Sock Drawer Discussion



The intent of this area is to include items that all of us consider “sock drawer” holdings.

My definition of “sock drawer” is those issues I own that I consider extremely safe and don’t have to be watched to closely. Normally they would have more modest coupons, but you can sleep well at night (relative to safety)–you know the income stream is extremely safe, althought the share price may move around quite a bit.

Others may have their own definition–in fact I know they do–that is fine

For instance, I have held the Tricontinental 5.00% preferred (TY- or TY-P) issue for years and years. Tricontinental is a closed end fund managed by Columbia Threadneedle. TY was formed in 1929 and this small amount of preferred stock is the only leverage the fund uses–2.2% leverage. Because it is a CEF they must maintain a 200% asset coverage on the preferred stock–the last time I calculated the coverage it was over 4000%. This is a $50/share issue and last traded at $54.66. The issue is callable anytime at $55/share. Shares were issued in 1963.



140 thoughts on “Sock Drawer Discussion”

  1. I just got my 1099-DIV from Schwab and it appears as though they’re reporting IPWLO as non-qualified. I also own several other illiquid utility preferreds (my larger positions are APRDM, IPWLK, UEPEP, CNTHO, WELPM, PPWLO) and I won’t be receiving my first dividends on those until next year. I’m afraid that Schwab is going to report as non-qualified for every illiquid preferred. My tax rate is fairly high so the qualified vs. non-qualified treatment matters quite a bit. Does anyone else hold any of these through another broker and how are they getting reported? I may try to transfer these out of Schwab. Thanks in advance!

      1. Thanks but I’m not sure about the holding period being the issue. I bought the IPWLO shares on 9/10/2019 and I believe it’s a 90 day holding period for preferreds. Also, I thought brokers normally disclaim that they only report if the company is qualified and it’s up to you to reclassify if you don’t meet the holding requirement.

        1. Depends on the broker.
          some calculate holding period, some don’t.
          But the fact that it is illiquid pink sheet is irrelevant for US issuers.
          (it does matter for non-US, as it is not considered an established trading market), so you get some quirks with pink sheet shares from countries like Bermuda, that are considered not qualified.
          What also depends on the broker is the sophistication of their security master and/or whether they subscribe to a service that identifies qualified/non-qualified dividends

    1. Tex, my Schwab 1099 conveys qualified dividends for all my sock drawer pfds but for two: SLMNP (OTC Pink No Information) and IPWLG (OTC Grey Market).
      Your IPWLO is OTC Grey Market. All others you listed should be fine at Schwab (if I am not mistaken).

      1. Aarod – thank you! So based on your 1099, Schwab seems to make the distinction on the OTC status? So 1) Pink No Information and 2) Grey are going to be non-qualified?

        It would be nice to have an idea of the expected tax treatment prior to purchasing.

        1. Ugh… same here. For those that have been here before, as it relates to SLMNP, do we have to contact Schwab to get them to amend it? If it’s non QDI, then I’ll pass and sell the position. Or, is it something that we just have to have the accountant correct at tax time? Thank you.

          1. “Ugh” is right. TDA got qdi right on every one of my illiquids. Every. One. Of. Them.

            I hope Schwab doesn’t eff everything up when they take over. Sigh. Just when you think you’re all set…

            JMO

        2. Tex, it appears that way but I am not sure. Per Bob’s and Nomad’s posts conveying forthcoming Vanguard ban on purchases of four lowest OTC tiers. I had just checked my sock drawer pfds using the screener in otcmarkets.com. Thus, the thought that could be the reason. I also hold SLMNP in Fido but my 1099 has not yet been issued.

    2. I have also had this issue with Schwab. Allegedly, it gets straightened out in the year end 1099. Have you also noticed that they often have preferred dividends taken back then reissued – usually a few dollars different. Their clearing house kinda sucks.

      1. I’m in the middle of my busy season at work. Here is the contact for a manager at Schwab’s client advocacy team in case anyone would like to reach out and try to get clarification on how they are determining QDI status on illiquids. It would be great if you could report back on what you learn:

        I may be reached Monday-Friday at 1-800-468-3774, extension 48768, between the hours of 11:30 AM and 8:00 PM Eastern or; via email me at clientadvocacyteam@schwab.com.

        Sincerely,

        Dawnn Lone
        Resolution Manager | Client Advocacy Team
        1-800-468-3774 / Fax 1-800-977-0122
        211 Main St
        Mail Stop: PHXPEAK
        San Francisco, CA 94105

    3. Sorry, Tex. I was flipping through various screens (tasks) when I responded – and had forgotten that you stated that this was in your 1099 – rather than the transactions page – where I so often find those revisions. I own IPWLK, and in my 2019 1099 it is reported as QDI. As you know, there probably is a revision or two coming in the next couple of weeks. It may well be spontaneously resolved there.

  2. For anyone looking to add to their sock drawer, the ask prices for AL Power preferreds have come down a little. APRDO is 103.50 for 4.48% yield and ALPVN is 103.99 for 4.42%. The redemption prices are 103.14 for APRDO and 104.20 for ALPVN.

    1. Thanks for the heads-up, Tex. I decided to buy the 100 APRDO shares offered, at $103.50.
      This will join my sock drawer community as a neighbor of APRDM.

        1. Tex and inspbudget, I am looking at the many preferreds issued by Alabama Power and will probably buy one to replace KYN-F. I already have some ALP-Q and wondered if you know why ALP-Q was issued as a $25 preferred with all the rest being $100 preferreds. Thanks

          1. Alan,

            Sorry, I have no clue why ALP-Q is $25 par vs the others.

