I have made a couple changes–1 sale and 1 purchase in the portfolio.
1st of all I sold my AIG-A 5.85% perpetual preferred position on 2/2/2024 for $25.27. On 1/31/2024 AIG had announced a call of this issue for 3/15/2024. I decided to take a few cents less than call value in order to generate some cash for purchases. I forgot to post this sale at the time (3 weeks ago). I updated my laundry list. I had held this for a year or two and collected dividends plus a reasonable capital gain (4% +/-) on the sale.
On 2/23/2024 I bought an add on position of the Eagle Point Income 7.75% term preferred (EICB). I paid $25.08/share. This is a buy and hold for the coupon–mandatory redemption is in 2028. EIC is the closed end fund that owns primarily the debt tranches of collateralized loan obligations (CLO’s). I have no illusions of any capital gains on this short maturity issues–although if interest rates move strongly higher or lower the share price to temporarily move up or down, but revert back to $25 the closer we move toward redemption .
Speaking of EICB being pulled to par due to upcoming term maturity, has anyone looked extensively at when we can expect that? If there is a substantial cut in interest rates, one should expect a high coupon term preferred like EICB to go up in price. However, the fact that it is a term preferred forces it to go to par (as opposed to a perpetual preferred that MIGHT get redeemed at par). I’m just wondering how a term preferred owner might game selling at a higher price before it gets “pulled to par.” We know it is going to happen, has anyone done any research on when it will happen.
I just look at 3/15 calls (4) as frozen monies earning 6%. No upside/no downside.
And always be careful about re-investing that on the call date. Wouldn’t be the first time I’ve seen ‘failed to deliver’ without any explanation whatsoever. I’ve even seen Treasuries fail to deliver principal.
So If you Prefer, you’re agreeing with Tim’s decision then? Don’t know if this is a dumb question to ask for others and myself.
I made the same decision on AJXA and gave up the last dividend to re-deploy the money elsewhere. In that case though there are questions if AJX will make good on the call.
Yes it makes sense if he can sell for no costs. But I’m not in front of a screen where I can count the accrued vs where it’s trading. If it’s 10-15 cents then no big deal.
There are 6’s out there at 24.
Hi Charles–I never let 12 cents over the course of 6 weeks get in the way of reinvesting in a higher coupon.
Ajax has announced their plans to pay off the preferred from money borrowed from rithm capital corp.