I will be adding a new link titled “Sandbox” in the right hand menu.
That link will get you to this page.
I had originally set up the “Reader Initiated Alert” page for ‘alerts’. I was thinking this, for instance, might be when a preferred stock is undergoing a temporary selloff and someone wants to let the population know about it quickly. Of course we all (including me) use the ‘alert’ page for general messaging.
I am requesting that we start using the Sandbox page for all general talk, and try to preserve the ‘alerts’ page for ‘alerts’.
I have had a screen up on one of my monitors all week where I see all comments – no matter where they are posted–it is a great page and I wish everyone had a page like that–believe me we all benefit from all the knowledge being shared. I don’t want to stifle any of the exchange of knowledge, but hope to get things a bit better organized by adding the Sandbox page.
Who has an opinion on Vornado Realty Trust (VNO)? All three preferreds (VNO-L,M,K) are way below par and two of them are well past call. Is it circling the drain?
I’m surprised by this selloff too, bought some K’s at $21.8. Have no idea what this is connected with, I didn’t find anything suspicious in the news. We’ll see.
Dow Jones published an article by Randall Smith on July 5th titled “If you want to know where N.Y. Is heading these REITS offer a clue.” The article talks a lot about Vornado, the largest NY REIT, and is worthy of digesting. I’ll let you make up your own mind.
I just dont have the stomach for these types of reits, Mikeo. And they could be layup trades or holds, but I prefer owning issues where my first thought of financial stress from recent events, is not in my head when buying (thats the psychological part of investing for me). Flipping for in and outs is doing me well lately, but its at the expense of past call issues or ones heading that way.
5 year keeps drifting south. Locking in some safer issues of longer duration may not be the worst idea. I have done that with part of my money, and some on accident. I own two SCE preferreds sitting on close to a quick buck cap gain. But I feel compelled to hold though I dont want to. May be forced to since they are comfortably under par with decent QDI yield.
I even went back to an old essentially noncallable busted convertible BGEPF last couple days buying a few hundred in $88-89 range. Largely dismissed it As I need QDI. Then I realized Bunge headquarters is in US now and its QDI now. Confirmed my 2016 last dividend from it and yes it is QDI as it should be. quantumonline is wrong.
Can anyone give me an opinion on the safety of the Preferred SLMNP. Seems there is a lot of talk about dividend cuts at Schulman .
Thanks!
It’s LYB parent now paying the bill. I view it as fairly safe. If I had to take a wild ass guess I would rate it BBB-/BB+ zone.
LYB is paying a large common divvy and has lots of room to cut that before any problems paying pfd and company is nicely profitable even in economic downshift albeit volatile
Max – Given that Schulman doesn’t exist as a dividend paying entity in of itself, what talk are you hearing??? Talk of LYB cutting dividend?
2whiteroses
Yes I meant LYB the common …… I have read in two places they are getting ready to cut their dividend, very soon.
Max
Ya gotta love sell side analysts some times… Headlines on LYB today which closed at 63.11 include “UBS maintains LyondellBasell Industries with a Neutral and raises price target from $50 to $63.” And from 6/29, “Citigroup Downgrades LyondellBasell Industries to Neutral from Buy, lifts price target to $64 from $60.” Gee thanks, guys! Very actionable……..
I’m mostly a gut investor. I once owned a lot of SLMNP. Now I own none. When it dropped to 802 in March, I found it gut-wrenching and exited as it climbed back up. Now my portfolio is almost 50% in IG illiquid ute preferreds and I feel much better since I have absolutely no idea how this covid bs is gonna play out. And in my neck of the woods, it ain’t looking too good presently.
JMO
Camroc, your letting the law of big numbers unduly influence you. It dropping to 802 was only a 20% drop. That was peanuts compared about any preferred that was remotely liquid. Ya, I got some that never even traded the month of march and missed the crashed partY, but most got hit harder. Take my beloved SR-A. If it was a $1000 preferred like SLMBP, its low point was about $600. That was way under SLMNP. You name them, PPX, SJIJ, all of them rotted more than SLMNP. But still I definitely understand what you want….I sold before it dropped to buy others that did. I have since bought back 10, but keeping it modest. As I dont have definitive proof it really sits directly below LYB common or is an off shoot subsidiary that could die alone on the vine. I do love the $800 ish put floor and non callable feature though.
That’s right Grid. This one hardly dropped %wise. I kept this one and sold other sock drawer ones to buy PPX, SR-A, etc., on the big drop. SLMNP went right back up to where I bought it last Fall, and I have $3,600 in divies collected. In spreading/diversifying, this is not a bad one to own as the investors are not flipping it.
Sometimes it is better to not look at investments, but if you dont have anything else to do or you are retired, I bet it is hard not to look at them daily. I still have 15 yrs yet until i can start to collect retirement.
Mr. Lucky if you like having a few in the fold that show a strong history of reluctance in price dropping and no call anchor threat dragging price down put BGEPF on your tracker list. This is a nice diversifer ag company, Bunge, that has been around since 1818. $100 liquidation convertible that essentially is busted and non callable. Ignore Quantum it is QDI.
Grid, should we be overly concerned BGEPF is Moody’s/S&P at Ba2/BB+? Have you looked at the financials?
Actually, it was the big unknowns, not the big numbers that bothered me, Grid. Like you, I also sold most of my SLMNP above 1000, yet I could not make myself rebuy any of it when it dropped to its put value. A gut-check decision.
So…instead, I bought utility bonds and preferreds in the teens and felt a lot safer. I figured, no matter what happens with covid, those will eventually pay me. A master taught me that. 😉
JMO
Mikeo, Vornado is considered a New York City REIT since the majority of their holdings are in the city. As everybody has heard, Covid has fundamentally changed the business model for many white collar jobs in office buildings. Some percentage of those jobs are being transformed to “work at home.” Long story short, NYC rents are dropping which means the value of buildings is dropping. The loan to value which might have been say 60% is climbing which is a different way of saying that the Net Asset Value of REITS will be falling. On top of that, Vornado management which a decade ago was considered top notch, has been doing a poor job even before Covid. I would NOT own the common, but my guess is that the preferred dividends are secure. Investors will continue to mark down their value and I currently do not see a path back to par aka $25 for any of them.
Thanks everyone for the insight, much appreciated!
Agree with Tex the 2nd. Things look rough for the common, and a common dividend cut looks likely. But I can’t envision a scenario where the preferred dividend would be in jeopardy. But as Tex said…$25 seems unlikely as well. That also means a call is unlikely.
I have traded JSM for a significant profit in the past and am accumulating it today. I’m a fan of Navient and the stock rating is consistently been neutral from S&P and Credit Suisse.
Has anybody participated in the Navient baby bond JSM?
I have. Traded it for a significant profit in the past and am accumulating it today. I’m a fan of Navient and the stock rating is consistently been neutral from S&P and Credit Suisse.
Has anyone selling at Schwab having problems with lot orders? Twice in a week, on two different CEFs, they ignore the lot selection and go to the default last in first out. Really pissing me off, ’cause if I don’t catch it, the wrong ones can be sold. Then I have to spend a half hr walking them thru it even though they can see the problem — today tho, they could see the lots were selected, but it came out of the oldest lot.
thx
Ask them to change the designation or to have them show you their tool.
That means if you had it designated correctly then they will change it. Go to the site and dig around, change it.
Good diligence!
No- I used the lot selection tool- it was changed- but they can see that I did it correctly- can’t explain the change to first in first out.. I doubt I am the only one. I don’t want to see their tool 😉
RE: SAK, SAF-
SAR has reported:
https://seekingalpha.com/news/3589645-saratoga-investment-nii-beats-0_01-misses-on-total-investment-income?utm_medium=email&utm_source=seeking_alpha&mail_subject=breaking-sar-earnings&utm_campaign=rta-stock-news&utm_content=link-3
SAR has reinstated a lower div after suspending for one Qtr. I don’t own it.https://seekingalpha.com/news/3589640-saratoga-investment-resumes-quarterly-dividend
Not recommending anything just calling attention. The “industrial reit” (think Ecommerce shipping) sector is considered one of the safer reit plays being its strategic importance and usage. Anyways for one looking to research there is a S. Cal industrial reit Rexford Industrial that has 3 preferreds. A is redeemable in a bit over a year, the B series same 5.875% coupon but redeemable a year after that. C series is lower coupon and more duration protection. I have been in this during selloff and just got back in today at “par” $25.
What I like about this outfit is it is no debt hog. Last year this was its profile.
Less Established Capital Access: Rexford has issued $325 million of private placement unsecured notes since July 2015, expanding the company’s capital access and financial flexibility. However, Fitch continues to view REXR as a less established unsecured debt capital access pending incremental private placement notes issuance and/or demonstrated access to public bonds. As of Sept. 30, 2019, REXR’s capital structure consisted primarily of common stock (82.3%) and also contained debt (11.2%), preferred stock (4.7%) and OP units (1.8%).
https://www.fitchratings.com/research/non-bank-financial-institutions/fitch-affirms-rexford-industrial-realty-at-bbb-outlook-stable-26-11-2019
They did just acquire some more properties so more debt may have been added. Fitch is highly complimentary of management. Debt is BBB mostly from being a “newer” company, which last slotted preferreds at BB+.
Own some NRZ-C preferred at Fidelity. Saw it trading 4% lower today with ex-dividend on Jul 15,2020 of 9.1% at current price in $17s.
Fidelity restricting me from buying this!!! Says for closing trades only. Is this de-listed or stopped paying dividends?
NRZ-C at
https://innovativeincomeinvestor.com/security/new-residential-investment-corp-6-375-fixed-to-floating-rate-cumulative-redeemable-preferred-stock/
Fidelity is protecting you from yourself–they generally don’t allow online purchase of F-F preferreds, although you can usually buy them when they’re on gray market or in first few weeks (which is how I own some NRZ-C, or by talking to a fixed income rep, a PIA I won’t do), before they figure out they need to restrict them. Same with baby bonds, although not consistently (e.g., I was able to purchase two of the FDUS BBs recently, but another, almost identical to those two, was prohibited). No one I’ve dealt with can explain the policy, or inconsistency, or why there isn’t any attempt to change it, even though many of us on this site have complained to whomever we deal with there. Personally, I use another broker to buy these, even though I’ve had to buy non-qualified in a taxable account (because I’ve been too lazy to set up another IRA elsewhere).
Have them connect you to their fixed income desk and they will do the trade for you at no charge. It’s a royal pain because you can’t just leave a low bid with the strategy of changing it later. Any change in offering price requires an associate. The only thing you can do on line is sell or cancel orders. This goes for any f to f preferred with Fidelity. I complained bitterly and the person on the other end agrees but yet the policy still stands. I suggested coding the account to allow for this activity much the same as they code an account for options trading.
Thanks for the response Jerseyvinny and CR – I thought Fidelity was being nasty to me only!
Too much trouble calling their bond desk from what you both describe – I simply bought it at another broker (IBKR)
Some good news for MTBCP holders:
SOMERSET, N.J., July 07, 2020 (GLOBE NEWSWIRE) — MTBC, Inc. (MTBC) (MTBCP), a leading provider of cloud-based healthcare IT solutions and services, today announced that it is increasing its 2020 revenue guidance to $105 – $107 million, which represents year-over-year revenue growth of approximately 65%, while reaffirming its 2020 adjusted EBITDA guidance of $12 – $ 13 million.
“We’ve had a remarkable first half of the year and we are pleased to increase our revenue guidance, based on our recent Meridian acquisition,” said Stephen Snyder, MTBC CEO. “Moreover, we are better positioned today than ever to continue to grow our revenue and expand margins during the balance of 2020 and beyond.”
“We expect annualized revenue of approximately $130 – $135 million during the second half of 2020, which reflects our assumptions regarding a modest and temporary reduction to our normalized run rate revenue due to COVID-19,” said Bill Korn, MTBC CFO. “We expect to achieve approximately $24 – 25 million of annualized adjusted EBITDA during the second half of 2020, representing an adjusted EBITDA margin of nearly 20%. Our adjusted EBITDA during the first half of 2020 was reduced due to the CareCloud acquisition during January and COVID-19, which reduced the total number of doctor visits during March through June.”
About MTBC
MTBC is a healthcare information technology company that provides a full suite of proprietary cloud-based solutions, together with related business services, to healthcare providers and hospitals throughout the United States. Our Software-as-a-Service (or SaaS) platform includes revenue cycle management (RCM), practice management (PM), electronic health record (EHR), telehealth and patient experience management (PXM) solutions for high-performance medical groups. MTBC helps clients increase financial and operational performance, streamline clinical workflows, and make better business and clinical decisions, allowing them to improve patient care while reducing administrative burdens and operating costs. MTBC’s common stock trades on the Nasdaq Global Market under the ticker symbol “MTBC,” and its Series A Preferred Stock trades on the Nasdaq Global Market under the ticker symbol “MTBCP.”
I didn’t go through their presentations to see if they mentioned the preferred being called, but it is trading as if it will be called in November. A little hard to see how it will not be at 11%. Back of the envelope shows it’s worth 26.375ish if it is called in November and I show it is trading at 26.31.
re MTBCP–what probability do you apply to them calling it? They have sold shares as recently as late April.
I am not educated on them, but it would seem hard to believe they could allow that high of yield to continue when it has dropped so much. My comment was purely observation, no basis for it.
MTBC- yes the company is doing quite well. That said, if they get more institutional support which they will, then the probability that they will call the preferred is quite high. The CFO was recently on Cown and Roth just initiated coverage. The company could well make another acquisition this year which might delay calling the preferred but I expect that this will happen within the next year.
The chairman did not want to issue common until the price of the stock was higher. At or near present levels, I think they will either do that or replace the preferred with low cost issues. The common dilutes but the preferred will probably cost more. We will see. Good luck to holders SC
MTBC- yes the company is doing quite well. That said, if they get more institutional support which they will, then the probability that they will call the preferred is quite high. The CFO was recently on Cown and Roth just initiated coverage. The company could well make another acquisition this year which might delay calling the preferred but I expect that this will happen within the next year. Bottom line is that one needs to buy fairly close to par . Just my view but based on experience. Good Luck SC
RE: EP-C
El Paso Energy Capital Trust I was senior to the distribution of El Paso Gas common dividends. El Paso Gas has been acquired by Kinder Morgan.
1) Are the present payments from EP-C senior to the All of the common dividends from the new parent, i.e. Kinder Morgan, or only those dividends distributed which are sourced from the assets of El Paso Gas?
2) In general are all parent holdco UTE dividends subordinate to prior covenants with each the child company? That is, must each child be satisfied before a dividend may be declared by the parent UTE holdco?
Please excuse my ignorance.
Would gratefully appreciate your opinion. Thanks!
Dave, Yes, KMI is absolute guaranteer of obligation and is so stated directly in their SEC filings. One thing that changed was the conversion formula used for KMI instead of El Paso which has no public trading stock now. I forgot the actual owner optional conversion (Which includes cash consideration and partial stock) but it is so far out of the money its not even funny. So basically its a busted convertible with a mandatory maturity date.
I was leaning toward the AEP-B as discussed below
as far as convertibles go it looks solid
I dont think I would take a hit like the CNP.B issue
Any thoughts? Or do you avoid convertibles in general?