            But our Jedi Master of Illiquid Utes, Gridbird, should be able to uncover the mystery whose answer you seek, as he wanders the dusty vaults & catacombs where ancient IPO prospectuses go to languish & die.

            Pay homage to All-powerful GridBird, and he will perhaps bless you with his unmatched wisdom !!

            1. Inspy, It really is an irrelevant non issue. 50-60 years ago preferreds were issued as $100 issuances. Now the common retail issue price is $25 for retailers. I highly suspect 50 years ago, institutions largely purchased these not retail investors. It has no material effect on anything.

              1. Totally right, it’s all about the calendar.

                Way back when, preferred were for the well-heeled individuals or institutional buyers. A $100 preferred issued in the 40s or 50s is like a $1000 issue today and very few individual investors could play in that league. Were hard to get your hands on.

                1. Thanks Gridbird and Bob. That makes sense. The $100 preferreds from Alabama Power I was looking at were issued in the 50s and 60s.

    2. I wonder if Schwab will show these as non-qualified. They showed ALP-Q as non-qualified on my 1099. 🙁

      1. Alan, I just checked my brokerage accounts. All were correctly done QDI, including the Canadian resets. You need to find the guy in charge of correctly implementing proper tax procedures and put a paddle to his arse. And tell him you are coming back in a week reshape that rear again if it isnt done by then!

        1. Gridbird – do you mind disclosing what OTC issues you had last year and with which broker? I think that could help the rest of us poor Schwab folks figure out how to restructure things.

          1. Tex, Which specific ones are you in question over? I trade a bunch of them. And to be honest I just looked at 1099 Consolidated form on TD and Ally. And all my dividends were qualified. Which matches of course prospectus. To be honest I dont think they program the holding period, because I get QDI whether I held long enough or not. And Ally, well they even gave me QDI credit with some baby bonds.
            If you give me names I will let you know if I held them last year. Vanguard hasnt given me 1099 consolidated yet. But they are the least of my concerns because I have had Vanguard for years and they always give me QDI status even if the holding period wasnt met. They all get the short term cap gain and wash rules correct though.

            1. Hell, if Ally is giving QDI treatment to baby bonds that’s where I’m headed!

              Not really. I have to believe they will find that mistake at some point and issue a corrected 1099.

        2. Thanks Gridbird. Schwab also showed SLMNP and EBBNF as non-qualified. I’ll call them the first of the week.

          1. Alan, Just remember these numbnuts arent the IRS. They dont get to set the rules and laws. You can manually override any of their pontifications as you have the tax law on your side.

        1. Thanks Tex. I’ll call on Tuesday when they reopen and will use this email if I don’t get any satisfactory results.

  3. On maximum of position sizing, what do investors here think is a good upper bound for sock drawer candidates? 5%?

    In this environment where assets have inflated, I am always wishing I had bought double, at least I could take half off the table. Eat my cake and have it too…

    1. Some items listed here are over 5% but not by much. When you approach 6% there’s probably too much risk to be considered sock drawer.
      Answer is always changing, ask next year and you’ll get a different number. Floating sock drawer.

      1. Thanks Martin, Maybe I should ask an alternative question. What in your sock drawer if any would you feel comfortable holding more than 6%.

        1. Are you asking about interest rate or % of portfolio? We might not be talking about the same thing.

    2. Hster – you get rich by holding concentrated positions (think Bill Gates and Microsoft) but you retain wealth by diversification. Think like a bank and categorize your risks and decide how much risk you are prepared to take by category. If you own 100 different preferred issues but they are all US banks you have a very undiversified position. Not good for capital preservation.

      For a single issuer (not just issue) 5% would be the highest I would ever consider. Surely one can find at least 20 sock drawer quality issues to include in a portfolio. And please don’t rule out CEFs. Lots of diversification and access to assets and asset classes you can’t buy as an individual. Just wait for better entry points. Almost everything in the CEF fixed income world is richly priced. Both the underlying asset prices and discounts/premiums are near extremes.

      1. Good point, diversification is about avoiding losses not maximizing gains.
        Also, it’s relative. If you have a million dollars spread it around. If you have $40,000 to invest you don’t need 20 different things.

      2. Thanks Bob- all excellent points esp. about banks and about issuers.
        I actually started in CEFs(JPS/RNP) and was forced to look at single issues as no good CEF deals were available. The last CEF mini-sale for me was end of last year when HPF/HPS tanked and then leaked slowly after distribution cuts.

        It’s hard to build up a sock drawer when you’re late to the party but I’m waiting and watching and learning from everybody on this board. Thanks again.

    3. Hster, I would think 2%-5% on any single issue is top end for prudent investing purposes. I presently have 10% of mine in IPLDP which may or may not last long term. But Im a pensioner and dont come close to spending my monthly check, plus its a COLA. I doubt I ever spend a penny out of my stash, so I feel I have more liberty to do whatever the spirit moves me on without any worries about it impacting my lifestyle.

      1. Dear Gridbird, I’d keep 10% in IPLDP if I could get it at a good price! My biggest is 5% in JPM-J(yes… sighs…) as I only started a few months ago but 7% would have been ok. But not having the pressure of relying on the distributions or needing to liquidate any time soon makes all the difference. I follow your comments very carefully! Thanks for the continued wisdom.

