Snoozers are Losers–Gabelli Comes a Calling-UPDATE

I just knew this had to start happening–and I am less than happy that the Gabelli funds have now figured out they can save a bunch of money by calling old outstanding perpetuals.

Gabelli Convertible and Income Securities Fund (GCV) has announced a redemption of their 6% GCV-B issue (see it here). This is going to be painful for holders of this security–currently trading at $26.55.

The call notice is here.

Investors should make sure that they don’t hold any crazy highly priced Gabelli CEF preferreds. You can peruse the CEF preferred list here and see that the Gabelli family of funds has over 20 issues outstanding (Ellsworth and Bancroft are Gabelli managed funds as well) and many have been redeemable for years. Many are trading at steep premiums.

I would suggest income investors double check their portfolios and make sure those with the largest premiums and are currently callable hit their sell list tomorrow. I am not firmly predicting they are all going to be called–BUT…….

Disclosure–I own at least 5 Gabelli issues–but I don’t believe I have the big premium issues, but I will be double checking later tonight.


NOTE– Gabelli Equity Trust (GAB) filed a registration statement for new issuances of common and preferred stock on 9/24/2019. Within the prospectus supplement it states that the proceeds of any preferred shares issuance will be used to redeem outstanding preferred issues. There is 1 issue at high risk of the 4 outstanding. GAB-D 5.88% is trading at $26.31 and is redeemable.

NOTE–Gabelli Dividend and Income Trust (GDV) has filed a right offering to attempt to raise $162 million in new common equity. The fund states they may use a portion to redeem the 6% GDV-D issue which is currently trading at $26.95 and is redeemable.

NOTE–Gabelli Multimedia Trust (GGT) filed a registration statement on 9/26/2019 for new issuance of common and preferred shares and state proceeds from issuance of preferred shares will be used to redeem outstanding preferreds. The 6% GGT-B issue is trading at $26.66 and is redeemable.

I didn’t go further in researching. Obviously there are numerous issues at risk here–some at absolutely huge premiums–some at more reasonable premiums. If you read through the above documents you will have to dig deep to find redemption references.

Additionally even though the funds have filed various registration statements there is no guarantee issues will be redeemed.

24 thoughts on “Snoozers are Losers–Gabelli Comes a Calling-UPDATE”

  1. I never invest in bonds or preferreds when YTC falls below a (positive YTC) threshold, and I place on the sell list any holdings where YTC falls below that threshold. That threshold is based on my personal long term targets and retirement projections, and varies depending on a number of other factors such as IG ratings, corp financials, nearness of call / maturity dates, etc. I do some arbitrage on new issues, for example switching out GLADD (sold at 25.95 after div) for GLADL (purchased at 24.87) to double YTC and slightly increase YTM.

  2. Decisions, decisions.
    Well, they can be shorted, but for pretty high fees, but it really seems both of them are going to be redeemed shortly and any that can be shorted over 26.15 or higher seems like a no-brainer

  3. They could put 3% debt on if they wanted to do right by the common shareholders. (I’m in GDV-G) All “income” in fund goes to pay the preferred and management fees. All I can think of is Mario owns a lot of the preferreds.

  4. What I find stunning, on second look, is that the redemption is today!
    I don’t see a date on the announcement – did they not give their shareholders any time to adjust to this? That’s a loss of $1.333/share from the 26.55 price. (26.55 – 25.2167) Ouch! You don’t even get a full, final distribution.

    1. This one gets nice boost in quality as now there will less capital at the preferred stock level since common equity is taking out the D Series.. Like you said no call risk due to date and frankly a low coupon rate (5.375%)..

  5. Hi!

    I don’t understand your logic here.

    I own GUT-A (I think that’s what it’s called, anyway) and it just dropped to 26.09, probably on this news. I’m going to take the same hit if it’s called or if I sell it to try to sidestep the call, so why not just wait to see if I get another payment or two?

    You’re doing a great job.


    1. David–thanks. What don’t you understand? I have the GUT-C–not redeemable until 2021.

  6. GAM-B at $27.27 and 5.45% current yield is another one of these types. There has been a several year old joke about why this has never been redeemed. That being that many of the fund holders also own the preferred. And the fund has been so bad over the many years they dare not redeem the preferred as it would infuriate the owners.

    1. Grid–I think most of the Gabelli funds are kind of crappy and I wouldn’t own them–but the preferred yes. The old Glacier Water 9 1/16% Trust preferred was owned by directors–in particular Richard Kayne (of Kayne Anderson) which always called into question why it remained outstanding (of course now gone)—so I think there may be a bit of truth to speculation.

    2. That’s what I suspected. Gabelli doesn’t call for a small gain because they don’t want to antagonize their investors. The Amazon theory. Charge less than you can get away with in order to cultivate customer loyalty.

    1. Right now. I like 5.5% and above issues at par for any investment grade issues. Cannot really get at par but can get really close when you consider the accurred amounts. Since you can seem to get new issues at 5%, you get a nice premium for call protection. So 5% at par without call protection isn’t that attractive to me.

  7. I think you and I have briefly exchanged ideas about this before:

    Why don’t the Gabelli closed-end funds put their common shareholders first by calling preferred shares when they can clearly refinance at significantly lower rates?

    It’s a mystery to me. One that caused me to sell all of my Gabelli closed-end preferreds way too soon, many as early as 2016, leaving me feeling like a fool.

    I never really puzzled out why Mario would bleed his common shareholders that way. Perhaps, many of his common shareholders were encouraged to hold the preferreds as well. Was it some sort of loyality issue?

    I don’t know, and I guess I will never know.

    If there has been some sort of regime change, or change of philosophy, or whatever, I still have to believe that holders of Gabelli closed-end preferreds are at some risk. Since I have been so wrong for so long, I can’t say I told you so.

    Look at the numbers, and decide for yourself.

  8. Tim, I think some investors are unknowing buyers on even called issues as I’ve watched a few climb straight out of the redemption plus accrued channel. The current holders keep them in check of course through their sales.

    1. Alpha8–some of these issues are trading out of this world–are there that many unknowing buyers out there? Maybe so.

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