Thank you for sharing Gridbird. I appreciate your thoughts as always. I like the assets of KMI. 70,000 miles of Natural Gas Pipelines. The claim is that almost 40% of Natural Gas in the country moves through KMI fee based pipelines. Hard to replace the Plantation pipeline for moving gasoline, diesel fuel, and jet fuel from the Gulf Refineries to the East Coast markets (50% interest). Mr. Kinder believes in the enterprise enough to have a significant equity position at personal risk and has had for quite some time. He has skin in the game junior to EP-C. I do not believe that long term rates will be increasing anytime soon. But I am not able to forecast interest rates with any degree of certainty. The 8 year term of EP-C limits the interest rate risk. We may see a tariff (toll) reductions on contract renewal and unfortunately counterparties will go under with the shale collapse. The interest coverage is reasonable. I see EP-C as a fair balance between current yield, YTM, credit risk (interest coverage) and term. Not a UTE but very close. Thanks again!
Yes, Dave, I think so too. Dont let the below par price fool you. If it was issued at 6% it would be right at par now. But its largely a victim of its purpose. 20 some years ago when issued, it was largely assumed it would be converted through stock price growth, that is why the issue came with such a low yield in the higher rate late 1990s.
But things change…El Paso got in a bit of trouble, KMI buys them out fully, then KMI becomes C Corp and that ended that. But KMI is actually doing better, lowering debt, even raised dividend couple months ago…Plus all what you said.. All in all a reasonable risk/reward for me.
Grid, am I correct in assuming that when 3/31/2028 rolls around, KMI will redeem EP-C for the $50 face value plus accrued dividends?
The conversion attribute should have no relevance as it no longer applies, is that correct? In any case, it is assumed we as the holders would not exercise the conversion.
Yes, there is an owner optional conversion anytime. The trouble is it is very underwater. I would have to dig out details from SEC filing, but KMI would need to get well over $30 to approach breakeven as it involved partial KMI stock and some cash. Not happening. So yes it would redeem at $50 plus any interest payments. These are the only type of convertibles (non mandatory convertibles can be fine also) I like as the the typical mandatory convertible can cause big losses. It has to do with why they were issued to begin with.
Usually buying something they shouldnt have and overpay, and then need time to grow into the earnings before dilution occurs.
Great. I have a small position, bought at higher prices ( $48+ ).
Will hold on and not worry too much about it.
I have also experienced Rich Kinder in the way he managed KMI that was not pleasing to me, but like you say, EP-C sits above his own KMI stock and the likelihood that he would not muck around with it is a good probability.
I might even add if it swings below $43-$44.
Grid
Your comments on KMI are correct but personally I would not buy anything that is issued by them. Reason is that the founder i.e. Mr. Kinder is not shareholder friendly in fact he is probably much like the guy who founded ET. If there is ever a choice between what is good for him or the company you know how he will side. He has done this on several occasions in the past. Life is too short to worry about the integrity of the guy controlling one’s investments. I just don’t want to deal with him. I may hold assets that have people worse but I don’t know about it. Best SC
Sc, I definitely agree having confidence in what one owns is paramount. I see this one a bit different for me though. Remember KMI did not issue this. They assumed it and its financial obligation. In fact EP-C sits above his approximate $3.6 billion in KMI stock. EP-C is actually in essence a debt obligation. Actually over the past several years he has acted in a manner that benefitted debt owners more than the equity. KMI has had several credit upgrades in past few years and sawed off billions in debt, and went to C Corp. Basically all KMI has to do is avoid bankruptcy for 8 years and its paid in full come 2028.
That is the unknowable, so I will take my chances, without staking my entire little stash on that outcome of course…As the future is unpredictable!
I saw this notice from Fitch over the weekend affirming a stable outlook for American Electric Power (AEP) and its many subsidiaries.
https://www.fitchratings.com/research/corporate-finance/fitch-affirms-american-electric-power-subsidiaries-ratings-outlook-stable-01-07-2020
AEP also has a 6.125% BBB rated exchange traded equity unit (AEP-B) that converts to common shares starting in 2022, and which are currently trading around par value of $50. The language around the conversion is a bit complicated, so it may be more trouble than its worth to own them long term.
I sold KTH this a:m @$32.45. My analysis, possibly flawed, results in $14 in dividends plus a $27.10 2028 redemption price, or total cash return of $41.10 over 8 years. Subtracting out $32.45 current price results in net gain of $8.65 or 26.66%. Annualized over 8 years the return is 3.33%/yr. I would think that price of KTH will decline as it inches toward 2028 redemption.
Codger, That is funny because I did the same thing with about 400 shares between 32.40 and 32.45. Still the YTM bought here is about 4.4%. Not the worst for a defined maturity. But I locked down some gains, and continue to hold some also.
Grid – I was going to suggest that Codger use Fidelity’s bond calculator (https://gpi.fidelity.com/ftgw/interfaces/pyc/) to come up with a more accurate yield than his roughly but not illogically figured 3.33%/year number, but now I’ve got to ask you how you came up with 4.40% YTM….. If I put all the numbers into the Fidelity calculator correctly, using 32.45, even taking into account it pays semi annually according to QOL and that it “matures” on 4/6/28 but pays on 4/30 and 10/31, I come up with a YTM of 3.76% stripped… This’ll be fun in a boring bond math kind of way..
2WR, I can help you there. I use same calculator. You are going by YTM…You cant do that, you have to look at the YTC yield. See this is a dummy calculator and is using YTM as $25. Its not maturing at $25. It is being redeemed and matures both at $27.10. The calulator doesnt understand this unique behavior of this individual security so YTM is useless here.
Ah, but it can understand the uniqueness, Grid, which you point out, if you’re bright enough to put the right info in in the first place – which I was not.. I did not take into account that it’s going to pay 27.10 not 25.00 at “maturity.” So to force the accurate info into the calculator, you set the “maturity” to a dummy date of 10/31/2028 so as to get the semi-annual payments correct, then you set the call date at 4/6/28 and the call price at 27.10 which again you probably did. Strip out 37.8 in “accrued” using settlement 7/8/20, and voila! You get a YTM (shown as YTC) of 4.54%. So we’re in the same ballpark now with the calculator giving you a tiny bit more juice the way YTM is calculated… Apologies for not getting the numbers right initially as I didn’t spend the time to realize KTH’s “par” at maturity is not 25.00.
There ya go! Now technically I put $25 into par price as basically you have to. That gives you the incorrect YTM which I previously referenced. You just ignore that and refer to YTC. Yes, my 4.4% was just approximate as I didnt factor in the accrual process…Also, FWIW to get easiest close accurate yields, I just put payment dividend payments as monthly every time,
WhiteRoses:
I appreciate the referral to the Fidelity bond yield calculator. I am sure that it is correct re YTM of KTH, but Grid is usually on the ball. Of course I kinda like my calculations, too.
Codger, the real question for me is why was I so eager beaver to lock in profits here and I own 4 other minor issues with perpetual yields lower than KTH. And Im not looking to sell them. Figure that out and tell me so we both will know, ha.
These KTH shares sold were an interesting lot. A couple weeks ago I sold about same amount at $32.25. Then the next day golfing, I noticed ask dropped to 32.05 or something close. But bid was real low like $31.40. I set a 31.90 bid to repurchase but got no sniff. So I closed bid out and for a couple hours on course kept shooting off random 25-49 share market orders and they were hitting in $30.50-75 range. Somebody was willing to unload to not move official price. So I got about 400 this way and then just sold again today.
Codger, Im just doing this in my head, but I think you were short $2 on interest payments. It will pay out $16 still, not $14. You got 7 years of $2 payments, and $1 payment left this year and one in 2028.
If you bought KTH today @ 32.4, it will have an IRR (Internal Rate of Return) of 4.63% to when it matures on 4/6/28 @ 27.1. You can run the calculation yourself in Excel using one of several math functions, like XIRR.
Tex the 2nd, Great tool that XIRR. We should probably qualify that the 4.622% IRR assumes re-investment of dividends to maturity while YTM here is 4.21%. KTN was a good 3-week near $2 flip from March lows.
I personally would pass on the obligation to have to reinvest proceeds. And at that assumed price. Next to impossible.
Close to half of my holdings have a volume of exactly zero shares traded weeks at a time so reinvesting divvies wouldn’t be too useful, though for DGI-ers with a long horizon seems highly effective. Speaking of equity REITs, have picked up a few now that their forward PEs have returned to earth and prices are below NAV. Viewing them as yet another hedge, this one is for inflation.
Grid,
I questioned myself about the years to call, so I set it out on paper.
2020 $1
2021 $2
2022 $2
2023 $2
2024 $2
2025 $2
2026 $2
2027 $2
2028 $1
So $16 in dividends, not $14 as I used in my calculations. Also I did not consider effect of reinvestment of dividends. As I previously stated, Grid is usually on top of this stuff.
Why did I sell KTH? Just to pocket a a$2K capital gain. I have a YTD 14% loss and need some positive reinforcement.
You have taught me something. I didn’t know about nibbling away with small 25-49 share lots that would not move the market price. I may not be smart enough to use that strategy successfully, but it’s something to do and doesn’t have any downside. Thanks for mentioning it.
Codger
Codger, Those kind of low buy orders dont always work, so u have to test it out with 1 share micro bomb tests to see if it hits well below ask price.
Not sure where to post this message, but know that we have a great number of investors here that are newer to preferreds and baby bonds. Today I placed an order with Amazon, but am always on the lookout for new books on preferred stocks. Even though I have owned preferreds and baby bonds for 20 years, I’m still ready to learn. In addition to the sneakers that I bought today, placed an order for this new book on preferreds. It may be helpful to new investors and think the $20 will be well spent – although I don’t expect the 10% to 30% yearly return will ever be reached, but I’m certainly fine with 7% in my accounts. Here is the link, and hope a few people find this helpful. Happy July 4th everyone!
https://www.amazon.com/gp/product/191124938X/ref=ppx_yo_dt_b_asin_title_o00_s00?ie=UTF8&psc=1
Lou, I gotta get you on that buy PPX in 25.30s and lower and sell above 25.80 bandwagon and that alone would get you double digit returns. Milk that baby until the call cow ever comes home! 🙂 There are about 4-5 of these one just rings the bell over and over and over.
I know your preference is reits. I dont track that area and there may be no patterns to juice..LANDP worked for several years for me as a reit flip, but that was about it. And now being in its late stages I would need it to go a lot lower to play that game with it now.
Grid, if an investor worked hard – they could probably get returns of 10% per year, but they would have to work for it! Earlier this year was a perfect example, when new preferreds could be bought on the grey market for about par and then sold for a quick .50 – $1.00 gain per share in the next couple of weeks. Chapter 25 in this book is actually called Flipping and Clipping and Front Running. It’s actually the first time I’ve seen a book on preferred stocks mention flipping shares. Most of the time I’m just a long-term holder of preferreds, but have traded in and out of SJIJ in recent times as they appear to be stuck in the range of about $24.50 to $25.25.
Back in 80s or early 90s a guy named Wade Cook sold investment seminars that touted flipping. Thru the years I have done it some. Eventually the stock would exit out of its range and I would have to look for the next candidate. Never tried it with preferreds. I think he went bankrupt eventually in his seminar business.
Lou, As you know I am just teasing you. We may not buy the same issues, but we share the same general philosophy. And as long as one is staying in reasonable secure type issues whatever sector they may be, sticking to ones plan generally leads to the same results eventually. The key thing is avoiding Rida Moron and Pendynut yield chasing schemes. They can permanently impair capital. I noticed after a couple weeks of laying low, they are back to their same money losing schtick of promoting double digit income yield chases as safe again.
Grid–was surprised to see them become conservative a few weeks ago–but I guarantee you that unless you are pumping junk stuff on SA your clicks will fall way off. Readers love to see the junky stuff get pumped up–they all want to make an easy dollar (that of course turns into a giant loss).
Ha, Tim, you noticed that also huh. They just cant resist staring into the light of junk high yield. But of course serving the dish as a “safe plate to eat from”.
Thanks for the heads up Kap. I bought the book. I hold more than 40 different preferreds and am always looking to learn something new about the segment. Oh yea, bought a new power tool also. Just can’t have too many of those.
Jeremy Siegel was on Barry Ritholz’s podcast last week. One of the more interesting comments was about inflation which is very pertinent for all of us fixed income investors.
Verbatim quote from the podcast:
SIEGEL: The new portfolio analysis. But — so, there’s a huge demand. But with this liquidity in the economy, as we say, I expect moderate inflation, not — I’m not talking about hyperinflation. And so, I’m nowhere near that. I expect inflation to move up next year to two, three, four percent, five percent and maybe run again in 2022 the same way.
So, cumulatively, I expect inflation may be to go up — the price level, consumer price level go up 10, 12 percent over the next few years, maybe 15. Now, back — don’t forget, we had almost 15 percent inflation in one year back in the terrible years, of the late ’70s.
Podcast Transcript:
https://ritholtz.com/2020/06/transcript-jeremy-siegel/
6.5% coupon MCX matures in 7 months at $25, but is trading a hair over $23. The III rating is “D”, which gives one pause, but a 10% jump in 7 months plus the current yield of over 7% sure looks tempting. I figured it is worth a (very) small position. (Or maybe not???)
https://innovativeincomeinvestor.com/security/medley-capital-corporation-6-50-notes-due-2021/
I own some preferred shares in the Gabelli Equity Trust, specifically GAB-K which currently with a 5% coupon yields 4.86%. Given the A1 rating from Moody I feel this is a good return for my current investment objectives. However, I am curious as to how the GAB common shares are able to pay a 12% distribution rate. I’d love to get such a return, it seems unrealistic, but the shareholders are getting that. Does anyone have insight or knowledge on these Gabelli CEFs?
TEF – How much would you like to get that 12% distribution if you knew that 94% of it is your own money being given back to you???? If you haven’t seen it before, take a look at GAB’s press release of 5/14… That should give you a good idea of what’s going on… 94% of their distribution this year is anticipated to be return of capital.. “Gabelli Equity Trust 10% Distribution Policy Reaffirmed and Declared Second Quarter Distribution of $0.15 Per Share” https://finance.yahoo.com/news/gabelli-equity-trust-10-distribution-132000748.html
Thanks. It seems to me that anyone offering 10% return in today’s environment is deceptive at best. I think that a company like GAMCO that attaches its founders name to most of their funds would be more straightforward and honest in their dealings and explain upfront how they achieve this return in the short run and the long term outlook for such a policy.
TEF – A couple of thoughts. First, a “managed distribution” which this is, is not all that uncommon in CEF world. For most investors (and I suspect those will include you in the future -lol) , when that policy is established, they know to expect return of capital will most likely be a part of the equation, so it’s a bit harsh to consider Gabelli as being dishonest or deceptive for utilizing the managed distribution policy the same way many others do. Secondly, just because ROC is 94% this year, that doesn’t mean that it will always be that high or that it will always be used to partially pay the dividend in any one year. ROC is sort of the catchall last alternative way that the managed distribution amount gets paid once the policy (in this case the annual policy) has been adopted… .
Some of the Gabelli funds recently cut their dividend by 40%. In that way it’s a lot like REITs, collect your high dividend and whenever the strategy goes bad there’s a reduction. This is not true for the preferreds. much less risky.
I believe Gabelli uses high leverage but I don’t know the details.
Does anyone know why IPWLK is up today (Gridbird)?
Paul, Dont have a clue…2000 shares 7% over par. Current yield 5.28%. That aint worth the risk. I got a modest 150 shares. If a $107 bid was out now, I would have no problem selling.
Thanks, Grid.
Question regarding CEF coverage ratios.