  4. The appearance of this sockdrawer section has actually forced me to consider what ARE my untouchables…and my socks often are, especially after golf. Anyway, with huge thanks to Tim, Grid, Camroc and all who contribute so regularly, the current residents are, in order of position size:

    NCZ-A (wish i’d loaded up when they were 22.90!)
    SLMNP (sockdraw allstar surely)
    EPR-G (Only REIT in there)
    WRB-B (I will survive)
    IPWLK (Never been to Indy..but love their power)
    AILLL (future hall of famer)
    PPX (needs no introduction)
    AATRL (an oldie, but a goodie..recently added)
    ECF-A ( ..or how I learned to stop worrying and love CEF preferreds)
    F-B ( built tough enough not to touch)
    DUK-L (last years gift)
    AHL-D ( 7 yr itch..not callable till 2027)
    AFC (Logic defying, call defying….)
    UZA
    UZB
    TDA

    To be honest, I’m pretty conservative buy and hold, so there are prob more issues that qualify for me, particularly financials/banks. But thanks again for all suggestions. Tim, you do amazing work. And I have 1 unhappy financial advisor I left about 18 months ago..

    1. I just sold NCZ-A not two minutes before reading this. Took the profit and redeployed the money closer to par value. Sold WRB-B a couple days ago, don’t want the call risk.

      I bought some AATRL and SLMNP because of posts here. Two forum favorites.

      Toward the bottom of your list are tradable stocks but I don’t like them for sock drawer.

    2. Adrian,

      I have several of the names on your list. ECF-A, NCZ-A, SLMNP, AILLL AATRL & IPWLK.

      For QDI financial preferreds, my favorite sock drawer residents are WFC-L and BAC-L. They have gone up significantly from when I first bought, but being noncallable busted convertibles, they are worth consideration IF you are willing to accept the current yield as being what you’re getting for as long as you hold them.

      Another company for your consideration: Connecticut Light & Power. They have preferred issues CNTHO, CNTHP, CNLPL, CNPWM. Although they are all callable ( and have been so for years ), Grid believes there is very low likelihood of call. I own CNPWM & CNTHP. Recently sold CNLPL and now looking to buy back.

      Good to see another like-minded income investor here. Look forward to your input on the rationale you employ in choosing which issues to buy & hold.

    3. Adrian–thanks for the compliment–the folks here make it all worthwhile. Your sock drawer looks kind of like mine–in particular your CEF preferreds–I love them–not for their coupons necessarily, but I know the safety and back in 2008-2010 Gabelli proved to us what happens when the shix hits the fan.

      Here is a poorly titled article (they did the titles then) on Seeking Alpha from 2011–I recount the fall of a Gabelli CEF in later 2008 and 2009 and how they reacted. Good history for folks.

      https://seekingalpha.com/article/265958-preferred-shares-of-these-4-cefs-for-a-conservative-outlook

    4. Great list, thank you! About the PPX, what are you think is there a big risk this issue to been called in short time?
      Always looking at it but always afraid to buy )))

      1. Yuriy, a good thing to remember is most of these are ultra safe in terms of payment and future ones down the road. But for most a proper entry point is very important also. If you overpay you may not be happy. And on some you could get a double whammy…Overpayment and call notice slapped on you.
        Take AILLL, Its current yield is still way above current ute preferreds. So it represents relative yield value. But that $3 premium to par is just too much risk for me.
        And I am the Godfather of AILLL in investing forums and am saying this. But I just wont risk owning it at $28. But I will trade in and out of it when I can if I get right entry points. And some have held so long they are willing to risk as it has been good to them, so I get that….And it may never be called. Just my opinion being one who owns them, but many are not real good value risk reward be it a call or just purchased too high. But this is an opinion based on people who value capital protection more than security of payment. Many people may feel they are in it for income, but change their minds if one later finds they overpaid by 20%. Something to ponder.

        1. Grid, yeah this sock (ailll) is on my drawer too ))) bought it approx. 1 year ago below $27. But there were another times when no one expected that the Fed will go to cutting rates and there was no such steong fear about redemptions.
          Now I think to buy more Ala.Pr.U but it bothers me that I’m already too deep in Canadian resets. Also there was a good opportunity at DUKH but my bid was too greedy so I missed it… and other utes mostly are too expensive now, above the $26 is a level which is unacceptable to me. So the PPX at today’s level (25.70-25.80) generally looks fine to me, will think whether to take this risk or not.

          1. Yuriy, PPX has been a frequent hold of mine since it went past call. Im presently out. In past shortly after exD it would drift down into 25.30s to low 40s and I would load up and sell around $26 usually pre exD. But it really never drifted down much after exD this time. I love buying past call above par issues, but I try to stay sensitive to redemption and risk/reward. I have never got stung with holding the call bag, and hope to continue the streak.

        2. Well, I simply could not stand it, seeing a bid for 200 shares of AILLL at $28.50. So I sold 200 shares to the bidder.

          Wanted to sell more at that price, but now the bid has fallen to $27.90.

          If it falls to the $27.50 level before next XD ( April 10 ) I will buy back for sure.

    5. Although a common stock, Regions Financial Corp (RF), is in my sock drawer–4.0% dividend. But, given an opportunity to collect 2 years of dividends, I sold RF today. History indicates that I will have a chance to buy it back within the next several months and stuff it back into my sock drawer.

  5. question about CTPPO. quantum has it callable at $110 and fido says it’s not callable. i tried tracking down the prospectus for it but couldn’t find it. looks like EAS got bought by iberdrola in 2008.

    1. Woody–I had it callable at 110, BUT this shows otherwise. From 10K filing in 2005–there were just 5,713 shares outstanding which includes 533 shares owned by CMP Group.

