Partial Redemption on Eagle Point Credit Term Preferred

CLO owner Eagle Point Credit (NYSE:ECC) has called for early redemption of the 7.75% ECCA term preferred effective 6/28/2019. These shares have a mandatory redemption in 2022.

The company will redeem 909,000 shares of the $25 issue (we show the issue was a 1.6 million shares issue).

Share price is off 1% today as there was that much call risk in the issue, which we mentioned the other day here. Note that I own a modest position in the issue.

Shares to be redeemed will be determined by lottery among owner accounts per the company filing which can be seen here.

When one of these partial calls occur it tends to keep the share price on the remaining outstanding shares closer to $25 so one should be able to purchase shares a bit cheaper in the future–after the redemption. 7.75% is a tough one to replace and I may pick up shares if mine are redeemed.

55 thoughts on “Partial Redemption on Eagle Point Credit Term Preferred”

  1. Can anyone please explain why ECCA is currently trading near $25.60 so close to the redemption date? I would sell my entire position if I thought I could buy it back much closer to par.

    1. 35, thank you for your question and comment. Your shares should have already been “split”; this delineates the shares that HAVE been called from the shares that have NOT been called (please see my post below). The shares that have NOT been called are trading on their own at $25.60 as they have not been called and there is a bit of an additional call, but you can see the premium.
      Wishing you profitable investing, Nomad

      1. Noma, my broker AMTD has not split my shares yet and said I could even sell them all up to and including the day before the redemption. I guess the premium will still be there for the left over shares?

  2. Just wanted to see if others still holding (ECCA) Eagle Point Credit Co., 7.75% Series A Cumulative Term Preferred Stock due 6/30/2022 got a better/worse partial call of ECCA, being called June 28, 2019. I saw in Merrill Edge my 5000 shares have now been split at 2460 of ECCA showing at $25.35 and 2540 of CUSIP 998096986 showing at $25.00. Anyone else have their shares divided yet, if so how did you make out?
    Investors should purchase stocks like they purchase groceries, not like they purchase perfume.” Ben Graham
    Have a great holiday weekend, Nomad

      1. I’ve got 300. Purchased November 2018 at TDAM so far no notice or change in the way they are listed

      2. Thank you Golfergonebad; my friend has accounts at Trade King and Morgan Keegan and has not had his shares separated yet.
        All the very best, Nomad

        1. Nomad, a little more than 1/2 of my shares are showing as yours are @ Merrill.

          From what I read in the redemption notice, we should still get the dividend payment for May and June, meaning (according to my math), we’ll get a total payment of $25.32 per share when all the dust settles. Do you concur?

          I base this on the $25 par value and two more payments of .1614583 for the divvies yet to come.

          1. Affinity, my belief is that you are right on the money. I was told this weekend by a money manager friend that ECC has plans to file for another preferred (maybe perpetual) so they can call the rest of the ECCA issue and expand their CLO portfolio. Hope you had a great holiday weekend.
            We are all so fortunate that we have had such an incredible military to protect our freedoms, Nomad

            1. This doesn’t seem likely in the near term, as the rationale for calling half of ECCA was to get within their long term leverage range (25-35%), which they exceeded due to ongoing NAV declines.

              1. 730Cap, you may be right on ECCA because nothing has been filed yet, but just when were the markets or corporate America rational?
                Wishing you profitable investing, Nomad

  3. FWIW, Fidelity shows exactly half being redeemed in both accounts in which I hold it.

    1. And although I’d like to buy it back near par, this is one of many baby bonds and/or F-F preferreds Fidelity won’t let me buy online (I’ve only been able to purchase these either when on gray markets or very early on offer….go figure).

