Mid Day Ramble

With the DJIA down all day long between 250 and 400 points income issues are trading normally with very little movement–except the usuals.

The new lows list for preferred stocks includes some of the usual suspects such as some of the AmTrust Financial preferreds as well as the Seaspan 6.375% baby bonds (SSWN) which mature on 4/30/2019 so the bonds are sticking around $25. 1 Chimera issue (CIM-D) and 1 AGNC Mortgage issue (AGNCB) are showing up on the new low list, but are hanging around $25.

Preferreds with large share price losses include the Dynagas LNG 9% preferred (DNLG-A) which is off $2.38/share on 300% or normal volume. The Global Ship Lease 8.75% perpetual (GSL-B) is off $1.20/share. Other shippers–Diana, Teekay Offshore and Tsakos issues are all weak. All shipper have become the most heavily hated group, along with previous contenders in the insurance sector (AmTrust and Maiden Holdings).

The new lows list can be found here.

Large share price loss listing can be seen here.

22 thoughts on “Mid Day Ramble”

  1. I have “core holdings” but trade outside that. I only do it because it makes me money. Some guy yelled “fire” and “sell MDLY debt” in the middle of a market sell off. It was a stampede down to $17. I had to pay $18. Sold it today for $21.50. Thanks Seeking Alpha!!!!!

  2. For those that read Barron’s, they had a pretty bearish comment/article this weekend on AmTrust. The preferreds are not cumulative and I would not touch the debt either. Perhaps I am just being too cautious, but overall it’s not something I would ever own.

  3. Thanks for sharing, Gridbird. It looks like there is both a C and D series. I couldn’t find a prospectus on their website. Is there one available?

    1. Alan, here is some basic primer info including press release for initial offering. I have prospectus before a year ago, so I know I can find it if this info doesnt suit or you are still interested….If interested I need to add this point and link will explain it also…But Emera Class C shareholders have the right to convert to the Series D every 5 years before reset it they want. It got voted down, because Series D is reset to 90 day Tbill yield, and 5 year was higher, so the vote continued using 5 year. If this interests you make sure you ask questions if you dont understand…I have read these things for years and they are second nature to me…So after reflecting, I think Gabriele has the right to call esoteric. Im just too used to them from research, so I forget others have not been exposed to such issues…Its better to know too much about something, than not enough, so that one doesnt have any surprises.



      1. Thanks for taking the time to add the links, Gridbird. Is it correct that 15% will be withheld?

        1. Alan, from my research, the 15% is witheld from taxable account, but not IRA per US/Canada treaty (but this is screwed up a lot from what I have read anyways, so I will not attempt such a purchase inside tax free accounts). If less than $300 total is WITHHELD (not total total dividends received) it is a simple dollar for dollar credit. It you buy a substantial amount and more than $300 is withheld (filing single) an onerous Form 1116 will have to be filled out, and that is a no go zone for me. In order to use the dollar for dollar credit you must have offsetting taxes to claim it on. Here is a larger amount example from Schwab (this example would trigger Form 1116 which I will not need as I am staying a bit under $300 withheld having only a bit over $30k invested in Canadian Resets.

          For example, let’s say you received $10,000 in foreign dividends, and you paid $1,000 in foreign taxes on that income. If you’re in the 25% tax bracket, you would have to pay an additional $2,500 in U.S. tax on those foreign dividends ($10,000 multiplied by the 25% tax rate). Here’s how the credit or deduction would affect your tax bill:
          If you claimed a $1,000 foreign tax credit, you could reduce your $2,500 U.S. tax bill on the dividends dollar-for-dollar, to $1,500.

      2. The press release for the Emera issue states “The securities referred to herein have not been and will not be registered under the United States Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.” So ERRAF can be sold in the US but the underlying Canadian issue cannot? Do I understand correctly? Can Americans purchase and sell Emera preferred on the TSX or can they only trade ERRAF in the US?

        1. Dave, some brokerages allow foreign stock trading..And some will do it for you if you call them (additional fees apply I have been told for ones that will). I havent asked mine, and largely view they would screw it up if they could. Whenever I call for anything, I basically have to tell them what to do.
          EMA.PR.C is official TSX ticker symbol
          As far as ERRAF goes, I bought through TD…My TradeKing does not allow trading in F (foreign) securities. Vanguard makes you call in to order this but when I did they were so dumb they couldnt find it to place a bid. Vanguard has no rhyme or reason. I can trade two [F] Enbridge preferreds but not two others.
          ERRAF is what you call an unsponsored ADR. In other words Emera the company did not set this up to be traded. Some investment brokerage or investment bank instead bought some of the shares on TSX and then registered them to trade on OTC. Thus this is an OTC Grey market issue. Notice the parent Emera does trade pink sheets on OTC under EMRAF.

        2. Dave, personally I like the Enbridge preferred EBBNF more and own more of it than ERRAF. EBBNF is US 5 yr TBill reset paid in USD with higher 3.15% kicker. It is the Series L issue from Enbridge. You may want to study it some. I like the terms of Enbridge better, but like Emera the company more long term (Though Enbridge has very similar credit profile and is actually about to get a credit upgrade). I just have a desire for owning regulated utilites and Emera is in process of deleveraging and shedding assets to become an enterprise of ~80% regulated utilites earnings with much of them US based.