      6% Noncallable (2)

      $100

      5,713

      $571

      $571

      1. thanks tim. that’s kind of the info that i found. just wasn’t sure which
        one was correct. thanks for the great website.

        1. Thanks Woody. That filing specifically said ‘noncallable’ so I assume that is a fact.

          1. You will have to go deep into an annual SEC filing (I think I had to go back a few years, also) to find share count. I could be wrong, but I remember a number closer to 2000 shares. And the preferred would take over the majority board if not paid (which it never has not been). This is a very old preferred. When I was flipping modest amounts of it years ago, I dug pretty hard into the history of it. Its too hard to mess with to get shares much anymore. I would like to be definitive for you but this was a hard one to dig up if memory serves so I am not doing it again.

            1. Grid–I knew you might be familiar with the issue–the 5xxx share count is from a 2005 so not certain if they may have bought some in. When I feel energetic I might deep further.

              1. Tim, Im usually pretty sure on these things as I researched them all. But here I put the warning bells out as I am suffering from a 75 year old brain trapped in a 55 year old body. So my memory could be incorrect without verifying. But people “chasing these types” need to be aware of a few things. Even if some are snagged it is a Pyrrhic victory if paying too much. As these have high bid spreads. To put it in perspective…In past TWO YEARS CTPPO has traded 30 different times…Total amount of shares traded from those transactions? 213 shares give or take one or two shares. 17 of those 30 transactions would have netted you a one share purchase. Only one of those transactions would have netted you more than 23 shares, and it wasnt even 50. So one has to keep that in mind. I bagged a 100 shares a few times but both were years ago.

  6. TIm;

    I appreciate the tip on the AATRL! Just purchased a small position myself at the same price of $48.10. I would not have known about this one without your assistance.

    Thank you.
    Mike Havel!

    1. Great–I do have to correct my research on this as is in not redeemable at $50–they can end the trust and call in the shares if they do, but there is no mention of the $50 in the prospectus (although that is kind of assumed–but they word it more like–they can liquidate the trust and distribute the proceeds, without a $50 mention).

  7. I bought a small position for the sock drawer of the Affiliated Manager 5.15% convertible Trust Preferred (AATRL) this morning for 48.10. This issue is callable now at $50 (it is a $50 issue). It is in the drawer now and won’t see the light of day for years I hope.

    1. Do you mind showing me where in the prospectus is says it can be called at $50? The only info I could find is:

      AMG may elect to redeem the junior subordinated convertible debentures prior to maturity, without payment of premium, for 100% of the principal amount plus accrued and unpaid interest and other amounts to the date of redemption:

      • in whole at any time or in part from time to time on or after October 15, 2012 if the closing price of AMG common stock for 20 trading days in a period of 30 consecutive trading days ending on the trading day prior to the mailing of the redemption notice exceeds 130% of the then prevailing conversion price of the trust preferred securities; or

      • in whole, but not in part, at any time following certain specified events relating to a change in the investment company or tax laws that adversely affects the status of the trust, the trust preferred securities or the junior subordinated convertible debentures.

      1. As I understand it, this is a broken convert. No chance of a call since the call price is so far away. It does mature in 2037.

        1. Thats right RetiredBroker. I like ‘date certain’ issues if the date isn’t too far out–like some that at 2102 etc.

      2. Hi Landlord–Redemption of Trust Preferred Securities

        The trust will redeem all of the outstanding trust preferred securities when the junior subordinated convertible debentures are paid at maturity on October 15, 2037. In addition, if AMG redeems any junior subordinated convertible debentures before their maturity, the trust will use the cash it receives on the redemption of the junior subordinated convertible debentures to redeem, on a pro rata basis, trust preferred securities and (unless there is a debenture event of default) common securities having an aggregate liquidation amount equal to the aggregate principal amount of the junior subordinated convertible debentures redeemed.

        1. Tim – but the junior subordinated convertible debentures have the same terms as the trust preferred and I don’t remember seeing any callability other than at the stated maturity… The trust does have the ability to liquidate the trust and then distribute the debentures to the shareholders, but I’m not quite certain how that could negatively impact AATRL holders because you’ve bot the trust relying solely on the quality of the debenture in the first place.. AATRL shareholder should be indifferent to owning the preferred or the underlying debenture and might in fact ever prefer to own it outright, wouldn’t he?

          1. 2WR–I am going to have to do some deeper digging–you and Landlord could be correct–which wouldn’t change my opinion, but would be nice to know for certain.

            1. Tim – As I remember the only true callability factor on AATRL had to do with circumstances having to do with trading level of the common where they could force a call if shares were trading above convert price for x number of days… AS this is a broken issue from that point of view, I’m viewing it as non callable… would love your set of eyes taking another look as well…

              1. Yeah. AATRL would have to trade at/above $260/share for 20 consecutive days in a 30 day period. At $80/share now, it has a long way to go from a few years ago where it was at $200/share.

                As long as AMG can pay its interest on the junior subordinated convertible debentures, this will be fine. A quick look at the books and I come up with 8 x interest coverage.

        2. Thanks, Tim. So it sounds like it matures at $50 but we’re protected from a redemption until the maturity date unless one of the events triggers (like a tax law change). So, even if this went to $55, you would calculate the desirability of AATRL based on YTM with a 2037 maturity date. You don’t need to worry about YTC.

          It was unclear to me if this was a broken convertible like RLJ-A/WFC-L/BAC-L but it sounds like it mainly is with the exception that it’s not perpetual and will eventually mature at par in 2037.

          I think the uncallable feature and long maturity date make it a reasonable hedge to floating preferreds or Canadian resets.