      1. CR,
        I use Merrill Edge. Since the beginning of 2019, I’ve been increasingly restricted in what they allow you to trade online. I just found out today, that in order to trade what they qualify as “junk bonds”, I have to fill out a form and have a certain minimum account balance.
        (I just got the form while typing this msg)… The form is called a “Hold Harmless Bond” representation letter. It is for “unsolicited purchases of below investment grade securities rated below B3/B-/B- by any of Moody’s, S&P and/or Fitch”. It looks like one big fat release of liability or hold harmless arrangement.

        It has to be renewed annually.

        This is all new to me, although I’ve been with them for years and have a substantial amount of $ with them. At any rate, maybe you could contact them and see if a similar “form” for trading junk bonds is needed so that you can resume trading in these securities. Just FYI…

        1. Affinity, I am with ME and everyone that invests in below investment grade bonds there has to fill out a hold harmless form each year. It stops you from filing suit against them when you lose more or the heir’s of your estate go after them for losses you have incurred. We all live in a very litigious society and they are just trying to protect themselves from heinous claims of undue risk.
          As every thread of gold is valuable, so is every moment of time, Nomad

          1. I’ve been buying below IG rated bonds for years and never had an issue until now. I can understand their position, Nomad, but the form states it’s for purchases of B3/B- or lower rated securities (truly trash rated). I was trying to buy a BB+, which is far from that type of junk. Even with the form filed, they said I’d still likely have to call to execute trades. PITA.

            What about bonds and pfd’s that aren’t even rated? At least with a rating, even if it’s a crappy one, you can have a better idea of where you’re at. With so many that have no ratings at all, it’s like the wild wild west of guessing. Seems like a movement that most brokerages are going thru and will continue to restrict purchases more and more as time goes on.

            From talking with them, it seemed to me to be more about the ‘market cap’ of the company than the rating on the security by Moody’s and/or S&P. However, they’ve always let me buy all of the AQNA that I wanted, but now, they won’t let me buy AQNB at all. Go figure… Will file the form and see what happens.

            1. A4I, which is odd because Algonquin actually has got a credit upgrade this year.

      2. CR, I get that message every time I attempt to purchase any Fixed to Floating preferred from Fidelity online. A phone number accompanies the message and calling it connects me with a person who will make the purchase for me once I convince them I understand what F to F means. They only charge the online rate for this ‘service’. I asked them why they have this annoying policy and the explanation comes out sounding like Nomad’s explanation.To paraphrase ‘we don’t want you to sue us because you lost money in a stock you didn’t understand’. If you get blocked online with Fidelity, pick up the phone and you should be able to get what you want (at online rates).

        1. True, but that’s a PIA compared with online trade.
          And, I can’t see why buying a baby bond could be considered riskier (to me, or to them if I want to sue) than some very risky preferreds they let me buy without going through the bond folks.

          1. For that matter, is buying one of these investments riskier than buying some stocks?

            1. Absolutely NOT riskier. All investments have the capability of going to ZERO. It’s all about CYA for them or forcing you to call in order to gain a higher trading fee for those that would suffer from it, I suppose.

    2. CR…that’s interesting. I sold 600 shares of ECCA @25.36 through Fidelity shortly after the open on 5/22. Today my account shows me short 300 shares.
      I called Fido to see what’s up and they’re telling me ECC is demanding 300 shares from me even though I sold them on the open market two days ago. The rep said that ECC is claiming holders of record on 5/20 are subject to the recall regardless of when the ‘announcement’ was made.

      I’d like to hear from anyone else who sold ECCA on 5/22, to see if they’re getting held up like I am.

  4. This partial redemption should drive the price down near $25.00 per share. I will definitely be buying at that price range if my existing shares are forcibly redeemed.

  5. For you guys with multiple brokerage accounts, which one(s) do you feel give you the quickest access to new offerings of ETD and preferred’s? I’m finding Merrill to be quite slow unless they are the primary underwriter.