If a CEF such as Gabelli Dividend and Income Fund were to have its coverage ratio drop under 200%, it is my understanding that it wouldn’t be allowed to pay any distributions to its shareholders. Does this mean both the holders of both the regular and preferred shares? I guess what I really want to know is under what conditions can the Fund management NOT pay dividends to the the Preferred share holders?
DCOMP – Dime Community Bancshares Pref. :
Bridge Bancorp, Dime Community agree to $489M merger of equals
Jul. 1, 2020 5:06 PM ET|About: Bridge Bancorp, Inc. (BDGE)|By: Liz Kiesche, SA News Editor
Creating a community bank that will cover the entire Long Island, NY, market, Bridge Bancorp (NASDAQ:BDGE) and Dime Community Bancshares (NASDAQ:DCOM) agree to combine in an all-stock merger of equals, valued at ~$489M.
The combined company will have more than $11B in assets, over $8B in total deposits, and 66 branches from Montauk to Manhattan.
The banks calculate that the combined company will be 7% accretive to Bridge’s GAAP EPS and 40% accretive to Dime’s.
After the closing of the transaction, Dime shareholders will get 0.6480 shares of Bridge common stock for each DCOm share.
Each outstanding share of Dime’s 5.50% fixed-rate non-cumulative perpetual preferred stock, series A will be converted into the right to receive one share of a newly created series of preferred stock of Bridge with the same preferences and rights.
They projects that the transaction will result in cost savings of ~15% of the combined expense base.
Mseni19 :
As a holder of DCOMP, I appreciate the information you provided.
Howard
TEF–very good question–and very complex actually. 1st off a CEF (which is organized as a RIC (regulated investment company)) MUST pay out 100% of their taxable income–normally they will do this via quarterly (some monthly) dividend payments and then if they have excess they will pay out a special at the end of the year. A CEF or RIC is a pass through vehicle – like a REIT or BDC – and as long as they pay out at the required rate they pay no taxes at the corporate level.
Remember we have 2 coverage ratios to consider—if the senior security is debt the coverage ratio minimum is 300%, if the senior securities are preferred shares the coverage ratio minimum is 200%.
Now back to your original question–NO dividend may be declared on any capital shares if the DEBT coverage ratio is below 300%–EXCEPT preferred stock dividends may be paid as long as the debt coverage ratio is 200% or above.
This would mean that if the DEBT coverage ratio fell below 200% NO preferred dividend could be declared.
So this is the only time that I can conceive that a preferred stock dividend would NOT be declared–and I have never seen it happen (but never say never)
Now the ‘what ifs’ get pretty detailed and Section 18 of the Investment Company Act of 1940 is long and confusing. It can be read here.
https://www.govinfo.gov/content/pkg/COMPS-1879/pdf/COMPS-1879.pdf
So if the CEF breaks leverage rules they have to either 1) buy in the senior securities (debt or preferred) or 2) issue common shares to beef up.
Remember that every penny of the assets of the CEF are pledged to covering the senior securities. We have had examples of some of the Gabelli issues ALMOST breaking leverage–I wrote a seeking alpha article on this in 2011–it is here.
https://seekingalpha.com/article/265958-preferred-shares-of-these-4-cefs-for-a-conservative-outlook
thanks
Tim: Thanks for the lesson. I was wondering why the CEF’s, particularly Gabelli held up so well during the crash. Mostly holding ute’s and banks right now, but adding a few CEF shares might be a good way to go until things get “normal” again, or should I have said ” If ” things get normal again ?
TEF,
Violation of the coverage ratio means no dividends for common stock; preferred stock dividends can still be paid. However, preferred stock dividends don’t HAVE to be paid if the CEF runs into serious liquidity problems. But the preferred dividends are cumulative and will have to be paid eventually, unless the CEF becomes insolvent. (Hint: try to avoid CEFs that could run into serious liquidity problems or become insolvent!)
Critically, the CEF does not have the option to stay under 200% coverage ratio even if it feels like it. It has 60 days to get the coverage ratio back up to 220%. And if it should fall under 200% again by the end of that quarter, it has to get it back up to 220% again.
AHLPRE & ALHPRD have been steadily dropping. Anyone have any info? I don’t own them but a price alert I set months ago just triggered.
Does anyone here own NEE-P? If I buy now for today’s close price of $42.19, I think the following happens:
– I get a yield of 6.27% (not qualified) until 3/01/2023 (conversion date)
– On 3/01/2023, it converts automatically based on the following: The stock purchase settlement rate will be 0.1428 shares per unit if the then current market price is equal to or greater than $352.55 and 0.1773 shares per unit if the market price is equal to or less than $282.04. For market prices between those values the settlement rate will be $50 divided by the market value.
– Assuming I believe NEE common stock price will be above $352.55 by the conversion date, this seems like a decent way to start a position in NEE’s common.
This prospectus is very tough to get through. Am I close? Thanks in advance!
Yes, but… You say you believe NEE will be above $352.55 on 3/1/1023. How much more? You lose any appreciation in the common above that amount.
Your convert appreciates as the common appreciates above that level
mcg is correct. Sorry…need more coffee!
Dick W – Thank you for the post. I wasn’t aware of it. I actually like it because I like NEE as a stock so this is a good way of getting in and earning some dividend along the way. I will research it a bit more as I do see upside on the common (just my opinion on it)
Can somebody help me with the math here please. I assume the unit is one NEE-P share that currently costs around $42.5. If so it will get the holder of that share – if conversion would be now – 0.1428*240.90 (current NEE share price)=$34.40. Seems like it’s wrong but what am I missing? Thanks.
I believe about the worst relative performance of NEE-P vs NEE is if the price of NEE was at the high end of the flat conversion value window on 3/2023, say it was $352. If you bought the common today at $241 you would get a nice 46% long term capital gain. If you bought the preferred today at $43 you would get $50/$43: 16% capital gain plus an addition 4% interest for ~3 years.
That’s if I understand all this which is not certain at all.
Buying a mandatory convert is simply a way to buy the common with an enhanced yield. You are paying up front in the form of a conversion premium in order to get some more yield. On a total return basis you are almost always better off buying the common over the convertible. In the case of NEE you have to factor in that the company has been growing the common dividend by 12%/yr so by owning the convert you would not participate in the dividend growth.
In summary, if you like NEE and the current income is more important than the total return the convert is OK.
You should buy whichever is cheaper (not market price), the convert or the common. As prices fluctuate one or the other will be priced at a discount relative to the other.
Anyone who has a TDAmeritrade account might be interested in the following:
I received a notice from TDA that they were filing a 990-T for me for UBTI in my IRA. I only held the partnership in the IRA for 3 days and sold it for a one dollar gain. I bought it in the IRA by mistake and immediately sold it. Of course there is no UBTI. the 990-T is incorrect because it did not show my basis on Schedule D nor on Form 8829 that accompanies the 990-T. I called them to straighten it out. Helpful agent was totally unfamiliar with the 990-T and became the relay messenger between me and a woman supposedly “in the know” after a few back and forth the helpful agent suggested I speak directly with the 990-T expert. Marvelous idea finally. The 990-T expert refused to talk to me. I was dumbfounded. What kind of business refuses to talk to it’s customers? The poor agent on the front lines was obviously shocked as well and promised to get someone higher up to address the issue and call me. I informed her that if that incorrect 990-T was filed and the tax taken from my account I would file an amended return myself, something I should not have to do, to get my money back and would be moving my three accounts to another firm. I already have accounts at Fidelity also, so a simple task. I doubt i am the only one about to have an incorrect 990-T filed. I had ZERO UBTI.
My account at Fidelity…they sent me several notices that I “may” be subject to UBTI. I know that I am not. I’ll worry about it if they report otherwise.
Yes, no problem with Fidelity in that department. TDA was totally incorrect showing the gross amount of the trade as UBTI. I have NEVER paid UBTI tax.
Yes, that is standard practice at Fidelity if you hold an issue that issues a K-1 in a tax deferred account.
You get the standard notice saying you may be subject to UBTI and to send in any documentation (on carryforward losses, etc) you may have that they are missing.
But if you know you have no or minimal UBTI, nothing more will happen.. Otherwise, if you really are subject to UBTI, they will send you a draft of the 990-T they will file for your account
Fidelity does a very good job with this
Yes, i completely understand the process. I’ve been a CPA for 32 years. This is not a form letter from TDA, it is a completed 990-T showing tax owed, but incorrect, and the date it will be paid from my account. There is no way to correct this online and the person in the correct department refused to speak with me. I was courteous, never raised my voice, explained the situation to someone who had no idea what I was talking about.
Called back, on hold for an hour, got an agent, asked to speak to the retirement / IRA department. On hold another 15 minutes, told the rep I needed to talk about the 990-T, she immediately hung up.
Wow, that sucks at TDA. Hope you get it resolved.
Just note that if the incorrect 990-T is filed, you may need TDA to file the amended return as they are responsible party.
That said, if you do file your own amended return, note that those funds will go back into your account at TDA but could take up to 6 months to do so. So don’t close your account fully til you get the funds back
Yes, i will have to wait until everything is fully resolved. I’m going to call everyday until I speak to someone who understands the issue. If that doesn’t happen before they file the incorrect return at least I can attest I did everything I could.
Who signed your 990T? I got one from TDA for 2018–with no tax due!–signed by Price Waterhouse Coopers as paid preparer, with the actual preparer’s name, office address, and phone number on the form.
It was a complex, 21-page submission, including enclosures, that I’m sure cost TDA a pretty penny. They submitted this zero tax 990T after my many phone calls and emailed documents and explanations to TDA explaining why I owed nothing.
If they had paid taxes out of my IRA erroneously, the first number I would have called would have been PWC’s.
JMO
I am not shocked by your tale. Brokerages, somewhat of necessity, are schizophrenic. Half the firm is trying to gain your business and the other half is trying to beat you with a stick.
The only firm I have not been abused by yet is IBKR, but I’ve only had an account there for a year so I’m sure it’s a matter of time.
I move monies from firms that are giving me too much trouble to those that aren’t giving so much. I’ve not found a better way.
The problem moving funds is that the market can go crazy- up or down while the transfer happens. No trading then– caution.
I just picked up some SR-A for $26.10. At that price, the YTC is 4.61%.
So did I. I got my SR-A at $26.09.
Will probably flip if it goes into the high 26 range.
Dick you back out about 30 cents on your price since it goes exD in about 2 weeks? That slots it at 5.03% for me anyways.
Hi there gurus! Quick question, based off of WSJ article that just posted RE: Banking guidance from fed….
Does anyone know if know if this impacts banks preferred shares as well, or only the common stock dividends?
“As a result, the Fed ordered the banks to cap shareholder dividend payouts to preserve capital. Banks, which will announce their dividend plans for next quarter as soon as Monday, won’t be able to make payouts that are greater than their average quarterly profit from the four most recent quarters.”
https://www.wsj.com/articles/fed-stress-test-finds-u-s-banks-healthy-enough-to-withstand-the-coronavirus-crisis-11593117020?mod=hp_lead_pos3
Hopefully someone will know as it piqued my interest, too. I have never found any definitive reference to separating the two. Unrelated I know the courts really confused investors early on with PCG, statIng 3 year minimum non payment of dividends. Finally later they started showing cash disbursements coming to preferreds post bankruptcy so clearly the reference was only the commons. But clearly at some point they could be mandated to suspend if needed. One would assume that would be a last straw though. Preferreds are a huge underpinning of capital for banks. In fact last I read only about a quarter are publicly traded. There is massive amounts of preferreds in private hands.
I only own 3 bank preferreds now well under 10% my total stash, and they are all regional banks. So they are not part of the “critical” banking structure, so Feds arent making them do stress tests, and obviously will have more latitude.
Which may be good or bad I guess.
Grid, I thought I read somewhere here or over on SA you were down to one bank stock. I know you picked up some of the AUBAP to flip but its been under water from last week or so.
Charles, I have three. I got that woof woof AUBAP, SBNCM, and the Heartland Bank new preferred. I did have quite a bit of the CoBank fixed one, but I sold after exD and getting out just under $101.50. I like the issue, but I had other stuff to buy. 🙂 I also have a couple recent IPO insurer reset preferreds.
I only have a couple hundred shares of AUBAP. Probably just hold. SBNCM I just keep, and the Heartland one I may sell some and keep some if it ever jumps appreciably. Not holding my breath though, but I got them around $24.72 if memory serves, so Im not in any hurry. Im not interested in owning any more banks for time being. No special bank insight or skills there. Heck when I first started buying preferreds I wouldnt even own one, so I have loosened up a lot, ha.
Gridbird, I was the one who probably bought some of your CoBank a few days back after the dividend 🙂
Is there some event you are anticipating about CoBank that prompted you to sell?
I am building a preferred portfolio so thought this will be a good addition (along with CEF preferreds, utility preferred and notes and some insurance preferreds).
Just remember that CBKLP is past call.
I am not sure what their plans are for it so you might keep an eye on it and will want to mind your entry price.
I own a bunch of it at an average price that is below par.
Thanks Scott. That’s a good point. I am not sure how fast after the call date did they do the previous redemption. But I just took a chance with a solid bank where my downside is limited to a couple of months dividend if they call it immediately
Jay, CBKLP cannot be called except on dividend date so its good until next payment at minimum. My sell really had nothing to do with the company. I just got to the point where I had too many past call anchored issues. And there is nothing wrong with that, its just I bought recently many deep illiquid issues below par, I plan to keep. I needed some trade money for liquid call protected issues. So it was the one that went.
I try to balance between liquid and illiquid, and call protected (or under par and little likelihood of call) and past call issues. If it ever sagged below par again (though not at $92 ish again like I got it at again last March) I probably would go back in again and figure something else out to sell, ha.
Gridbird Thank you for sharing your reason. I really appreciate your guidance on this and many other investments
I still hold a little CBKLP at TDA after selling most of what I bought in its March meltdown. But I may have to hold those remaining shares indefinitely when Schwab takes over soon.
Someone posted on another venue that Schwab has frozen his CoBank shares, saying he isn’t eligible to buy or sell those shares, and if he wants to sell them, he has to find an eligible buyer and set up the trade himself! Schwab will NOT put them up for sale.
FWIW
Thank you Gridbird!
preferred div’s are generally fixed.
common div’s vary, up or down per quarter. fed saying no div increases and no share buybacks. So I suspect, if anything, bank’s preferred div’s are probably a bit “safer” as banks div “kitty” could even grow.
Billo, today pundits were talking about the market was up because at same time as this stress testing they were relaxing the requirements for banks to hold reserves for losses and also allowing them to invest in venture capital funds. As far as I am concerned loosening regs is what got banks in trouble in the GR. Doesnt restore my confidence in bank stocks
Does anyone know why SLMBP is not paying the floating rate that should have started in 2011 ? The price would make sense if it was at the 3mo +1.70%, I guess.
thx
Ooops- I ignored the $100 par- duh. Got distracted. Still helluva low price now. SLM has done pretty well in last few quarters.
I just read that the IRS has expanded guidance on their Waiver of 2020 Required Minimum Distributions. Two key points are that the waiver now applies to ALL 2020 RMDs and you now have until Aug 31st to roll back RMDs you have already taken. Here is the expanded waiver notice from IRS
https://www.irs.gov/pub/irs-drop/n-20-51.pdf
I’m no CPA, but this looks like a useful tool to preserve qualified balances for those retirees not absolutely needing the income.
good to know. I suppose it really depends on your individual tax bracket.
NO doubt taxes will be going up at some point to pay for all this spending.
I plan to take mine this year just in case tax rates increase sooner then later.
