrap my head around the future implications of dollar exchange rates both on price and dividend received. The exchange rates may be more likely to turn into a tailwind instead of a headwind, I don’t know… Fun looking into this one, and thanks, Dave for the link to the prospectus which I didn’t attempt to find yet, but bottom line I’m a pass for now.

                    1. My pleasure and I thank you for the info on SLMNP yesterday. I like Enbridge too. We may be in similar lanes.
                      – Dave

      2. Dave,
        Trying to help out as I have been researching SLMNP and reading and pertinent comments.
        Here is part of a reply from article “Income issues holding up well” by Gridbird dated 5/7/19.

        “Anyhow for the patient and correct entry point (lower than mine, lol) this is a unique preferred that can be put back to LyondellBasell (LYB) at $1000 anytime. It doesnt trade much. About 125,000 shares were issued by Shulmann as a convertible but it lost convertibility after LYB bought them out. So now they can be tendered anytime. Only about 10,000 have been tendered. LYB who is responsible for payment is Baa1 long term investment grade. This flow chart shows the credit rating, and the Shulman preferred and tender option if one is so interested in such an issue.”

        Look carefully at the flowchart and it’s footnotes, you will find the answer there.


      3. Don’t want to speak for Gridbird, but here’s something from Quantum Online:
        The preferred shares are convertible any time at the holder’s option into 19.1113 common shares of A. Schulman, Inc. (NYSE: SHLM), an initial conversion price of $52.33 per common share. On or after 5/1/2020, if the price of the common stock exceeds 150% of the conversion price for 20 of any 30 consecutive trading days, the company may, at their option, cause the preferred shares to be converted into common shares at the then prevailing conversion price.

        1. Steve, Im just trying to catch up here and trying to match post times. 2WR is correct…Remember there is no Schulman stock anymore. They got adsorbed as a consolidated subsidiary. So nothing to covert. I havent read the legalese deep enough (may not understand it anyways), but I suspect the reason LYB just didnt redeem them was because they werent allowed too. Otherwise they wouldnt be leaving a standing offer open to redeem them anytime an owner wants to.

          1. 2WR, Leslie Joy, Steve C, and Gridbird:
            Thank you very much for the responses. I understand now that the “put price” is = the par value. Great. Very helpful.
            Thank you also to Tim for managing and moderating this site which facilitates exchanges of detailed factual relevant information between parties in a rapid manor. The site is invaluable to many.
            I like the varied opinions and Tim’s personal insight.

  12. Looks like the SP500 is on the way down the next few days to test support at the 200-day moving average, which is ~2,776. If that doesn’t hold things could get more serious.

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