    1. A4I, I own 3….Vanguard, TD, and TradeKing….TradeKing is a dump mess site. But amazingly and quite frankly probably by sheet accident they have these issues immediately up for trade. Always…Of course when the temp ticker changes, you have to call them and correct them to the NEW ticker EVERY time. Because your balance will show $0.0 and the issue untradeable unless you do. For the zillionth time I will be calling soon…My Spire preferred is showing it is worth zero dollars now. It would sit like this until the end if time unless I call them.
      Here is something for you to consider. I have an online friend who has an account with Morgan Stanley. And they let you buy at $25 IPO price…Remember DUK-A and SIPRY? And the bitchin we peons did paying up to buy? He got them at $25, just by filling out an IPO access form through them.

      1. Thanks Grid. No TK for me, that sounds like a hassle I don’t need! I just despise having to pay anything to trade and that’s why I love Merrill. 100 free trades per month whether I call in or as usual, do most everything myself. Interesting about the Morgan Stanley route. Will check it out.

  6. I took the aggressive route back in March and bought the common (ECC) instead at $16.77. So far so good based on current price, latest quarterly results, and a partial call on the Series A preferred.

    That said, am interested in adding ECCA to my IRAs post-partial call if I can get it close to $25.00

    Thanks to Tim and all who contribute to this very useful website.

  7. Going back to pluck the chords of CN Prefs again. Did a bunch of work yesterday, I may say ‘scratching the nagging itch of a few months ago’. Chose 12 Resets, all IG (2-rating in Canadinaese), cum or non-cum, Resetting within approx 2 years, all resetting at a good bump of 4.06 to 4.99. CN 5 Year Bond is at 1.54% and 2.31 a year ago.
    Then I looked into non IGs.
    Bottom line: the IGs are all trading above par and will be call bait if rates stay same or lower, YTC is poor. Most of the resets I have noticed on the CN issuers are quick to call too for even small incremental gains to the issuer. (maybe that was just the NVCC issue/ Tier 1 capital requirement change over recently?).
    BUT: the non-IGs (3s) are way beat down in price and trading likewise that the CN 5 Yr Bond rate in 2 years will not be going any higher; there is a small higher yield for the 3-rating, about 1% in general. They are acting like any future resets will end up yielding approx the same as they are yielding now., based on a LOW price. Since many prices are so low below par, there is leveraged eventual yield (lower denominator, your buy price). If there is a CN bond increase at reset time (higher numerator, your new payout) can add real future value. Higher top number / lower bottom number. You collect a quarterly divy to wait, AND if called a very large cap gain.
    If indeed CN rates do decline again, it would bring you in to the realm of the current IG yields upon reset.
    Part of the problem is the often recognized issue of buying/selling in the CN market and the CN withholding that I am getting in taxable accounts.
    May be worth a fairly good spec position and a happy surprise if rates move off of this long bottom.
    Don’t forget there are resets further out too. Rates will eventually be going up. (HAHA?)
    Probably waaaaay too much here! It’s really not too difficult, but a new paradigm. JA
    Going to Winnipeg to open an account now!

      1. x59: Here are two links one with a universal index. It takes time, but notice it is divided into the types of CN prefs very nicely. I printed and separated each into ‘chapters’.
        The second is a recent report that echos the same focus I am talking here, but with a typical CN conservative brokerage report.
        Take some time with them.
        Answering directly: I have a Watch list of 35 CN – five digit “F” stock that are supposed to be on TDAM site and I am nagging them to be better at representing them.
        For instance APRWF, Atlantic Power, is a fixed reset utility. Pays about $0.91 annually on a price of $11.60 (all USD) for 7.8% if you can buy it. It resets last day 2019 at 5 yr CN bond (1.58% today) + 4.18% = 5.76% of $25 par = $1.15 ($0.92 US) / a buy price today of 11.60 (USD) = about 7.9% yield after reset; IF: CN Bond rate stays flat.
        Caveat: rate will fluctuate before reset.
        If called, $20 (USD 80% of $25 CN par) – 11.60 or $8.40 gain / 11.60 your buy price). Cap Gain = 72% possible kicker. Could happen.
        My order sat all day, then expired and indicated no Bid/Ask/Vol ever.
        Just a modeling, if resets out 2-3 years (laddered?) are in a rising rate envirn? Do some guessing and figuring. Some of these issues are hammered down.