Yeah, I took extra out in the March meltdown. My bet is it will never be cheaper taxwise.
For many retired people, the number one concern is outliving their nest egg. This waiver gives them the option of taking less than is required in 2020 without penalty. It remains to be seen how quickly the markets recover from the global pandemic, and I personally would rather pay some extra taxes in the future then come up short on living expenses because I took too much out in prior years.
Your nest egg doesn’t have to be just in tax deferred accounts. Depending on one’s situation and tax bracket now and projected in the future, some people are better off taking the money out now while tax rates are low. Even if they don’t need it, they can simply invest it in a taxable account not subject to RMDs and generate QDI
You can put it back, but it will add to the IRA balance on 12/31 which will be used to calculate what will have to be removed next year 😉
Gary that’s true, its definitely a ymmv situation. However, the average retiree subject to RMD on their investments is probably sitting on paper losses which would more than offset the extra cash not distributed. The waiver is an option if you need it.
Thanks, I had my RMD (which I never really need but am forced to take) automatically taken out in February prior to COVID and with this document that you sent it looks like I can put it back. I knew that they said RMD’s would not be necessary this year however that was after mine was already taken out. I am going to ponder if I should or not due to the tax rate will probably not be any lower yet if I put it back it can continue to grow tax deferred.
RayDaBoz, I suspect the current income tax rates will be the lowest we’ll see in our lifetimes.
Re: TCO-J, TCO-K
With the surfeit of retail space in shopping malls, rent delinquencies, tenant bankruptcies including anchor tenant bankruptcies, space vacancies, a consumer spending recession, and the growth of online shopping with the uncertainty of CV-19, I assume that market rental rates have materially fallen. With the roll off of above market rents and the transition to LOWER current market rents I wonder about the sustainability of the preferred dividend. I wonder if the 145 – 245 basis point risk premium over a UTE such as IPLDP, NI-B, or SCE-H adequately and sufficiently compensates for the risk. Just my opinion. Probably not worth much.
Dave, take comfort in that it is worth as much as mine is… Let me add up all the Reits I own…One and it is an industrial reit, PLYM-A I bought 2 days ago at $24.65. I dont know why but 2 days later I see its $26.26…Come tomorrow, I will have zero reits again, lol…
Dave,
Just a example regarding reits and how much has changed with this Virus. When my dad lost his job in mid 70’s due to recession when the Nam war ended and the feds quit with the massive military spending he said he could survive just as well at home as in Calif. so he moved back to Pa.
Recently my wife told me San Francisco has lost like 8% of it population with people moving out. Here north of SF rents have gone done in the last few months and a lot more ads for places to rent. Other side of the coin, a lot more sales have closed with people buying to own. I would say not including mortgage REITS this may be a distressed time for those stocks. As Tim mentioned, when 3rd quarter reporting comes out it may get worse.
Any buzz on PPX being called? If it were called for its next distribution date, July 30 (which seems to be common practice), loss would be about 1 cent per share at yesterday’s closing price. If not called, stripped yield of ~5.9% not bad in present market.
NH, It pays end of next month, so if they dont within a week, it likely lives on. I recently flipped them all when it bounced to $25.90, and then got a little eager beaver repurchasing same day in $25.50s. Left a bid this morning before golfing and noticed it hit at 25.38, so I am more than full with my position here.
Sounds like we’re on the same wavelength on this one. I think that the risk of small loss is worth the good yield. Not necessarily looking for a quick flip but will take it if the opportunity arises.
As always, the insight is much appreciated.
Here’s a link to a Gridbird Special and a Digger to be admired.
Grid, you may be related and have a claim. Plenty of “Dutch” moved over here.
http://prefblog.com/
Should be the lead paragraph under June 22.
Woulda thought the interest had run up alot more!
Gotta love the name: Hoogheemraadschap (Gridbird in Dutch!)
Ha, Yes, I read about that bond several years ago, Joel. I love reading about the goofy and unusual money stuff like that perpetual bond. Another good oddball is a 100 year bond issued in 1930 that actually matures in 2030. It was issued by American and Foreign Power. Which was a US utility that expanded into buying utilities overseas. The interesting part of this is the utility long ago expired but the bond lives on with Office Depot. Yes, Office Depot being the guaranteer of payment of an old utility bond. That is a great history also.
Though I personally would own nothing affiliated with Office Depot, it will be interesting if Office Depot can stay solvent long enough for this 100 year bond to stumble to the 2030 finish line.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C317996&symbol=ODP3707068
You just gotta love Ally Brokerage. If you want an IPO quickly, they have them for you. So quick they dont even know they have them. Yesterday I bought 500 shares of that Heartland Financial that just came out at $24.72.
So today before golfing, I checked and found all those shares gone and $12,000 extra cash in my account. So I was playing around to enter in a possible trade and found my account locked. After an hour on phone they told me I have the shares but they havent got the ticker programmed into the brokerage computers we see, it is only on the back end computers.
They said the shares would be there by tomorrow. They unlocked my account if I promised not to use that $12k to buy anything with. So I said ok. They are the darndest outfit I deal with of the three, but they are the quickest by far on allowing IPO trades, so I will keep them.
That’s a funny story Grid. I opened small positions in two accounts via Fidelity and they’re there but still not showing share price, which is listed as n/a. Odd.
D, At least you see them, ha. Disappearing shares (and money) has happened enough I wasnt going to even call if I hadnt been locked out. What was odd was the transactions showing the trades were wiped off also, as if I never even attempted to buy them… I have also had issues such as them keeping the temporary ticker as the ticker long after the permanent ticker was being used. Of course I couldnt trade the shares until I got them to program the correct new ticker in. They make things interesting.
what’s the symbol for that one
Its HRLLL.. Heartland Financial reset preferred. Looks like it closed at $25.05 today. Tim wrote about it, under the “Iowa bank” title I think from late last week, maybe Friday.
bob, temp ticker is HRLLL.
Grid, one of my pet anxieties: we’re all knitted together through the internet, strings of code and zeros and ones that 99 percent of us couldn’t explain if our lives depended on it. So there’s yet another 1 percent that can make things happen behind a veil of unaccountability. Reminds me of a Little Britain episode if you ever watched that one where the guy comes into the government office for whatever and can’t get it done ‘cause the bureaucrat checks the system and comes back every time with the same explanation – “the computer says, No.”. Take care
D, I hear you..When I first got knee deep into online trading 7 years ago. I would print off everything, thinking I would need proof of something if they ever stole my money. Admittedly its been years now since I even looked at a statement let alone print anything off. Complacency has set in.
In March, on one of the days the market hit a circuit breaker in the morning and was halted, I had a trade that simply disappeared from my account history. There was no notification to me. I called Schwab and was told the trade occurred during the halt, so it had to be backed out. Not a large trade for me, but I imagine things like that happened to others in much more consequential ways.
Karma and D, I guess no one has an Ally brokerage or they would have some more stories too. Another one today…So I decided to man up and own a small amount of SLMNP again. I bought 9 at $1000 recently and wanted 10. So today I bought 1 share at $1012 to get my 10. So you would think I would have 10 shares of SLMNP. Not with Ally. I have 9 shares of SLMNP Lyondellbasell Advanced Polymer and 1 share of SLMNP Schulman A Inc.
Grid, that’s funny. I unloaded a bunch at $1000. and today sold more at $1018. For every buyer there’s a seller, lol. I’m about 50% cash at the moment and expect a decent pullback in Spx. Might drag the preferreds down. If you ever make it to DFW I’m buying. Go Cowboys, Ha. ATB. BROTHER GRID.
Tim, ‘Boys season win total 10 this year. Means they gotta win 11 to cash. That is too steep for me, so I will root with no cash on them, ha. Would love to go to JerryWorld one time, maybe you could let me park at your place to save on the outrageous parking costs for a game, lol. At 10 shares Im not showing a true love affair with SLMNP…No way, was you gonna fleece me at 1018, ha! 🙂
I received an email today that Qwest Corporation is making a partial call of their 6.875% notes due 1/10/54 on June 29, 2020 @ $25 plus 42 cents/share.
They are redeeming 35% of my shares.
im having 40% of mine redeemed
David P–got the same in my etrade account and they have already segregated the called shares.
Yesterday, my M-Edge account had 40% CTV allocated and transferred to a slightly different named CTV security which M-E listed the value as $2,500 per share. Now that was a head turner. – lol. But lo, the called lot are back to $25.30 per share.
I flipped the remaining 60% yesterday for 25.35.
Thanks all for discussing the this issue.
Yes I was a millionaire for a day as they put mine in a crazy account symbol. Wells Fargo was oblivious and it has been hell dealing with them. They use the covid and work from home excuse more then any. other bank.
40% of my CTV is being redeemed over at Fidelity.
40% of my CTV is being redeemed in Vanguard. What is the record date for this redemption?
i bought on the 17th and then they took it out on the 19th at Wells Fargo.
Can’t buy this, nor would I, but DLR knows how to get cheap money– in Euros:
https://seekingalpha.com/pr/17903655-digital-realty-announces-pricing-of-euro-denominated-bonds?utm_medium=email&utm_source=seeking_alpha&mail_subject=pre-market-summary-on-your-portfolio-portfolio-1&utm_campaign=nl-portfolio&utm_content=link-30
What do people think about Frank Portnoy’s article on the Atlantic “The Looming Bank Collapse”? A looming diaster on CLOs which can hurt the banking system in the same way MBS did in ’08.
https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/
As I hold significant chunks of banking preferreds, I’ve been concerned on such warnings that had been rearing it’s head little by little.
Hi Hster,
Interesting article and thanks for the link. IMHO the author is assuming the worst case scenario and sure hope it doesn’t turn out that way. I’m currently looking at adding some HWCPZ so the article was timely. Any thoughts on this newly issued baby bond?
Best,
Bill
A few points:
1) The main premise of this analysis is that the country continues on virus lockdown or semi lockdown for a long time. He is correct that a lot of these CLO’s would then fail. What he fails to mention is that everything else financial would fail at the same time. Home mortgages, car loans, credit card debt, student loans, a gazillion corporate bonds, many municipal bonds, even more massive bankruptcies. So the worst case is NOT just about CLO’s failing, it is about the ENTIRE economy failing. We have seen what pain a three month shutdown has caused, try it for a year or two and it will be exponentially worse.
2) Lets assume that only the CLO’s 100% default and everything else is money good. They estimate the CLO total market is $1 trillion. Easy peasy! The Fed has the ability to give that to banks WITHOUT any congressional approval. The Fed has done $5 to $6 Trillion of shady loans already by ignoring what the laws are. If they needed to do an extra $1 Trillion, it would not even be noticed.
3) Bush, Obama, Congress, and Bernanke made the big bank problem worse. All of the big banks got BIGGER when they were forced to take over smaller failing banks. If you let them all fail, like Citibank, JP Morgan, Bank of America, etc. we would have had the 2008 DEPRESSION. If you let all of them fail this year, you WILL have the 2020 DEPRESSION. We can all be upset that they got bailed out, but I would bet they will get bailed out again if need be. Mnuchin and Powell are ex-Wall Street guys, they understand it would cause a depression. Possible, but not the most likely outcome. Plus by then, President XYZ will save us all somehow.
Hi Tex and Bill,
I read the counter arguments from Nathan Tankus which points out that CLOs do not have the credit default swaps of MBS to blow up the market in the same way.
https://nathantankus.substack.com/p/worst-case-scenario-or-inconsistent
Our financial system is so convolutedly complex that a catastrophic failure from somewhere else is not impossible.
I’m just clutching onto my investment grade ute/bank preferreds and munis, reminding my husband we are getting almost 100x bank interest rates.
There was also a bloomberg article about CLO restrictions and opportunistic behavior by hedge funds is preventing CLOs from recouping losses.
https://www.bloomberg.com/news/articles/2020-06-22/hedge-funds-exploit-clo-weakness-laid-bare-by-corporate-distress
“The main premise of this analysis is that the country continues on virus lockdown or semi lockdown for a long time”
“We have seen what pain a three month shutdown has caused, try it for a year or two and it will be exponentially worse.”
That is the problem. not everybody shut down effectively, so the places that are coming out of it (like the tri-state area) are being overwhelmed by the places that didn’t lock down or didn’t lock down effectively. (Florida, New York, Texas, Nebraska etc)
Until the entire country locks down all at once for a short period of time (say 6-8 weeks), and doesn’t lie about their numbers(Florida) , it is just going to keep spreading and we are going to just keep cycling through lockdowns again and again.
Like clockwork, the hospitalizations are soaring as a result of Memorial day re-openings.
Jeremy Grantham thinks the stock market fall is imminent. Its a crazy bubble and people are cooped up and trading crazily
https://www.marketwatch.com/story/stock-market-legend-who-called-3-stock-market-bubbles-says-this-one-is-the-real-mccoy-this-is-crazy-stuff-2020-06-17
Sorry Jay R–this got caught in the spam filter for some reason.
Fwiw, and others with more knowledge can correct me if wrong, Grantham is known as perma-bear and always thinks the market is too high. Not saying his comments won’t be proven to be correct, but he has his bias.
I agree Grantham is a bear most of the time. However, in this he is bullish on international and emerging markets … but his fears about US match concerns of a lot of posters on this site
Btw – Tim thanks for posting … I was wondering why it didn’t post.
every once in a while a squirrel will get a nut. you would be nutty to sit out the stock run from 2009 to 2018.
Grantham is NOT a permabear. He was right about the 2000 tech bubble but was about 2 years early. He lost 50% of his assets under management (AUM) due to people thinking “he had lost it.” The investors that stayed with him came out ahead. He was right about the 2008 GFC, but about one year early. He correctly made a bull buy call in March 2009, so he caught that perfectly. And he is clear this time, that his forecast has great uncertainty, unlike his 2000 and 2008 calls which were high conviction.
Broadly speaking many “value” investors have been labelled permabears since ~ 2000.
PCG Bankruptcy Decision tomorrow 6/17 per the BK Judge Montali:
“I’m not going to delay things… I apologize if I sent terror through your mind and hearts by suggesting there’s going to be an open forum.”
Expect a written decision tomorrow, and another hearing likely on Friday.
***************************************************************************************
We don’t know when, but we might see the preferreds react on Thursday if the Judge approves the plan as expected. . .
Tex, It only takes one dummy to scalp, but we are close to the top range already one would think. Might squeeze a buck more who knows. They are up 8% alone past month. Its pretty much a formality now as everything has been rolling towards exiting. The bonds are getting teed up as well as the equity. And with the Friday agreement to give the victims more shares, everything has pretty much been tidied up.
If everything goes as planned, I would assume at the earlist a Nov. payment off the 12 accrued dividend payment in Oct. As even if judge approves, PCG said they probably wouldnt officially exit bankruptcy until end of August.
SYF-A is trading like the bank is going out of business whereas WFC-V is still above par. Very different banks I know, but SYF doesn’t have the problems WFC has. Any idea why SYF-A is getting beat up so much? It’s my worst preferred.
According to Quantum….Synchrony Financial preferred A-shares were assigned a BB- rating as of 6/12/2020. I have no idea if that’s an upgrade or down grade since I don’t follow the company, but the S&P website might be a logical place to look for more information.
https://www.standardandpoors.com/en_US/web/guest/article/-/view/type/HTML/id/2334293
SYF specializes in store branded credit cards.
they could have a VERY high default rating with the pandemic
last year the default rate was 6%
is a 6.5% current yield a fair yield for that type of risk?