          1. Falls Church–yes with a current yield in the 5.4% area and a pretty good credit rating I’m not sure you can do much better–right now. 2whiteroses and Landlord Investor opined they didn’t think it was redeemable early–my first glance said it was, but they may well be correct–I am going to dig a bit deeper.

            1. Oops, auto-filled my handle from another website. That was Landlord Investor writing, not Falls Church (or rather, we’re one and the same)! Thanks, Tim for looking into this. Would definitely appreciate your opinion on callability.

            2. I fully agree with you, Tim. This is the best on the board right now at 5.4% and 4.5 – 5% under Par.

    2. Tim, did you trade this through fido ? i use fido and they don’t allow
      trading with that ticker. Thanks

  8. Along the lines of the Gabelli callables noted below, what do folks think of the WFC callables, O, N and P series? 30+ bps more yield than WFC-Z, 20+ bps over WFC-L and very unlikely to be called unless rates go lower without spreads rising.

    1. Surely better than WFC-Z with lower yield. I’m never afraid of calls at stripped par, just buy something else if called.
      Wells Fargo has had some problems and scandals lately, spooking some investors.Is that the reason for the price drops? As long as they are too big to fail it’s probably no big deal.

      1. Well, it’s not quite at stripped par. Around 20 cents above that level. When there’s call risk, you always have to ask yourself whether 20 cents is worth the risk to earn an extra 2 cents per quarter over WFC-Z. However, it really seems like a call is 99% unlikely unless we start seeing banks issue preferreds below 4.5%. The thing is, even if the 10 year went down another 25-50 bps, it’s not necessary that preferred yields will follow suite. If spreads increase, then yields could remain the same or even go up.

        Hard to imagine that WFC would be able to issue preferreds below 4.5% if the yield curve is deeply inverted.

        To make a call even less likely, I think WFC-N is your best buy. The P series is a buffer as it has a 5 bps higher coupon and would be called first. Double calls are extremely rare. You could go one level safer on call risk and go with the O series. Then WFC would need to make a simultaneous call of three series of preferreds for you to get hit with a call. Probably never happened in the long history of preferreds.

  9. RILYZ @ 25.20 for 5% YTC in 4 months. Too risky to be considered sock drawer?

    GAB-G, GAB-H, GGN-B. Solid 5%. Price is vulnerable to rising interest rates.

    1. Martin G–I know you trade so your risk tolerance is much different from mine, but none of the B Riley issues would go in my sock drawer–but I do have some of the Gabelli’s there–but now in smaller quantities as I had to let a couple go on outragerously high prices.

    2. I own RILYZ with expectation of call in mind given they called RILYN with same 7.50% coupon on 12/30/19. However, I agree with Tim it’s a little too dicey to be a sock drawer candidate. Also, I’m beginning to rethink the call possibility. When you look at where every series of RILY preferreds is trading you begin to wonder about whether the level RILY could actually refinance or issue another series of notes would be good enough to be economical… Even the RILYP perp preferred’s level doesn’t give them much incentive to refinance RILYZ. So given RILYZ’s stated 2027 maturity, I’m beginning to think there’s a good possibility that RILY might enjoy the relatively longer maturity of RILYZ more than they’d relish retiring the coupon. With that in mind, I’m beginning to think they will more likely leave RILYZ outstanding at first call OR they may combine a refinancing of both RILYZ and RILYH at that 5/31/20 time but be more incentivized to call RILYH than RILYZ for purposes of extending their debt maturity structure… Were it not for RILYH being outstanding with same initial call date, I would bet RILYZ lasts beyond the first call… On the plus side, though RILYZ already offers the best YTM of any of the series but RILYH offers a much better YTC for the same 5/31/2020 call date than RILYZ.

      1. Yes, they called RILYL with the same coupon but not until over a year after it became callable and less than 12 months before its maturity date. It’s just not prudent to get too close to a maturity date before rolling a bond if you’re a high yield issuer. So, the question is if the driving factor in the RILYL redemption was the ability to refi at a 100 bps lower rate or the approaching maturity. If it is the latter, it could be years before Z is called.

        I prefer G as we get a chance to see what happens with Z first. As long as Z is outstanding, there’s a buffer against a call of G (plus G is not callable until the end of the year).

        The RILY bonds are safer than they appear due to their high coupons. It’s kind of like being in a higher tranche in a CLO. The lower coupon RILY bonds/preferreds would have to go seriously below par before RILYG/Z would have a fair market value of below par.

        1. Landlord – You’ll pay up 30 basis points on RILYG vs RILYZ on a YTM basis? You and I are sort of agreeing on why Z may stay outstanding longer than the first call, yet you’ll pay up for G… I don’t get it…. and for me, I’m looking for the shorter actual or implies maturities as the ay to play RILY notes – it’s a take it one maturity at a time kind of strategy for me on a credit like this… a relatively conservative approach to some relatively high yield situations. That’s why I’m rethinking Z and wanting to be more balanced between Z and H.

          1. 2WR, I think it depends on the spread between Z and G. At 15 cents, I think I prefer G. G won’t get called for several months at least after Z gets called. Sure, G may drop some initially on the news of a Z call. But my guess it goes right back to where it was a few months later, after people forget about the Z call. That’s when you have a chance to exit G.

            Also, while you give up 30 bps on YTC with G vs. Z, your total return on Z is higher than owning G, getting called on the call date, and reinvesting proceeds in a money market fund until G is called at the end of the year. Who knows, maybe by December the preferreds market has gone down (unthinkable, I know) and RILY’s other bonds are trading with 6.75% yields and it no longer makes sense to call a 7.25% bond early.