    2. Alan, I sent a reply. It has links attached so these are usually held up. So hopefully it will go through soon.

      1. Hi Grid–I reset the settings now so one can put up to 5 links in one message without moderation.

  4. Finally snagged an issue I have tried to for several months. ERRAF, which is the illiquid depository shares of Emera Series C, Canadian 5 year bond reset preferred. Bought 500 shares at $15.40. This is Canadian currency converted though as the par is $25 Canadian and trades in a more liquid manner on TSX. Was issued in 2012 at 4.1% Canadian yield and reset this past August and will not reset until 2023. So for my US currency purposes a 5.82% QDI, and goes exD end of this week, so stripped yield is a bit higher. This is my 3rd live reset purchased (EBBNF, EBRGF) and NI-B presumably will be my 4th reset if it is not redeemed at reset date. This modest purchase is for a long term hold.
    Emera is a big energy and services company that owns a lot of utilites including US utes of Emera Maine, New Mexico Gas, Peoples Gas, and Tampa Electric.

      1. Gabriele, I would suggest it is too illiquid (though not on TSX) for most peoples interest. Dont let what I wrote make it sound complicated. Its essentially NI-B except it has already reset because it is an 8 year old issue except its Canadian not US with different kicker. So I dont consider it esoteric at all, but maybe I have studied them so much over the years, that I have discounted that too much for others who havent though.
        I am not suggesting anything bad on SSWN, but I wouldn’t say one could compare a SSWN purchase to ERRAF. A total different purpose and trade. SSWN is a 3 month short term play for 22 cents max before maturity. ERRAF is a long term play on future interest rates long term with price already absorbing the hit of the low reset from last year. Im just explaining difference and not suggesting one is better or worse as that depends on ones purpose and goals.
        If there were more US 5 year reset preferreds out there besides NI-B (which I own a slug of with ave purchase below par) I would gladly buy! I also have term dated and pure perpetuals also.

        1. Grid,
          You may heard about Brookfield Asset Management Inc., one of the worlds largest alternative asset manager. It has more than $330 billion of hard assets under management, such as real estate, renewable, infrastructure and private equity. It’s been around for 120 years.
          Here are couple tickers for your consideration.
          BAMGF (OTC) = BAM.PR.R (TSX) Next reset on June 30, 2021 at Canada 5-Year Bond Yield + 2.29%. Last price on TSX was 16.96 with yield 4.42%
          At current interest rate (1.863) future reset yields around 6%

          BAMKF (OTC) = BAM.PR.T (TSX) Next reset on March 31, 2022 at Canada 5-Year Bond Yield + 2.31 %. Last price on TSX was 17.15 with yield 5.06%
          At current interest rate (1.863) future reset yields around 6%

          Even though these are much higher quality compare to Enbridge, I would like them drop more in price to have better yield.

          1. LYR, Hey I appreciate you digging into these type issues and poked around on the other website you mentioned..Thank you! You may be surprised to know Moodys does not agree with you and doesnt think BAM is of any higher quality than Enbridge debt wise. They both share same Baa2 Senior unsecured rating. Enbridge has done a lot to clean up balance sheet and will continue to and recieved a fresh review just this month. It is simply a powerhouse in the energy industry and been around forever in fact 64 years of continous common stock dividend payments.
            Still, although not a huge REIT guy, this will be a good one to file away and follow. You have been reading so you may know this, but from last info I found over half of all Canadian preferreds issued are the 5 yr resets. The appetite for perpetuals is less up there. In fact when issued perpetuals cant bring to market dollar wise the amount the resets do. So the trend is resets.

            1. Grid,
              Moodys maybe right, but for some reason investors disagree and similar coupons of BAM are always historically stronger than Enbridge. I like both of them though, I just wish BAM preferreds will drop more.

              1. LYR, It may be tough for a while to get that drop you want as Canadian yields have slipped below US lately. I havent got a chance to research your info you gave me yet, (thank you again) but is the BAM reit preferreds QDI or are they like the US reit brethren?….. That is why EBBNF a month or so ago when I got in about 18.20 overall cost basis was a great entry point. I got some at almost 7% off that 1.8% US 5 yr reset…Sitting with 70 basis points in my pocket on a lot of the purchases….I suspect part of historical difference was Enbridge more complicated corporate set up. They have been streamlining lately for efficiency and stronger credit profile. Plus the upgrade is very fresh too.
                The SCE preferreds keep on climbing I see…Cant complain there!

                1. Grid
                  I tend to look at yield relative to issue more than price. The SCE-L at 7.1% was enticing for me, but if it hits 6.4% it probably goes away. The ASFI debt is going back on sale if you want another bite of that apple, it hit new lows today. Anything I ever bought that got delisted went to zero, it’s bad luck for me.

                  1. Same here P! Now if SCE was in MO I would be buying hand over fist at 6.4%. But these would be sock drawer buys…This is still segregated flip money though, so I dont hold out for top dollar sold, as my comfort level is not high. Already have another 7% QDI energy play in mind to rotate some of these monies into. I assume you are saying basically what I do…Risk/reward in relation to current yield…But its all relative, the risk level here isnt is big yet on a relative basis compared to many shippers for example so that is always factored in. But shippers arent in my lane so I never play in that sandbox.

          2. Limit Your Risk, I thought you might like a follow up on experience with OTC Canadian resets. I wanted to see how pricing would react to another discovered utility preferred so I sent a 15 share buy probe a dollar above conversion price. It sold to me exactly at conversion price. So I went in for 500 and then 200 more at 50 cents above conversion price and they were sold exactly at conversion price also. I had to go above to get the buy noticed, as it wouldnt transact at conversion price oddly when the bid was at that price point. It sat for an hour before I again went in way above, and then it transacted immediately at correct TSX price. This was the same exact experience for my purchase of EBRGF too. But OTC price discovery is not correct though. I bought EBRGF in 11.40 range and it still shows someone elses prior $12.63 price. Now ERRAF and EBBNF that I own do show correct last trade prices, but three others I own just show outdated prices from long ago.

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