I didn’t think of it like that and I suspect that is the reason why this has lagged. I think it’s going to take a few months to see what the real default rate is since so many people are in forbearance.
Any opinions on QVCC and QVCD. Seem to have got rated investment grade and now part of Liberty Multimedia.
Jay – a quick look at source material @ Moody’s and S&P using QVCC cusip number does not confirm IG. BB+ @ S&P and Ba2 @ Moodys. I think S&P still has QVC on negative credit watch..
2wr – Thanks, didn’t realize their rating had dropped. That explains the price, I guess there are better options to bet on for similar returns
Jay, as someone said about QVC. The long term safety of a company relying on old women buying things off the tv doesnt seem reasonable. The next generation of old women know how to use the internet. 🙂
It’s a well known fact behind the scenes at both rating agencies – if 2whiteroses becomes 1 but I’m still writing posts, QVC automatically goes on negative credit watch, proving your point, Grid…
CUBI-C – On fixed to floating rate issues in general, how does the floating rate change get handled by most companies? Is there normally a public announcement of what the exact new rate will be for the next dividend payment? In other words specific to CUBI-C, the docs say. “For any dividend period during the floating rate period, three-month LIBOR (the London interbank offered rate) shall be determined by the calculation agent on the second London business day immediately preceding the first day of such dividend period (which we refer to as the “dividend determination date”) in the following manner: (i) Three-month LIBOR will be the rate for deposits in U.S. dollars having an index maturity of three months in amounts of at least $1,000,000, as that rate appears on Reuters screen page “LIBOR01”, or any successor page, as of 11:00 a.m., London time, on that dividend determination date.” How does a shareholder determine what that exact number ended up being used by the calculation agent or does one have to guesstimate? I’ve seen no official announcement of now floating rate on CUBI-C for this next period…. I don’t own it anymore but wonder if anyone knows how exactly these floats are normally handled by most companies after they begin to float.
From my experience (extensive) very few companies make it a practice to announce the new rate on 3-mo floaters (they do on 5-year resets). One has to calculate for themselves; you don’t get confirmation of the rate until the dividend is declared, which can be several month away. I’ve always been able to come within a couple basis points of figuring the rate.
But you do need to read the prospectus as you’ve done, know what the reset date/time are, and what happens if the determination day is on a non-banking day. Some go forward; some go back.
Thanks, Bob…. don’t know if it’s the old memory or what but I just don’t remember seeing how f/f issues have been handled in the past…. sure one can estimate and feel comfortable with his own guesstimate but it still seems odd that that’s the way issuers do it and apparently prefer it be done.
Roses – I’ve asked issuers on a few occasions to confirm (or deny) my calculations on their floaters and they won’t.
The logic I think, is this: until and unless a dividend is declared there is no dividend. So no need or obligation to make an announcement. On the 5-year rests, if you read the prospectus, in most cases the issuer is obligated to announce the new rate within so many days of the calculation date.
I think that a lot of current selloff is due to the changing political landscape and the rise of the Democratic party in the polls. Less than 5 months, and the very real possibility of Dems in control of both houses and POTUS. Higher taxes and more regulation probably putting a lid on further market gains.
I agree Chris – that is the one thing that worries me the most about the market. I will lighten up considerably if this scenario looks more and more realistic
That’s one of many factors. Covid shutdowns is a bigger factor. Riots and refusing to stop them may also be a bigger factor. Fed policy is counter productive. Lots of instability going on. Market is correcting because it never should have bounced back so much.
Betting markets moved swiftly in favor of Democrats in the 2 or so weeks prior to last week’s big sell-off and stocks SURGED higher during that time. So to pin the pullback on the same cause doesn’t make sense. Don’t get caught up in narratives of what the stock market is “supposed to do”, because it usually doesn’t respond the way you’d think.
I am thinking this can’t end well . . .
From Bloomberg:
Barstool Sports’ Dave Portnoy had bought just one stock in his life before the quarantine hit. When the country shut down in March, canceling sports and sports betting, the founder of the brash media empire considered sexist by some dusted off his old E*Trade account and started day trading.
“With the volatility, it is kind of like watching a sports game,” said Portnoy, 43, who started live streaming as “Davey Day Trader Global” to his 1.5 million Twitter followers with the caveat: “I’m not a financial advisor. Don’t trust anything I say about stocks.”
Despite the obligatory warning, Portnoy has touted stocks like InspireMD Inc. and Smith & Wesson Brands Inc., while dissing the acumen of Warren Buffett, the world’s fifth-richest person and widely regarded as one of the greatest investors ever. “I’m sure Warren Buffett is a great guy but when it comes to stocks he’s washed up,” Portnoy tweeted Tuesday. “I’m the captain now.”
https://www.bloomberg.com/news/articles/2020-06-12/barstool-sports-dave-portnoy-is-leading-an-army-of-day-traders
An old saying. “Making money on your first stock can be the worst thing that happens to you.” Makes a newbie overconfident and reckless.
I’m curious as to what happens in the case of notes such as those of LTS maturing in ’27, ’28, ’29 – if they are unlikely to be called, what might be paid at maturity? If they have to pay par, could they do a tender offer while prices are low, or is that just for preferreds (ex: SPKEP) ?
And what of similar damaged preferreds at maturity? $25 even if the price is $20?
thanks
Gary, Tenders can be offered usually at any time by companies. But I would suggest they wont be near term anyways because the company that bought them out is a dirt bag credit quality outfit.
Look at their own issued bond…Just rated Caa2 by S&P 3 months ago.
http://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C840849&symbol=ADVS4866959
They dont have cash laying around and the LTS is cheap debt at 7% ish compared to their own 11% debt. The LTS baby bonds are not “miss priced” so no company benefit to do anything in all probability.
Gary – In regard to what happens as those LTS notes mature, yes, barring default, they all are required to be paid at $25, but if as they approach their maturities they’re still trading at $20, that’s the market telling you that that default scenario is a HUGE IF, and, if it’s a HUGE IF, then odds are they’re not going to be able to pay what they’re required to pay. If, therefore, default occurs, then the company gets restructured, most likely through bankruptcy, and in the course of the restructuring (almost always, unless prepackaged, a lengthy, long drawn out procedure during which time the noteholder’s money is tied up getting nothing) an agreed upon price below $25 ends up getting paid. How much actually gets paid out in that scenario can vary dramatically depending on how awful the company’s financials are and how far down in the company’s capital stack the note are. This is a very simplistic answer, but it sounds as though your question was one that was asking a very basic question that implied you might benefit from a Bonds 101 type answer. Don’t be shy about continuing to ask. And Grid’s right, a company like this, especially one like LTS that was bought out by a company in worse shape than itself, will most likely not have extra money laying around to take advantage of a self tender for its bonds that are trading at a substantial discount to par.
Grid & 2whiteroses-
Yes 101- but just what I was wondering, and great answers- thanks again.
At least there’s 7 or more years to see where they will go.
Tom, Gridbird and others – Senior notes have priority over Preferred when it comes to principal payments. However, can a company stop paying interest on senior notes and continue paying dividend on commons and preferreds? I understand they have to pay dividend on first on preferred and then on commons but was not clear about the priority of interest on Senior notes
I cannot envision a scenario in which a company could be in default on a note of any kind but continue to pay dividends.
Any attorney that wrote such an indenture, or underwriter who sold it, would be out on the street.
But if any one has ever seen the situation I’d be interested to know.
That’d be a new low for “cov-lite.”
I agree with Bob, can’t happen.
I can’t find the article, but there was an offering of debt about a year ago with practically zero covenants and the company just royally screwed over the bondholders in favor of the insiders, and it left a really bad taste in everyone’s mouth.
Jay, I have never heard of that occurring. Debt holders have claims above capital holders. Each prospectus as Bob mentioned will state this though. Even quasi debt trust issues like EP-C and NSS have this protections.
Covenant light terminology for debt typically means company has no restrictions on piling as much debt on top of the issue afterwards, with higher pecking order claims, and no coverage ratios, etc.
Some lower stack preferreds (mostly older ones) have some covenant protections though this is rare. Ameren preferreds, for example, state interest coverage ratios of debt above them must be a minimum of around 2X (Cant remember exact number without looking) or they would have to redeem the shares to protect preferred holders.
Personally unless you read the details, I wouldnt get excited when a company offers a “Senior note”. That really doesn’t mean a lot on the surface without details.
Thank you all for sharing your perspective. I understand that no company has paid dividends but stopped senior note interests.
New to this type of investing so I thought of asking the learned and experienced folks here. Will look for these clauses in the prospectus
Jay, here is an example…RILYM (or any of their baby bonds) is an example of a “Senior Note”, which sounds all high and mighty. But lets look under the hood just a bit in prospectus….
The Notes will be our senior unsecured obligations and will rank equal in right of payment with all of our existing and future senior unsecured and unsubordinated indebtedness. The Notes will be effectively subordinated to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. The Notes will be structurally subordinated to all existing and future indebtedness (including trade payables) of our subsidiaries.
The indenture governing the Notes does not limit the amount of indebtedness that we or our subsidiaries may incur or whether any such indebtedness can be secured by our assets.
This info is pretty standard for “Senior Notes”. Which means they are like your knee is higher than your foot is in cap stack. See Rily has all sorts of subsidiaries and as mentioned above this Senior Note is subordinated to all the subsidiary debt…Plus as other paragraph said we have the right to incur any and all the additional debt we want…
Ever read about a company violating its debt covenants? This is from the “big boys debt” club…IE, the banks and such which sit above you. They can limit terms and such on things as they have the priority. These are just out there hanging in the wind sitting above a few things. But when things blow up, they tend to hit hard into these subordinated notes when the common gets stressed.
Im not suggesting these make bad investments, just trying to ensure the fact that one isnt mislead by “appealing words” such as “Senior”.
Thanks Gridbird. So this description implies that if the company (and its subsidiaries) has or will have any other secured debt then this will be next to those in the pecking order. I think the subsidiary debt obligation will have its own nuances. The devil is in the detail ..
But by and large they will get paid before the preferreds in case of a meltdown (the 2 instruments I am considering i,e, preferred and senior debt). Of course the quality matters so we may have to keep in what how they are rated
What i understood is there is a lot to learn 🙂
Jay, it can get complicated and well above my pay grade. But one must understand each companies structural relationship between holding company and subsidiaries and debt/preferreds. Take EIX which is parent of Southern California Edison utility. Too many times people just assume the holding company is at the top when usually that is not the case. All the holding company is, is the entity that holds the common stock of the subsidiary and thus controls it.
As Moodys details below, The debt (or at least a chunk of it) of EIX parent is actually subordinated to SCE the subsidiary AND its preferreds. So here the preferreds of SCE get paid first before the EIX debt does. But this relationship can be complicated and usually when one catches the flu the other is mostly likely in bed with the fever, too.
Outside of wildfire risk, SCE and Edison’s credit profiles primarily reflect SCE’s business fundamentals as a stable regulated utility with mainly transmission and distribution (T&D) operations and moderate debt leverage. Edison is rated one notch below SCE because Edison has an additional $1.75 billion of parent holding company debt, which is structurally subordinated to SCE’s $13.1 billion of long-term debt and $2.25 billion of trust preferred shares.
Thank you Gridbird for your informed answers. I will post it more dumb questions in the future
Glad to help, Jay. Though I would caution on asking me more complicated questions than what you have as you are reaching the outer boundaries of my cranial capacity already, ha.
SOJD is below par, with 5% current yield.
WRB-B too, about 5.7% current yield.
PRE-I near par and 5.7% current yield
Yep, interesting prices began to appear.
I picked picked up a few shares in SJIJ as it went under 25. Anyone else see any good deals today due to the sell off?
Personally I think that we are at the very beginning of the second wave. I plan to start to buy a little after S&P drops below 3000 and(or) USDJPY below 105. There sure will be a lot of good deals.
Now it’s too early, imo.
I agree which is why I just bought a small position for my IRA account. I have a ton of dry powder ready to go if we go back near the March lows.
I agree on the second wave. The diagonal or wedge has broken down today. Should see a pretty big pullback. Normal w2 retrace .500 to .618 %, but .382 might hold as the A/D line is strong. ATB
Jef, I bought 400 more at $24.66 today. This pretty much puts me at a full position. I got some at $24 a few weeks ago and never filled it up. This issue can be a bit more jumpy than some of the ute baby bonds though.
Bought some of the CTV that Tim recommended at $24.75, it’s still available at $24.85.
Heard a great quote the other day….
“If you invest in debt, you only need the company to survive, not thrive.”
Bought a few shares of CNFRL. Maturity Date: 09/30/2023.
San_Diego_Dividends–not for the faint of heart, but it has been sometime since I have looked at their financials.
Hi Tim, roger that. Position was super tiny. Still trying to learn how you big dogs play! So much knowledge on this site, really enjoy it.
The JPY began to rise in price suspiciously, such movements in the pair often precede the start of the correction.
Maybe now it’s the time to raise some cash?
It looks like a reaction to this news:
The National Bureau of Economic Research said Monday that the COVID-19 crisis has officially launched the U.S. economy into a recession, thus ending the longest economic expansion on record. https://finance.yahoo.com/news/us-economy-officially-in-recession-nber-165226139.html
Since when is a recession determined by a single down quarter?
It wouldn’t surprise me given we shut down the economy on purpose, but June isn’t even over yet.
Gridbird, What is your opinion on CBB-PB? The yield seems to be good but is it safe enough?
Any other expert opinions are welcome too
Jay, sorry I havent really followed it since it was first in play last winter when I was playing it. I dont know enough to give you any meaningful info. Hopefully someone else can.
CBB-B was considered high risk becasue of the debt load but they keep chugging along. I haven’t been following it lately.
continuing to watch SITC-K and SITC-A…both are rising along with the common. I believe A is worth more with its higher yield, yet last quote on K is 23.45 vs A which is 22.31. Spreads are huge.
I should note I was a buyer of the A shares at 22.31 this morning.
At yesterday’s optimism I bought a little (one lot) CHK-D.
Pure gambling, I don’t really believe they will survive, but if a miracle happens, it will be a huge bet.
Boy what a lousy gambler you are, Yurly…. your CHK-D only went up 88% on the day when you could have picked CHK itself and had a 186% day. How ordinary……….What a loser you are! LOL…….
Lol, I sold them at after hours for $5.50. These waves are not for me, I’m too old for this stuff )))
Yeah- tho it’s poor compared to Hertz rentals lately, almost a 900% incr if I recall– both companies gave huge bonuses. Hertz gave 700k to the CEO who had been on the job one month before going BK. Mgmt got big ones, all told $16 million.
I’m curious to get thoughts on SBNCM. I believe it is uncallable. The current ask is $16.21 which I believe would be a yield of 5.4%. Please let me know if you think that’s a decent value at that price. Thanks!
Boy the March lows were really a outstanding buying opportunity. One of the best in years.
Who among us saw this sharp V recovery’ coming? I sure didn’t. I hope everyone filled there trucks up in March . I got a few things bought up like Ebgef when it was yielding over 10%. Wish I had bought more. Will have to unload it before the reset.
There were some of us who did. I know Alpha posted his thoughts and some of his common stock buys several times as did I. While the recovery of preferreds has been nice, the returns on a number of common stock issues has been outstanding
Maverick it’s been an incredible opportunity. Scoring some points again on the commons bought last month. DAL (2nd batch) up $10/share, MMM up $31, XOM (2nd batch) up $11, BMO up $11. Also rolled over AGM-D as we got the beauty out of that one. Same procedure; ignore the headlines, focus on the value. We just don’t get too many opportunities like this.