            1. LI – But that’s what I’m saying now – that based on current prices of RILY issues today, it doesn’t make much economic sense to call Z now if today was 5/15. Based on current levels, including the perpetual preferreds where do you think RILY could issue a new issue now?? Ooops! Forgive me.. I’m thinking rationally – I lost my mind for a moment and forgot that practically anything can be issued right now for no less than 5.50% LOL.

              1. 2WR, I’d benchmark off of RILYN which is trading near par and yielding 6.43%. If RILY wanted to issue a new baby bond today, I’m guessing the yield would be 6.25-6.5%. If it is 6.5%, I think it makes sense to refi RILYZ but not RILYG (75 bps isn’t really worth it).

                1. LI – N is only a 2026 maturity and I think they’d want to go longer than that in a refi…. It’s RILYH I’m talking about as perhaps the slightly more likely one to be refi’d than RILYZ even if it’s a 1/8 lesser coupon…. If they have to issue in the 7 year range, perhaps you’re right that 6.50% would be ballpark and honestly a refi is what I’m hoping for but I think they’d want to issue a longer maturity and then 6.50% may not be as likely as say 6.75% at best. I realize “hoping for” is counter intuitive, but all I’m really looking to do in this environment is figure out how to beat short term rates with quasi short term investments….In any event, I do think their corporate desire will be to extend their debt load as long as they can with any new refi. Guess we’ll know more only 3 months from now….. i.e. 30 days before 5/31/20. The good thing imho with these issues at these levels is that if I’m wrong, they’re more likely to appreciate in the interrim barring a RILY implosion, so you can win either way.

                  1. 2WR, I take the opposite tack and hope they don’t call it. I want to sit in the zone where a refi is unlikely but the coupon is above market for as long as possible. That’s the zone of highest alpha and provides a margin if safety.

                    I agree they probably call RILYH first but that one has penalties for calling it before 5/31/2022. They probably call a few months after that date. After they call H, then it will be Zs turn and then finally G. This of course assumes no change to their cost of debt capital. If I see RILYN and RILYO break par, I’ll hit the eject button.

                    1. LI – Oh man, I’m getting so sloppy in my old age….. I can’t even read my own notes correctly.. Even though I had it written down correctly regarding call dates and premiums on RILYH, what I last wrote to you assumed that H and Z somehow both were callable at the same 5/31/2020 call date without premium call on H…. Rediscovering that’s not the case naturally has me doing a Rosanne Roseannadanna and saying, “never mind.” That certainly explains why I there’s a huge spread gap between Z and H as to YTW. Your approach is certainly more rational or more recommendable to most people, however I’m hoping Z is experiencing a “pinned to par” phenom because of its near term but not necessarily likely callability without premium and I like that. I just prefer the shorter runway to discovering what might happen on to these kinds of dicier credits in my balliwick. I realize that’s unconventional thinking these days.

    3. I recently started using RILYZ as a “short term” parking spot for some excess cash. 5% YTC. Call is likely, but if not I’m more than happy to hold longer at a $1.88 div. Maybe not quite “sock drawer” but a good fit in one of my buckets.

  10. Can someone please post further information, such as par value, coupon, investment grade, on the Southern Bancshares preferred issues, SBNCM and SBNCN. Quantum does not list and Fidelity provides limited info.

    Also, there is an E series preferred from SBNC (CUSIP 842243404), but no stock symbol. Even less info on this one.

    Thanks

    1. These securities are held primarily by insiders and a few folks on here that have gotten a few shares of SBNCM. They are not covered by any analysts that I have ever seen and hence have no investment ratings.

      SBNCM and SBNCN both pay $0.92/yr. SBNCM does have better “liquidity” I believe.

      The company basically went “dark” in 2006 and delisted the securities. I have been able to find a bit of documentation regarding what led up to the delisting by digging into the SEC Edgar database. This is the most comprehensive document that I can find when they decided to delist:

      https://www.sec.gov/Archives/edgar/data/703904/000119312505244652/ddef14a.htm

      and was one of the last things filed with the SEC by the company.

      1. Actually, they only pay $0.90 per year, two quarters of 22 cents and two of 23. I think they didn’t want to deal with half cents. lol

        At any rate, my shares are now more firmly in the vault. No more selling any @ 4.5% yield.

        Not even one. 🙂

    2. That other issue you mention Ken is a total private placement. Here was last quarters financials.
      https://www.southernbank.com/wp-content/uploads/quarterly-september-2019.pdf
      Actually they say on their website if you want to buy any common or preferreds you need to contact an owner and see if they want to sell. Aint that hilarious?
      I have dug up the details before but had to deep into the 90s and dig around before I first bought in 2018. Im not going there again. Fellow poster Aarod kept some of the link and reposted it not long ago. Maybe go to search box up in corner and type in SBNCM and you may find the link.
      SBNCN is only about 40k shares and insiders own over half. Probably since it was issued. SBNCM has about 250.000 shares, it also has insiders owning.
      The “Holding” family controls the bank. About 6 of them own over half the common float and them and offsprings own a lot of the preferreds too.
      The preferreds were issued in mid 1980s. They originally were a convertible preferred. But that option expired about 25 years ago.

      1. Thanks Gridbird. I appreciate your historical knowledge of these “oddball” issues. Very entertaining.

        1. Ken, I love the oddball issues too, as they are the ones that have the history and usually are safer too. Another useless tidbit about SBNC is the common and preferreds. They cant totally ignore them as they vote also. There are now only about 85,000 common shares. The preferreds get to vote just like the common stock holders do. So though preferreds through a 38 to 1 ratio actually get about 7600 votes. But as mentioned the family has control and also owns a lot of the voting preferreds so they have their flank covered.