        Grid and others set me on this track and if the electronics to CNs are opened up it would really help, they do some ok volume in Canada.

        https://www.cibcwg.com/c/document_library/get_file?uuid=56632e8f-3032-4033-9dbb-38354e4253a9&groupId=82580&version=1.0

        https://www.raymondjames.ca/branches/premium/pdfs/preferredsharesreport.pdf

        May just be mental exercise.

            1. Grid, I am fortunate to have access to TSX.
              Here is my latest pick from Brookfield Office Properties Inc
              https://www.bpoinvestor.com/investors/stock-and-dividend-information/preferred-shares
              The most interesting are BOP Split:
              BPS.PR.U US$ 5.25% fixed cumulative perpetual
              BPS.PR.A C$ 5.75% fixed cumulative perpetual
              BPS.PR.B C$ 5.09% fixed cumulative perpetual
              BPS.PR.C C$ 5.20% fixed cumulative perpetual

              None of the above are investment grade. But they have somewhat similar to SLMNP feature which makes them “very high quality” (in my opinion) automatically.
              They can be redeem at par by a holder at any time, which suits my investment objective to limit loses.
              By no means it is a “risk free” investment. But whole idea is to get out easily without (or with minimal) a loss at any given time, while collecting 5+%
              They only trade on TSX though. I have full position in BPS.PR.A.

              1. Thank you for response, LYR! And your last 2 sentences answered the question I was going to ask next. 🙂

        1. If you want your Atlantic Power order filled go for APRRF. It’s a better issue and unlike APRWF you can actually buy it.

          Ignore the posted US$ price; it is always outdated. Get the price off the TSX, convert to US and make that your bid.

    1. Before you pack your bags just know that opening a Canadian brokerage account will require that you complete a FBAR each year and you could well end up having to file a Canadian income tax return.

      Unless you like paperwork you may want to stick to Canadian issues with US tickers.

      1. I’ve simplified and downscaled sooo much now I could NEVER do that! That was HAha for the Minnesota Boys.

    2. Joel, maybe I am misinterpreting your prose but there are all sorts of investment grade resets trading below par. The only ones in my tracking world of interest that are above par are the “fixed floor reset preferreds”. Ala the Canadian Utilities LTD Series FF type. I have quite a bit of this but bought right at a divi above par, and have 2 divies under the belt. But it has also raced well above par again in the $25.70 ish CAD range though,
      I got my eye on last regular floater myself but need to move my money first to access it.

  8. Anyone have thoughts on ECCX? Certainly not as desirable yield but can’t be called early. $25.43

    1. Skg…my opinion on ECCX is the coupon is too low for the amount of risk you’re taking, but I could be wrong. If you want exposure to the CLO industry to replace ECCA you might consider OXLCO, which is a monthly payer, past its call date, has a 7.5% coupon, and matures in 2023.

      1. Citadel-

        One step ahead of you. I am already an investor in OXLCO.. thanks for the note.

      1. Sorry Tim. I knew that. What I meant to say was it couldn’t be called early right now.

  9. I sold at $25.36 this morning and will see about getting back in after the redemption date. Hard to find good monthly payers like this one.

  10. I am wondering how this lottery works? I have ECCA in two accounts, if chosen would I loose all shares owned or partial in relation to the percentage being redeemed?

    1. 35s, read FINRA Rule 4340 for the scholarly. You should lose partial but it’s rarely exact. I’ve often ended up with more than should be indicated.

      1. I found the procedure used by my broker TD Ameritrade. Looks like I should loose about half of my shares. Since my cost basis is $24.80 I might be able to buy some after the redemption and still maintain a cost basis under par.

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