Flipping them out now but scant options to replace any of it.
Alpha
It has indeed. Congrats on your buys. I have experienced similar, including some really decent size gains on buys made maybe 10 days ago. Alas, on two of them I did not have a chance to complete my full position when the price ran away from me:
BXP – Up $18 – bought on 5/26, 5/28 and 5/29 at average price of $84.30. This is an office realty trust with a really solid balance sheet and was yielding 4.65% at my buy price.
EXR – Up $11 – bought on 5/26 at $90 and change and 5/29 at $95 – but am not chasing it further as it is now over $103. Self Storage REIT that I was willing to buy at a 3.8% to 4% yield
CPT – Up $16 – another one I did not complete a full position. Bought this higher end Apartment REIT on 5/14 at an average of $82 which put it at a 4% yield. Alas can’t bring myself to pull the trigger to finish the position now that it is at $98
SPG – Up $31 – speculative buy – made 4 purchases of this Mall REIT from 5/26 to 5/29 at average cost of $58 as it is the best of the Mall operators . I suspect it’s dividend will be cut but even when they cut in 08-09 they continued a reasonable payout. Even though it has run up from my buy price, it is still a speculative buy IMO at $89, especially if it pulls back some
Just like you mentioned, ignore the headline and focus on value. The 4 above have been very solid REITS. And one of the things I distinctly remember from 08-09 is how every REIT I bought at crash prices then bounced back extremely strong. I am still looking, but like you, I have run out of good options to buy now of any of the higher quality options.
Maverick, Great scores for sure. I’d also picked up some SPG and in anticipation of a dividend reduction sold January 130s against it for a nice >10% “dividend” add to the existing. You can get about $7.50 today for a Jan 130 call. That represents about a 10% “yield” against the current price.
Did the same with one of the (four) DAL tranches I’m holding. Sold a SEP 55 for $1.24/share and in essence created annualized 9.5% “dividend” on the stock. And if it gets to the 55 by Sep from the $26 buy price…out of the ball park home run. Otherwise will continue to re-create the home-made dividend stream. Who needs the board, at those entry prices we get to decide on what the dividend will be each time the next option expires.
Have made similar moves with tranches of F, MMM, RDS.B, WFC, XOM, CSCO, EQR and RY. Just a corner of holdings, but pushes the effective yield of the portfolio toward 9%. And with the exception of DAL and F, all companies are rated A- or better, reflecting their solid balance sheets.
Alpha, thanks. Nice creative moves to create your own dividend stream with the covered calls
I may look into that for SPG. That seems like a pretty decent return
SBNCM pays 90 cents/yr, so the yield is 5.55% @ 16.21. It’s a small regional bank with lots of insider ownership. I used to own a lot of it and several more besides. Now, not so much. I don’t really trust this blowoff to the upside and my cash is higher than it’s been in a good while. But like Sgt. Schultz, I know nuzzink.
JMO
Dick, Its a great little tightly held bank. I hold 1000 shares. The sister issue hasn’t traded in over a year (mostly insider held). That being said look at other bank preferred and one can get 6% pretty easily. It’s a $13-$14 stock at best. It’s overpriced. I’m not selling though being I bought lower and don’t want hassle of trying to repurchase. One of our forum members has provided recent liquidity. It could go a year without trading also when these dribbles are gone.
I can’t find any kind of document on these, other than this page.
https://www.southernbank.com/about/southern-bancshares/faqs
It appears to be convertible, is that contingent on the common shares being sold to the public?
it went private in 2006 and this preferred seems to have been offered in a private transaction in 2015.
http://www.sec.gov/Archives/edgar/data/703904/0000703904-96-000004.txt deets here
Justin, That is not correct. It was issued in late 1980s and was an optional convertible that expired in the early 1990s. It became a non callable fixed perpetual, 9% $10 liquidation preferred.
It never went private, it went “dark”. In order to go dark around time period you mentioned they bought out enough preferred shareholders at around $15 (cant remember exact figure but it was very generous then) to get under the required shareholders to go dark. The common stock trades infrequently at around $3500 a share.
SBNCN and SBNCM were issued around same time. Insiders own almost all of SBNCN and it rarely rarely trades. SBNCM also has a lot of insiders too, along with common. SBNCN and SBNCM are on equal standing….Leave us alone is basically the message by going dark. But since these insiders own almost all the common and vast majority of preferreds interests are aligned and no dividend has ever been missed since issuance. Solid bank whose origins date back to around 1900. They send nice glossy year end summaries to preferred shareholders like me. About every 40 preferred shares gives one share holder vote equivalent to one common stock. Not much value to me since about a dozen people own the vast majority. Much of the preferreds floats have been bought back over the years.
I found a lot of info on this but you gotta go back into EDGAR into the early 1990s.
It is a $10 preferred? And it trades at 15 dollars?
That is 5 years of dividends built into the price
This was the filing I based the going private comment on.
SC 13E3/A Going private transaction by certain issuers
Acc-no: 0001193125-05-235857
(34 Act) Size: 14 MB 2005-12-02 005-41068 051240811
and they sold $48 million of something in 2015.
https://www.sec.gov/Archives/edgar/data/703904/000070390415000003/xslFormDX01/primary_doc.xml
Thanks for the information.
Justin, You made me pull out my glossy, mailing, ha. SBNC has two “trading preferreds” but have 5 in total. SBNCM and SBNCN are the Series B and C. There are about 266,000 shares of Series B (SBNCM) and 37,000 of Series C. But there are also 3 private preferreds.. Series D, E, and F.
Total liquidation value of all preferreds combined are just under $25 million. There are only 81,000 shares of common stock trading at about $3500.
Book value of bank end of last year was over $4100 per share.
hmmm.
48,500,000 total, with both debt and equity sold but no details on the breakdown.
I have it all, 58 pages and a separate 14 page glossy to go with it, but it is too cumbersome to write it all down. Net income last year $681 per share, dividend payout ratio 4.24%, Return on equity 17.35%. I dont think they pay out much in dividends because they all pay themselves so well during their jobs, ha.
Justin, yes everything is broken down including issue size and terms of the other series preferreds. Yes it was issued as $10 perferred, but provided company is never liquidated that is immaterial. As mentioned above, better relative values are out there at current pricing.
The company is tightly owned and has a cross ownership relationship with another bank First Citizens and they kind of work together. In fact one of First Citizens executive director owns personally 10.27% of SBNC common float and a separate First Citizens director owns 7.39%.
Also, I looked closer got tired last night…Series D preferred was retired in 2017 and Series E was retired in 2019. So only the Series F is outstanding, but non trading, but it is $20 million so I had the preferred value correct just didnt notice the other 2 were redeemed.
Feels like a blow off to the upside due to the great employment numbers this morning. Feels good!
I am really surprised we went from losing jobs to creating them in such a short period of time. I figured the momentum from the lingering damage would carry us farther down before we got back on the up slope.
Oh me of little faith…
I think there is a distortion tied to the Paycheck Protection Plan. The bulk of the hires were in Travel and Leisure (which I think includes restaurants). This suggests folks were re-hired so that the loan could be forgiven.
This from the Washington Post adds quite a bit of context.
https://www.washingtonpost.com/opinions/2020/06/05/may-jobs-report-good-news-bad-news-scariest-chart-youll-see/
This is a wonderful web site. Thank you for whoever keeps all this going.
I have a question: What are the “numbers” in Column Q of the Preffered Master List? I did note that they only show in the “alpha” view” of the list.
I did not know where to ask this, so I hope someone might see it and help me.
Thanks, s
Hi. It indicates the number of years before the first call. Do not pay attention, this is a purely service column (before it was hidden at all).
Thanks. I should’ve figured that out, but now I know. And I do watch the call dates when researching the stocks.
From Dow Jones:
PG&E Faces Renewed Challenge Over Bankruptcy Votes From Wildfire Victims
PG&E Corp. (PCG) heads into a third and final day of court fights Friday, with concerns a last-minute protest from fire victims could upend plans by the utility to raise $9 billion in fresh capital to get it out of bankruptcy.
Demands for an examiner to probe the voting process are before U.S. Bankruptcy Judge Dennis Montali, who must rule on PG&E’s(PCG) chapter 11 plan.
If he grants the request, investors that PG&E(PCG) is counting on to provide bankruptcy exit financing will be rattled, Stephen Karotkin, lawyer for PG&E(PCG), warned Thursday.
Speaking in a San Francisco bankruptcy court, Mr. Karotkin said the “overhang” of concern about what an examiner might do would trouble PG&E’s(PCG) trip to the capital markets, the final piece of a long slog through chapter 11.
“We have come too far, here. We have come too far,” Mr. Karotkin told the judge.
Judge Montali is expected to wrap up confirmation hearings on PG&E’s(PCG)$59 billion bankruptcy exit plan Friday, and rule shortly. The plan is an effort to address damages from years of wildfires linked to its equipment, and PG&E(PCG) is trying to hit a June 30 deadline to qualify to participate in a new California utility wildfire fund.
Nothing comes easy, Tex. A few were Sabre rattling about one final effort to stop it a couple weeks ago, so its not surprising. I followed the court dockets last month and opposing lawyers were daily trying to throw up roadblocks. The presiding judge said his final decision would be heavily weighted by the vote. And it came in at 86% or so affirmative to proposal. But of course I guess that depends on if he thinks the vote was clean. At least it wont drag out.
The chaos that would ensue if PG&E doesn’t exit bankruptcy at this stage would make make recent events in Minneapolis look like close-order drill.
Interesting, to me, is that this is the same judge who presided over PG&E’s last bankruptcy about 20 years ago.
IMHO, now the market has nothing to do. Everything has become very expensive again, and buying today (for investment purposes) can lead to serious losses. Of course, if the purpose of the purchase is short-term speculation, then perhaps there are some opportunities now. But this market is definitely not for the buy and hold investor.
Of course, I like the way my account now looks, but personally, I think that I will not return to shopping earlier than after S & P again falls below 3000.
An interesting read: Sinclair’s Loose Debt Covenants Come Back to Bite Bond Investors
https://www.bloomberg.com/news/articles/2020-06-02/sinclair-s-loose-debt-covenants-come-back-to-bite-bond-investors
“There’s a saying in the junk bond market that covenants don’t matter until they do. Now, as the economic fallout from the Covid-19 pandemic sends a new class of companies spiraling into distress, those investor protections are being put to the test.
“Sinclair Broadcast Group Inc. is asking bondholders to take a 40 cent haircut on a $1.8 billion unsecured bond it sold less than a year ago to fund the acquisition of Walt Disney Co.’s regional sports networks. The steep discount on the ongoing debt swap has met with resistance from investors, but the company sought to remind holders just how much power it has. That’s thrown into the spotlight how weak covenants are coming home to roost….”
2WR I saw a article today on AMC the big theater chain. Saying it has suspended all dividends and even then it has doubts it will survive.
iBonds
Has anyone used the iShares iBonds ETfs like IBHA or IBHB. These are target date ETFs that mature around $25 in both 2021 and 2022 respectively. IBHA is showing a 5.61% SEC yield and IBHB is at 6.96%. Fees are 35bps.
Seems like an interesting way to get high-yield exposure with a fixed maturity.
Any thoughts?
more than half the funds holdings are less than investment grade
be careful
RE: term dated bond ETFs.
Short version is I don’t like them. Look past the yield and look at total return. The various iBond term issues went out initially, I think I recall, at $25. I see IBHA closed today at $23.78.
I have looked at many term dated funds over the years (and bought a few to my chagrin) but have come to conclude that the term dated aspect is a gimmick that sells well but doesn’t provide good returns or lower risk relative to alternatives.
If you are going to do term funds I recommend 1) include CEF’s in your search, and 2) go for a longer term fund (2025?) and plan to get out 1-2 years before the fund winds up. Returns in the last 1-2 years of a funds life always crash, and you want to be out before then. Individual holdings are maturing, the fund is going to cash. It’s baked in.
To the extent I own fixed income funds (as opposed to individual issues) I own mostly CEFs. Very carefully selected and bought only when the market is in panic mode. March was a great example.
I see that TD Ameritrade still has a DTC chill on SLMNP after the name change. Anyone know how long it will last?
6, what is your question exactly? I am holding a few shares, curious what’s up. Thank you.
I recently heard from TDA that they have or will soon have a web-based version of ThinkorSwim available. That may be good news for anyone operating without a hard drive.
JMO
I wonder if that’s an indicator that ThinkOrSwim will unquestionably survive the Schwab merger?
My personal TDA rep continues to assure me that it will.
Glad to hear this.
My wife accuses me of ‘operating without a hard drive’ all the time, maybe its time I got a TDA account.
As long as she doesn’t start talking about your floppy disc you are still OK!
AEL-A has been very volatile on big volume. Haven’t seen any news and the common is strong. Not sure what is happening with it.
Lightened my load of SLMNP today. Sold 29 shares at $1000. Thanks Grid.
Can someone explain to me how is it possible that callable anytime securities like JBK and AILLL are trading so high, both around $28? Do holders of these securities KNOW they won’t be called? At what price are they a buy? They held nicely at the panic selling in March, and like many preferreds, they are back close to what they were before.
So the question is: why are they trading so high? Would you buy them at this price? If you hold them, why are you not selling them?
Thanks!
I don’t know much about JBK, but there seems to be some kind of cult following here about AILLL. lol
Do a search on it and maybe on “Ameren” and you might find a lot of discussion on the Ameren preferreds.
In a nutshell, the feeling–as I understand it–is that all the Ameren pfds put together are to total Ameren as a flea would be to an elephant’s backside. That is, they barely register, and if one is called, they will all be called just to be rid of them.
AILLL is not even the highest Ameren coupon outstanding. AILNP, currently redeemable at 100, has a bid of over 125 and no takers.
JMO
d, your question has been asked many times over the past several years.
The sum total value of all Ameren Preferreds is small compared to the rest of the company’s dividend obligations, for one.
The Preferreds are thinly traded, and most have been held for long periods, many owners have effective cost basis below par, that could be one reason why selling pressure is low. I consider myself in this group.
And I think there might be provisions in the prospectus for Preferred Holders to affect the composition of the Board under certain circumstances; now I may well be wrong on this point, so please research this.
Finally, I strongly recommend you ask Gridbird about this issue, it was Grid who introduced me to AILLL years ago. Grid is extremely knowledgeable on Ameren Preferreds.
D, JBK is non callable…Thats the long story short due to some legal issues too long for me to get into….Origen Financial which I suspect is a front for Goldman has offered a few third party tenders on the issue as the underlying bond is non callable.
As far as the AILLL, well its down to present yield versus expectation of a redemption notice. It has been past call since late 1990s when it wasnt even owned by Ameren. So its a do ya feel lucky punk thing..I have owned it off and on (mostly on, currently off) since 2013. I need a $27 handle or so to pique my interest since I recently sold out again at $28 and above…But….Im not without sin…I own 300 shares of AILNP and that $125 bid can suck it as I aint sellin’.
It’s a simple case of “you pays your money, you takes your chances”
I have owned AILLL since 2017 with a few adds in 2018 and one on 3/12/20 – my average cost is $26.51. You buy in knowing there is call risk and ask as Grid likes to say, “are you feeling lucky punk” 🙂
Why do so? Because its a nice QDI from a ute .
Why not sell when it is a year plus of dividends over par – because for me it is thinly traded and hard to re-enter the position. I am content to hold it. Gridbird is more nimble than I am and will flip it for a steak dinner or two.