    1. Sorry, but ORCC is not something I would keep in my ‘sock drawer’, much less my vault:

      “Owl Rock Capital Corporation is a specialty finance company. The Company is focused on lending to the United States and middle-market companies. The Company invests in senior secured or unsecured loans, subordinated loans or mezzanine loans and, to a lesser extent, equity-related securities including warrants, preferred stock and similar forms of senior equity, which may or may not be convertible into a portfolio Company’s common equity. Its investment objective is to generate current income and, to a lesser extent, capital appreciation by targeting investment opportunities with favorable risk-adjusted returns.”

      JMO 🙂

      1. camroc – I agree – business development company and sock drawer should never appear in the same sentence…. ha

  11. I’m happy to share my list, as I look for others. As Grid said, price is important, but this should provide some context. This is predominately for my parents account, where they’re spending 3.5% so if I can get 4.5%+, with a lot of safety, then I’m happy. I have a tendency to favor things that are busted, old & forgotten, or are trading below LV and have some behavior that I want. All of their assets are in IRAs, so I’m indifferent on QDI (and ignore Canada). Personally, I pretty much only buy IG, QDI above 5.5%, which I see as the break-even on equity over next 5 years.

    WFC/L, BAC/L: bought at higher yields than current, own
    SLMNP: 5.8%, own
    IPWLK: 5.5%, own
    IPWLO: don’t own
    WELPM: still waiting to acquire
    MS/A: Min rate of 4%, Libor + floater, bought at 4.5%, under LV so if it gets called I’m happy, and if rates move up substantially it hedges things listed above. Also have GS/A as well. Very similar. Much more volatile in price, but I like the hedge.
    LXP/C, RLJ/A – own
    NYCB/U – own
    KTBA – don’t own yet

    That’s my list… still looking for more idea. Thanks all.

    1. MrInprohet, you must have bought the same book I did, ha. I have owned all of those at some time. The trouble with many of my sock drawer issues is I will move in and out of them based on where they are trading in relation to each other. So I wont mention them as it can be fluid. So I will only post the few issues I own I will never sell in my sock drawer.
      SBNCM (learned my lesson and got lucky buying them back)
      SOCGP (will never sell, got in a good entry point and love the uncallable feature and always top shelf credit rating)
      CNIGO (love the term dated 9/23 feature)
      CNIGP (Owner optional convertible anytime with 9/2026, par $20.87 mandatory maturity.)
      CNIGP is the most fascinating issue I own. As they quietly changed provisions to owner converting at anytime into 1.2 common shares. It is already conversion positive for me, but Im gonna wait years to maximize the 1.2 factor. A thing of beauty.
      The CEO and Gabelli own 35% of the common float (CEO 18.3%)
      They both together own 53.7% of the small 245,000 CNIGP share float. They have not sold a single share since 2016 origination of the then issuance to shareholders only (they created a trading ticker later). They aint sellin’, I aint sellin’. Combined as a unit CNIG and CNIGP are my biggest holding.
      I forced out a seller at $23.70 for a 100 today, but this was to top off the tank as the others were bought cheaper.
      German has done a heck of job since he took this company over about 15 years ago. Reinstituted the common divi and it has increased 10 straight years.
      Like SBNCM, this tiny public utility is an insider only club. 7 people collectively own 57% of the common float.
      Caution, CNIG and CNIGP are not issues you just decide to buy and then buy. You have to know the terms and proper entry points.

  12. Another illiquid selling today, besides the CL&P issues mentioned in other threads, is PPWLM. It’s uncallable and yields ~4.6% @ the 152 ask. I added more earlier this week. It’s perfect for me. No sweat, no fears, no tears. Just pay me, Warren, while I sleep well.

    JMO

    1. I’m hoping to grab a few PPWLM as well, but got to be patient.

      One day – maybe – it will come.

      1. I picked up a 100 shares of PPWLM yesterday at around $152. 4.6% for non-callable and that level of quality didn’t seem like a bad bet. We’ll see if this was a good deal or if I should’ve been more patient. In any case, I plan to hold it forever.

        1. I also picked up 200 shares PPWLM at $152. Trying to get more at $151, if anyone wants to sell.

          This one joins the rest of the community in my sock drawer. AILLL, CNTHP, CNPWM, IPWLK, NSARO, APRDM, BAC-L, WFC-L, and FIISO.

            1. Yep, got impatient, since I know that KYN-F is going to be called in a couple weeks, wanted to find a solid and secure replacement for the funds.

              BTW, I sold 100 shares of CNPWM today at $51.50. Made a few cents and lowered cost basis on the rest of my position.

              1. I can here it now, Inspbudget, as I type. Your saying to your wife, “Dinner is on me tonight, but lets keep it under $50”. 🙂

                1. Funny you should say that – we have a new pizza store open in our neighborhood, called Pizza Press. Got good reviews about it, so we’re going there tonight. I’ll be sure and keep the cost at or below 1 share of CNPWM.

                  That leaves me the option of bringing her there another 99 times this year.
                  🙂🙂

          1. Great, Inspy. I was afraid you were gonna mess around and miss PPWLM. Sellers can disappear quickly on these illiquid treasures.

            JMO

            1. Yep, yep. I am glad I did not wait, and try to squeeze out a few more cents. very likely would not have gotten the PPWLM shares.

              I seem to remember that someone – was it you, or Grid – said that there are only about 15,000 PPWLM shares floating around ? Is this correct ?