That said, I would have sold when the bots went crazy the one day and ran it up into the 30’s – but I wasn’t paying attention to it then
Ha, I forgot all about the over AILLL $30 bot thing. As I sold then, bought back lower and sold already again. I sold at $30 on bot thing. If I had waited 10 minutes I could have got $35 or more, oh well.
AILNP is pretty much unbuyable with only a 4500 float. In fact since 2016, only 6 hundred share or more trades have even occurred. And my fingers were involved in either buying or selling all of them.
Grid, I was able to do a quick flip that $30 bot day. I sold about 400 shares for around $30-$31, then bought them back at $27.80.
I sold 200 shares last week at $28.50, now am trying to get those back.
Do you have comments on AILLO & AILLN? Yields are low but the redemption price is higher than present Bid/Ask, so there is zero call risk.
Grid, I was able to do a quick flip that $30 AILLL bot day. I sold about 400 shares for around $30-$31, then bought them back at $27.80.
I sold 200 shares last week at $28.50, now am trying to get those back.
Do you have comments on AILLO ? Yield is low but redemption price is higher than present Bid/Ask, so there is zero call risk.
Inspy, I remember now you getting a better sell price being the patient cagy ol veteran trader!
Inspy, I of course dont ever have a problem owning any AEE preferreds. I generally though if price is up near redemption price (call is $102) and sub 4.5% I generally go a bit lower and get the extreme call spread protection. For example.. I would rather own say UEPEN at say $87 with the $110 redemption price than AILLO at present price near $100.
I have traded around on these recently but currently only own UEPEP and AILIH. Got them lower than last prices, but havent really looked to shop them. Probably holding a while there.
Was just thinking about a few AEE PFD. “UEPEM pays 4% and 2,300 shares traded on the $ 93.75 offer. “UEPEN” pays 3.5% and is offered at $ 88.75 which is $ 5.00 cheaper. Why pay an extra $ 5.00 for only $ 500.00 extra on 1,000 shares ? Am I missing something or is the offering on UEPEN a bargain ?? Thanks in advance.
Thorton – Though this ute stuff is obviously in Gridland, I’ll venture an answer for you as it looks like nobody else has…. Are you familiar with the term, “current yield?” When comparing perpetuals, I would say current yield would be a way to equate issues with different coupon rates trading at different prices. If UEPEM is at 93.75 with a 4% coupon, that means it’s trading at a 4.26% current yield (4 divided by 93.75 = 4.26). In a sense that’s telling you that you are buying the equivalent of a 4.26% coupon Union issue at “par.” Now compare that to your UEPEN at 88.75. With it’s 3.50% coupon payment that provides you with a current yield of only 3.94%. Barring any reasonable expectation of either one being called and thus you getting your discount to par paid back to you quickly, which one would you rather have???? To me, the $5 discount in price to UEPEN is not enough. I think the market may have answered that question as I see where UEPEN has now traded down to 87.60 and then 86.5 and still UEPEN at 86.5 provides you with only a 4.04% current yield… Apologies if this is old hat to you as the calcs are pretty basic.
Guys my experiences with these is this. You both are correct but there are other random variables all at play either currently or eventually. First being they both are illiquid and are prone to bouts of days and even weeks on end of not trading, a dump seller without supporting bids can cause one or other to be more appealing at any given time. Outside of that, there is the “pull to par” that always factors in. Generally, UEPEN will have a slightly lower yield than say UELMO because its redemption price is $110 while UELMO is $104 and change.
Now neither are probably not in danger of a call being they have been callable for about 70 years. But they always will have a gravational pull equivalent to say the sun on Pluto. That is just the way it is. Otherwise they would both be in the $70s more reflecting current yields. But that isnt happening in todays present environment. When looking at these old issues like UEPEM, UEPEN, UELMO, etc. its really better to look at their 5 year pricing trend and not just recent trades as they can be deceptive.
Super illiquidity matters also. UELMO float is considerably smaller than UEPEN even though they are both institionalized. For me as a trade I prefer UELMO closer to 5 yr lows than UEPEN, because its easier to trade following my mantra…”Buy into liquidity, and sell into illiquidity”.
I cant say any are screaming values certainly not on an absolute basis, and just marginally on a relative basis depending on the price wobbles. I do own UELMO, but more of a ying and yang type hold as these dont move in sync with active liquid issues.
AFH pays again. This quarterly payment on AFHBL was 20% of current share price. Not suggesting this continues, but 80% annualized ain’t bad if it does. This is for the junkiest of junk buckets.
Qniform–I quit watching it–I held a few 100 which I bought cheap, but sold it a month ago for a small gain.
The SEC arrears reporting has been delayed due to pandemic. AFH is currently a total “black box” that spits out money without warning.
MDLX and MDLQ also paid. Current yield 51% and 48%!! Big risk but worthwhile if next two payments received.
I can’t understand why BPYUP and BPYPP trade with such different prices/yields. They have different call dates – one is already passed that date – but that is not relevant considering where the prices are. And BPY and BPYU (former BPR) are the same.
Was wondering the same.
I have 500 shares of BPYUP and its by far my wost performing REIT preferred trading below 14. As you said its “Sister” unit is at 19. Any reasons anyone can come up with?. Have been tempted to add a few more, but not sure if missing something obvious…
Since BPYUP is an US REIT, they have a withholding dividend tax which reduces their attractiveness in contrast to BPY for international investors (especially offshore-based ones).
Great question… and worth looking into more closely. Was BPYUP previously issued by the former GGP? If so, there may be some concern that the assets backing this are all malls.
BPYUP is only backed by the former GGP malls. BPYPP is backed by all assets of BPY of which the malls are only a portion.
That’s my read too. While the bpyu common a is supposed to track bpy, the security for the higher capital tiers appears to be different, maybe very different.
Hey landlord.
Thanks for clarification. Be that as it may, are they not at least somewhat protected by being under the BPY umbrella? worst case scenario, could BPY suspend divvies on these and not other issues? Looking at GGP prospectus doesn’t seem to help. What happens in a case like this when an originl issue is absorbed by a bigger entity?
I noticed that BPYUP is unrated or WR, while the other BPY preferreds are BB+. Maybe some institutions or funds are not allowed to buy unrated issues.
Adrian, BPY could definitely suspend BPYUP and not the others. Normally, when a company acquires another, they merge them into the existing company and the preferreds become equal to the company’s other preferreds. In this case, BPY just made BPYU a subsidiary. In theory, BPYU could go bankrupt without BPY being bankrupted.
Similar thing is happening with Brookfield’s acquisition of Cincinnati Bell.
I understand what you are saying but here is the statement from BPY web site: “Brookfield Property REIT (NASDAQ: BPYU) (“BPYU”) is a subsidiary of BPY, intended to offer investors economic equivalence to BPY units but in the form of a U.S. REIT security. Dividends on BPYU shares are identical in amount and timing to distributions paid out for BPY units, and BPYU shares are exchangeable on a 1:1 basis for BPY units or their cash equivalence.”
Val Ras, that statement on the website is regarding BPYU common shares, not BPYUP preferred shares. Common BPYU = BPY. Preferreds (and debt) of BPYU does not equal BPY. That’s why BPYU has a different credit rating than BPY. A noteholder of BPYU has no recourse to BPY nor does a preferred holder.
BPYU divs are currently identical to BPY but that doesn’t have to be the case going forward. If BPYU blows a bond covenant, lenders can force them to suspend both common and preferred divs. BPYU lenders have no say or control over BPY divs.
LI and others – this situation crops up frequently in the pref world. When an acquisition occurs the acquiring company may or may not take legacy preferred onto its balance sheet. Usually they don’t, in which case two issues that look to be identical from a credit perspective are not.
Same is true with holding company situations, especially banks and utes. Often, the holding company (parent) is structurally subordinate to the sub. You will find that language in the prospectus where that is the case. Pay attention to which entity is actually backing your issue.
BDX fell over 7% today and said will list a convert preferred under symbol BDXB. Mandatory Conversion June 1,2023 but don’t know at what prices etc.
Anyone following this or have more info?
mSquare
BDX Prices Offerings of $1.5 Billion of Common Stock and $1.5 Billion of Depositary Shares Representing Interests in Mandatory Convertible Preferred Stock
https://www.otcdynamics.com/bdx-bd-prices-offerings-of-1-5-billion-of-common-stock-and-1-5-billion-of-depositary-shares-representing-interests-in-mandatory-convertible-preferred-stock/?utm_campaign=twitter&utm_medium=twitter&utm_source=twitter
BDX Prices Offerings of $1.5 Billion of Common Stock and $1.5 Billion of Depositary Shares Representing Interests in Mandatory Convertible Preferred Stock
https://www.otcdynamics.com/bdx-bd-prices-offerings-of-1-5-billion-of-common-stock-and-1-5-billion-of-depositary-shares-representing-interests-in-mandatory-convertible-preferred-stock/?utm_campaign=twitter&utm_medium=twitter&utm_source=twitter
They sold common as well.
6% on BDXB
BDX convert
CUSIP for this convert is 075887406. The exchange symbol is BKDCL.
Any opinions on the convertible issue?
As with all mandatory converts you are totally tied to the performance of the common (no downside protection). You need to make a call on how you think BDX will trade over 3 years. The mandatory just gives you some additional income over the three years but takes it away from you at conversion. On the downside you’ll make a bit more due to the income, on the upside you’ll make a bit less than the common. All comes down to your analysis of BDX.
My experience with converts is to just buy the stock unless a pair trade is a planned part of the strategy. Busted converts are a different story. Love WFC-L for instance.
You should buy whatever is priced relatively cheaper on an as converted basis
Thank you for the comment.
Yes, I own WFC-L knowing it may not convert in my lifetime but I bought it for the yield and am happy with it 🙂
I have been a longtime owner of WFC-L and am happy with the assured income stream.
Intend to add more if there is any significant dip.
I expect to be leaving the stock to my heirs.
Well, that went well….
https://www.washingtonpost.com/religion/2020/05/19/two-churches-reclose-after-faith-leaders-congregants-get-coronavirus/
Good news for anyone:
a) looking forward to negative rates, or
b) looking for a solid IG with a net loss built-in
PLDGP last trade was $78.50, rewarding the lucky bidder with a negative 0.5% YTC over 5 1/2 years on this near-certain to be called issue. Held to maturity the owner will have handed over a net $0.23/share for the experience.
And if held in taxable…
Not sure if Sandbox is appropriate place to ask, but does anyone invest in the preferred from SPLP? SPLP-A
Their website is interesting, everything from defense to youth sports?!?!
they are selling common shares too. both will price later tonight
Jason, This is basically a mini me version of Berkshire without the success. Lichtenstein is a Buffett wanna be and not the pedigree. SPLP is the genesis of private owners wanting out of a private hedge fund during 08-09 crisis period. So Lichtenstein created these share to allow people out.
SPLP-A is the genesis of buying out other mickey mouse companies they already had equity interests in. Some acquired for the NOL’s (net operating loss tax carry overs). The one real jewel was Web Bank…
I owned this during the SPLP-A and SPLP-T chaos and exploited it. They were too cheap to give last buy out a dividend for SPLP-A, so they created SPLP-T for a couple months and then folded T into A. All sorts of pricing chaos on that. I was trading back and forth between the 2 until they were merged and havent been back since and wont touch it…Read the prospectus, and I mean really read it…If you cant understand 30% of it you dont know 99% of the problems you can have buying it if SPLP remains in trouble and judging by price it has fell off a cliff in past year or so.
It may be just fine, but I wont own something with a convoluted prospectus. I dont need money that bad.
I’m long Jason – but I’ve got more than 10 years with WL. You should listen to Grid.
Qniform, I was taking aback by current stock price. I hadnt checked common stock price since it was $12 ish down from $20…I was very surprised it is now under $5. Whats going on there?
I’m also long a little in my higher risk “bucket”. They are going through a rough patch, but recently cut executive compensation and other expenses. Seems like they will do what it takes to keep going.
From Bloomberg:
PG&E Surges After Saying Most Fire Victims Are Backing Its Plan
PG&E Corp. says preliminary results indicate that victims of wildfires blamed on its equipment have voted overwhelmingly in favor of the California power giant’s bankruptcy reorganization plan. The shares surged.
PG&E needs support from two-thirds of those who cast a ballot. Officials results will be posted by May 22, according a statement Monday.
“PG&E believes that it remains on track for plan confirmation by June 30,” the company said. The shares rose as much as 8.6%.
The vote by wildfire victims is one of the last milestones in PG&E’s effort to exit the largest utility bankruptcy in U.S. history. Bankruptcy Judge Dennis Montali will take the results into consideration when he decides whether to approve its plan.
https://www.bloomberg.com/news/articles/2020-05-18/pg-e-surges-after-saying-most-fire-victims-are-backing-its-plan?
Having followed the saga of PG&E since the dividend suspensions, I figured to get in on some preferred shares for a bit of profit as and when dividends are reinstated.
Was able to grab 86 shares at $27.50. From Grid’s previous posts, there are 10 accrued dividends, and if they pay the upcoming 8/15 as well, it would be a total of 11 dividends – $4.12.
But is PCG post-bankruptcy a good credit risk? In other words, will these preferreds trade at par or whatever levels they used to? If not, there might not be as much upside as you think from getting the accrued dividends.
P.S. I’m out of the loop on the whole situation. I’ve been baffled all along that the equity value wasn’t wiped out. Aren’t they going to end up with multi-billion liabilities from future fires?
Good point, Karma. You are correct that the risk of inverse condemnation from future fires, especially since we’re entering fire season in a few months, would serve to put a damper on future stock price appreciation going forward.
However, it is not in the interest of the CA politicians to force the state’s biggest Utility into bankruptcy again & again. I would hope that cooler and calmer heads prevail, to come up with a solution to avoid this type of issue. There could be special arrangements negotiated between the parties to do something to lessen the risk, at least.
Still, your point is well taken. I have only 86 shares, and will not be adding any more for now. If, as, and when accrued dividends are paid out, I may very well exit and move on.
Exactly correct Inspy. In-state retirees and retirement plans are tied into this company in a big way. Therefore, when Sacramento got involved, it’s seemed there’d be little question of the outcome.
This is not an insolvency, just a cash-flow issue (liquidity) related to claims. Obviously it will be paid back over time by rate payers.
The fires are not going to stop. The only question is future liability.
Alpha, part of the “pay out” is the victims are getting a chunk of that new equity issuance. And they may have to hold it a while. Dividends from common are suspended at least 3 additional years to help pay down some of the post bankruptcy debt.. Survivors are taking a bit of the risk here also, but they didnt want to incur years more delay or potentially getting less if it didnt remain a viable public company.
Karma, equity is never wiped if there is residual value (profit making ability) from a company. Texaco went bankrupt 20-30 years ago and the stock near did go under $30. The current equity is getting diluted from a capital infusion. Projected post bankruptcy has projections of low BBB credit out of post bankruptcy. There is a fire emergency fund being put together of over $20 billion dollars which PCG is contributing to from bankruptcy terms.
I cant refer any previous info as I have posted it here before but it gets lost in the maze. My entry price point is lower than todays pricing so Im heading on.
Im just going to refer to the 6% non callable as other variables come into play on the lower yield issues.
Long answer short, yes the market is very well aware of the accruing process. Pre fire PCG-A was in $30-$32 range. Now its $27.75 or so and about 3.75 in accrual through April. When I bought for the final flip time a couple weeks ago, backing out the accrued I would be getting 7% fixed non callable for a ute preferred. There is only one fixed US ute preferred above 6% and it has traded in 100 Share transactions exactly 4 times since 2017. And that was me repurchasing from selling them in 2017 and regiggering around selling to myself. The float is only 4500 shares in which I have 300 so in other words there are no plus 6% fixed QDI utes available.
Using SCE-G as a marker and near credit quality profile, Im figuring A will be in $26 range post pay out. And yes PCG is incurring more debt post bankruptcy than pre fires. So that is one thing one must factor in.
Inspy, I dont do it often maybe once a week or so as I dont get too down and dirty on it all…But I also just dont sit and twiddle my thumbs letting the process unfold. I have been trading against the various Series issues on drops. For example today, I snagged 300 of the Series D at $22.50 this morning right at market open. Just did the math and sold off 300 from other series with lower current projected yield sans the accrued divi. at higher prices so I dont accumulate more. A nice little no brainer way to squeeze more profits when they hit if one is committed to the unfolding process anyways.
I had a GTC order in at $22.5 for 400 shares of those and you must have taken them right from under my nose because only 1 share of that order filled.
I have some I got around $19 I am holding for the dividend and these were to flip in the interim.
You must have had your order in early because mine was placed last week at FIDO.
Scott, I entered a 300 shares bid about 2 minutes before market open. To be honest I set the bid at $22.70 and it filled at $22.50 right as market opened.
I knew the D had some sell volume pressure on ask side yesterday, so that is why I went there.
The volume is being shown so a seller is out on D series. $22.50 is considerably better relative value than Series A at $27.75.
Grid, I have had standing orders out for the D and E issues at $22.50 for at least a week and probably more like two so I don’t know why mine didn’t fill before yours at that price.
Which broker did you use?
Yeah, the D & E have been the ones I have been trading after I put them all in a big spreadsheet to see which were most attractive at the time. I am looking for them to hit at least 25 and with 12.5% in back dividends I would hope to exit the position up over 36% later this year. In the interim I have been trading in and out of a separate tranche on volatility.
I guess we had similar ideas on this one.
Scott, I bought these out of TD account. Yes, Im just goosing returns intermittently whenever Im bored and the spirit moves. Im not as optimistic as far as projected returns going forward though, but certainly wont complain if you are correct. As I am playing this through the payout to try to catch an additional spike somewhere.
Thanks Grid. I guess we will see how weakly they trade after the dividends are issued. You would know better than I would since you have been through this rodeo before. At my entry price I can afford to be a little patient and I picked up another $1000 on options trading PCG based on bankruptcy filings so I have a pretty good cushion on my position.
I also picked up some more Spire at 25.85 to flip. This would be my 4th flip on it the past couple of months if it climbs back up. I know this is one of your favorites.
Scott, I guess we got the Vulcan mind meld thing going on. I used to buy SR-A in bulk and dump in bulk on favorable movements. But decided I need to keep a base and then double down from there. So last spike up near $27 I unloaded only about half back to a fullish position. But likewise I doubled back down under $25.90 late Tuesday/early Wed.
Im a bit more laissez faire on Spire and Ameren preferreds. I could hold everything I own in these two and shut the computer down for good and not worry though. Spire just released a road show presentation. As I have been mentioning repeatedly about these gas utes, Corona is not a huge immediate concern unlike regular utes as they have already had their money earning quarters. They are 70% residential heat based. Deadbeats can stiff them next few months on their $40 bills and it is not meaningfully stressing them. In fact they mentioned that and the fact they are in process to open up a regulatory filing to get the stiffing money back.
https://seekingalpha.com/article/4348789-spire-sr-presents-goldman-sachs-global-staples-forum-slideshow
With today’s almost +4% in the SPY, I am thinking about buying some SDS.
I am thinking about it (but have not done it) because although there is no logic whatsoever in these movements, lately the market is ruled by the fed, the pharma press releases, lots of (deserved?) optimism with the re-openings all over the country, and of course the political interest of keeping the market alive, so who knows, maybe today is +4% and it will continue to go up ad-infinitum or until the bubble bursts by November (too long to hold SDS which loses value everyday). It seems that the real and long lasting economic damage just can’t sink in yet.
What do you III experts think? Anybody got any SDS today (or SH or similar products) today?
Tx!
Hi Dan, I’ve been toying around with the idea of SDS, but I guess I don’t fully understand it yet. What do you mean that it loses value every day? Are you just referencing the fact that as the market goes up, it goes down? Or, are there some “hidden metrics” that I haven’t discovered yet?
Other than the capital depreciation, (I don’t mean to minimize here….) are there long term risks to holding? I can see if someone bought at the beginning of a bull run that lasts 10+ years, they will be sitting on a significant paper loss. What are the other risks?
Yes, any leveraged fund experiences decay and are not suitable for long term holding. You should read the risk disclosures in the prospectus and make sure you understand them before investing in complex products like that
Mark in Co, mcg’s comment is so correct, that you could actually short the short and short the long and make money by arbitrating the price deterioration between the two over time.
In the absence of borrow fees, buy-in risk etc.
Yes, I skimmed the prospectus a while back when Tim had mentioned something about it. It was beyond my pay grade. As a buy and hold investor (typically), I don’t think shorting is in my blood.
Thanks for the comments on “decay”. I did a little reading and now have a little better understanding about leveraged ETF’s. While I do have a little gambling in my blood, I don’t think I would ever use leverage in my brokerage account, so leveraged ETF’s should be a no-no for me.
Now, having said that, and in the interest of integrity, I have to admit that I sometimes jump without looking. I bought a few shares back in April, missed a $1 bounce, averaged down a couple times and am now sitting on a $2 per share loss (140 shares). That’s why I was trying to understand the ‘decay aspect”.
So, now that I have admitted my foolishness, I am looking for a little guidance. Should I cut my losses and run, or is there a chance I can still come out ahead in this if things turn south in another month or 2? Or, is that too long of a timeline and the decay will be nearly impossible to recapture?
Interesting, I’m new to this concept too. Would it apply to such funds as FLC and UTF, which state they use leverage? I’ve seen both those recommended on this board, but are they unsuitable for long term holding?
Irish- that is a different kind of leverage. Levered ETFs are required to rebalance their holdings at certain intervals which causes decay, CEFs don’t have that problem
Ah thank you for clarifying!
Not necessarily, a strong move would push it back ITM. The decision to cut your losses or keep hold solely depends on your conviction on the trade. If you don’t have conviction, cut it.
Well, I feel pretty strongly that the market is in for another leg down, but it may take too long and the decay may be too great by the time it does. Futures are up again this morning, so not boding well for my short position… 🙁 I need to scoop the poop out of this sandbox and find another one that I am more comfortable in.
Thanks for the replies.
Consider straight index puts. They’re generally very cheap for short term positions. As I noted in another post the cost for hedging a 20% drop 2-3 weeks out is 3%-4% annualized (approximately $600-$700/wk per ~$900k notional). If you want a hedge it’s a better way but if you’re gambling on daily moves it’s not the way to go.
I’ve got a bid / ask related question. Specifically SBNCM. Bid / ask is $15.35 / $15.80. 100 / 300 (fluctuating some…) Anyway, I put in a bid of $16.10 and it is not filling. Is that because I am a peon investor and my bid doesn’t matter? (My buy order is for a measly 20 shares). Why, if there are shares out there for sale, doesn’t my willingness to purchase actually get me any shares? Or, is it just a matter of time before “the system” finds the potential match and executes the trade?
Or, am I still lacking in fundamental knowledge of what information I am inferring when I look at the Bid / Ask?
I know this is extremely thinly traded, but it appears that there are 300 shares available at $15.80…..
OTC is the wild west of trading. There isn’t a consolidated bid ask at any given exchange, rather orders are routed to market makers. So your broker is probably sending the order to their network of market makers who aren’t matching you against the best offer you see on your screen. It also doesn’t help that your order is for an odd lot which may not even be eligible for routing to away MM’s.
Someone just bought 1…… OK, now 300 have gone through…..
Since there were 300 at Ask, that may be a done deal until someone puts up more?
I put in a bid thru Schwab at $15.65 for 300 shares and got filled almost immediately for 299 shares…not sure where 1 share went.
FWIW – I got the one share. I had an open order for 200, but only got a fill for 1 share, and the next fill was 10 minutes later for your 299. I may have to go talk to the broker about it.
Snagged 400 via TD at 15.80ish after which ask moved into 16s. Another issue we all wish we bought at 11 and locked up.
Mark in CO, Sorry for your frustration here. What mcg said – but you also might call your brokerage company and ask them about the trade and why it did not execute. Unfortunately some of the markets are not as fluid or efficient as we might hope or imagine.
Pushing your case, you may want to ask them to fill the order under the premise it should have filled as you had an acionable order. It’s worked for me twice; once required the help of SEC/FINRA.
Thanks all. I bit the bullet and changed to 100 shares at $.05 above ask. Got filled about 10 minutes later. Big day so far of nearly 2000 shares – from the looks of it, mostly from this group of folks….. Was able to snag them at $15.91. Yeah, $11 would have been super nice.
Alpha, you got them to do that on an OTC name? Reg NMS best-ex rules don’t apply there so I would be surprised if they honored it and filled out of pocket.
Hi mcg876, The FINRA action was on KTBA which trades OTC Pink. As I recall it took about 30 days until the shares were unceremoniously posted to the account at the then buried original bid price. Ironically I then sold them immediately for a few $ gain/share then re-bought them a week or so later lower than the original purchase price.
On the first pass, the broker denied any culpability, though FINRA stayed on it. I had all my ducks in a row. Sent them bid entry info and time and sales reports etc. The MM abuse was blatant. That they tried to beg off it was worse than the offense itself.
They have tried to screw me over before, and still do, but I figured out a system on extreme illiquids and have turned the tables on their thieving arses a few times and have enjoyed it.
Grid, I well-remember your story and the details of how it executed on a couple of issues. A fabulous read. And after my experience with those random toll generating thieves; akin to a heart-warming fire-side chat. lol
SEC Fines Morningstar Credit Rating $3.5 million
The Securities and Exchange Commission today charged New York-based credit rating agency Morningstar Credit Ratings LLC for violating a conflict of interest rule designed to separate credit ratings and analysis from sales and marketing efforts. Morningstar has agreed to pay $3.5 million to settle the charges.
The SEC’s order finds that from mid-2015 through September 2016, credit rating analysts in Morningstar’s asset-backed securities (ABS) group engaged in sales and marketing to prospective clients. According to the order, Morningstar’s head of business development instructed analysts to identify business targets and pursue them through marketing calls, meetings, and offers to provide indicative ratings. For example, the order finds that one ABS analyst at Morningstar wrote a commentary specifically aimed at a potential client issuer and sent it to the issuer for the purpose of obtaining the business of the issuer, which eventually became a Morningstar client. The order further finds that Morningstar issued and maintained ABS ratings for certain entities where an analyst who participated in determining or monitoring the credit rating also participated in the sales or marketing of a Morningstar product or service. In addition, the order finds that between at least June 2015 and November 2016, Morningstar failed to maintain written policies and procedures reasonably designed to sufficiently separate the firm’s analytical and business development functions.
https://www.sec.gov/news/press-release/2020-112
Tex’s comment: Not sure why/how the SEC fines Morningstar but does NOT fine Moody’s/SP/Fitch for their shortcomings in the GFC. I am still very cautious on believing the ratings on preferreds. Not convinced they are done at arm’s length and/or up to date.
Thanks Tex
It’s my understanding that the entity being rated pays the rating agency,
which on it’s face is a conflict of interest. Kindly advise if I am incorrect.
Hormel with an A-rating and 6% debt/cap is trading near all time highs.
Latest news: Hormel made its first batch of SPAM in 1937. The company just announced that due to hoarding by consumers, it will be making its second batch.
LOL
im gonna use that one
very very funny thanks for the laugh.
Alpha8
Your comment belongs in the SPAM folder.
Reminds me of that fruitcake me & my brothers used to give each other each Christmas. We did that for years until I got careless and one of my dogs ate it.
2d batch won’t be nearly as good as the 1st. WWII really put a dent in the supply. I guess preppers will give a sigh of relief.
For those of you who might be in for a little heavy reading from this past week on SA
https://seekingalpha.com/article/4345783-simulation-game
I don’t understand this economy. And you’re not supposed to invest in things you don’t understand. Yet here I am.
What’s not to understand, Martin? It’s a classic case of “Don’t Fight The Fed” unless it says a full recovery from the damage done by the pandemic will take longer than the market anticipates and may not happen until the end of 2021. Then just ignore them…. simple to understand, really, don’t you think????????? Say what? I’m with you….
Marriott put out a 20% discount offer for their gift cards. Well, that’s one way to generate some cash. When considering MR’s margins it’s probably revenue-neutral to them when redeemed. Also a clever way of staging for post-Covid bookings – as holders will want to cash these in at some point.
We use a number of the Marriott family of properties throughout the year so picked up a few. I mean, used inside a year that’s a tidy 25% return. Oh yeh, and it’s QDI lol. For anyone interested:
https://gifts.marriott.com/?nck=11626724&ck=49714079&lk=1000412163
Alpha, my wife had a vacation all planned for 4th of July to Mendocino, but after calling the resort this week not so sure anything will be open even by then. But she happened to look at Amtrak and they are still running. Kind of comparing the tortoise to the hare, but your not crammed in a metal tube, you can get your own compartment and you can walk around and the facilities are not as cramped. The views can even be great. Just have to find a part of the country open to go to.
At close today, KIM-M with $1.3125 coupon and 12/20/22 call date closed at 22.11. Meanwhile, KIM-L with $1.28125 coupon and 8/16/22 call date closed at 22.85. Both can’t be right. (Both could be wrong.) Common been getting pounded, but Moody’s reaffirmed Baa1 on senior unsecured at end of April. Didn’t see anything there about preferred, but would infer that Baa2 on that was implicitly affirmed. Do you believe the Baa2?
Some good news for a change – New York, May 12, 2020 — Moody’s Investors Service (Moody’s) has assigned first-time ratings to Axos Financial, Inc. and its lead bank, Axos Bank. Moody’s assigned a Baa3 long-term issuer rating to Axos Financial. Moody’s has also assigned Axos Bank a long-term issuer rating of Baa3 and long- and short-term deposit ratings of A3/Prime-2, together with a standalone Baseline Credit Assessment (BCA) of baa2. Moody’s assigned long- and short-term Counterparty Risk Assessments of Baa1(cr)/Prime-2(cr) and long- and short-term Counterparty Risk Ratings of Baa2/Prime-2 to the bank. The ratings outlook for Axos Financial and Axos Bank is stable. Moody’s also assigned a Baa3 rating to Axos Financial’s planned subordinated debt issuance and assigned shelf ratings of (P)Baa3 for senior unsecured and subordinated debt.
Though I do not yet see an official rating listed for AXO by Cusip number, by list of ratings included, it should be Baa3. https://www.moodys.com/research/Moodys-assigns-first-time-ratings-to-Axos-Financial-Baa3-long–PR_424196?cid=
Huge selloff at end of the session 😞. Is it a start of the second wave, folks? (VIX is at 33 right now).
Dr Doom testified before the U.S. Senate.
Dr. Doom is right. Wrong in January about human to human transmission possibilities, subsequently wrong about the common sense need to wear facemasks, and so on and so forth. If left up to this career academic, schools will remain shuttered and most parts of the country will remain shuttered w/no hope. #CommonSensePlease