                1. I was looking at the shares outstanding the other day before I bought (see below). I didn’t want to screw around with trying to get a slightly better price. At one point, I saw a bid of $151.80 and an ask of $152 which I was amused by. If you like it at $151.80, you should probably just pull the trigger at $152. When Capital One is issuing at 4.8% with a BB S&P rating, 4.6% from a BBB+ non-callable utility seems like a much better option.

                  Schedule Page: 118 Line No.: 24 Column: c
                  Outstanding shares of preferred stock as of December 31, 2018 and declared dividends on preferred stock during the year ended December 31, 2018 were as follows:

                  Shares Dividend
                  6.00% Serial Preferred 5,930 $ 35,580
                  7.00% Serial Preferred 18,046 126,322
                  23,976 $161,902

                  https://www.brkenergy.com/assets/upload/regulatory-filing/2018%20FERC%20Form%20No.%201%20Final.pdf

                    1. Sam, that is an excellent question if one doesnt know. The answer is hell no they arent immune if interest rates rise. I just posted a chart that showed PPWLM had a trade at $114, 7 years ago. In fact based on ones entry point, the perpetual non callables are technically the ones MOST exposed to interest rate rises. And the inverse is also true. They are the ones most protected from interest rate declines.
                      And your question also implies the purpose of why they were bought. Basically most like Camroc and Inspbudget are buying these for protected income streams with some undetermined residual annuity sell value after they are underground and unconcerned at the price they are sold at.
                      Well Camroc doesnt care at all, but Inspy will occasionally whine about a price drop, but he is just whining as he knows what he signed up for, ha.
                      What ones goal of buying basically is conceding a trade off exposed to another problem. Take the recent KYN-F that is just been called. Owning that was a protection of capital with some modest income received. But the risk was at redemption being exposed to trying to reinvest at even lower yields and missing out on capital appreciation of the perpetual noncallables. Every purchase has their risks and rewards depending on what your purpose is.

                    2. Sam – Not sure if those are rhetorical questions but I’ll answer. Prices of noncallables should drop if interest rates go up. I’m buying more for the safety and annuity than the market value.

                      Here’s some other considerations…How many Boomers will be retiring in the coming years? Will they be shifting more of their portfolios from stocks to fixed income? If so, what will all that demand do to interest rates? What if the market only requires a 4% return on this type of investment in the future (then PPWLM should trade around $175)?

                      No one knows what the interest rate environment will be over the next 10-20 years. It probably makes sense to diversify holdings (fixed, floating, fixed to floating, resets) to hedge appropriately so you aren’t making a huge bet either way. For my preferreds, I’m about 75% fixed and the remainder in non-fixed. I think interest rates could stay low for a prolonged period of time but I’m not putting all my eggs in that basket because I very well could be wrong. I also hold a certain amount of cash in case of emergencies and that cash sits in an online savings account earning a floating interest rate. My Marcus savings account was yielding 2.25% a year ago and now it’s 1.7%.

                      If prices fall further on PPWLM down the road, I’ll probably buy more. Getting 4.6% on a portion of my portfolio gets me to my goal.

                  1. Tex, ya got me thinking about the “good old days” ha about preferreds. Here is some comparative pricing of some old illiquids with a ute issued that year. I chose Apr. 2013 as it was one month after IPLDP went to market (and just prior to the Taper Tantrum that rocked preferreds in a beat down manner) and people were appalled with the hideous 5.1% yield and immediately balked. Here we go.. No statement is being made here just reviewing. Not earth shattering results here being illiquids. I remember back in that time period buying PPWLM several times a year and flipping for $10 gains, rinse and repeat. But that was before everyone found the illiquids besides me.
                    April 1, 2013 10 year was 1.76%… Today its 1.51%
                    Then…
                    PPWLM (uncallable) $114 6.14%
                    NEWEN $112 5.35%
                    SOCGP (uncallable) $29.05 5.16%
                    WELPP $84 4.28%
                    IPLDP $23.55 5.41%

                    Today
                    PPWLM $151.80 4.61%
                    NEWEN $122 4.92%
                    SOCGP $32.40 4.63%
                    WELPP $90.10 4.0%
                    IPLDP $25.46 5.01%

                    1. You know me well, Grid. You know me so well. And BAC-L was $1244.68 on 1 Apr 2013. Even lower when I started buying it a little later.

                      BTW, all this interest in the precious illiquids you so lovingly uncovered is your own damn fault, darlin’, due to your magnanimity and generosity, your sharing spirit.

                      Had you kept all that fine research to yourself, you’d likely still be able to play happily in that field of rarities without much encroachment or competition from us folks in the peanut gallery.

                      But I would be ever so much worse off in my dotage. I can’t even begin to thank you enough for my portfolio’s solid foundation.

                      Namaste

                    2. Camroc, thank you for the kind words. But I must confess, I didnt like you at all the past 2019 year for agreeing to sell to you my SBNCM shares despite it being a very then generous offer. But I forgive you now since I was able to buy them back and plus a few additional ones last week finally. All is forgiven, HA!
                      Remember our discussion a few days ago with goofy ways to force some sales on illiquids? I found another trick to snuff out 200 more CNIGP on two different days. I would put an ask at a price and nothing would hit. Then one day right at market close I put a sell out at exact same price I was bidding at (I had closed the bid out before). The ask of course expired, but the next day the exact ask price come up and I then jumped on those. That worked twice. I got the idea from when it happened on same situation with CNIGP at 26.70 when I left an ask expire overnight. Except on that snag, it resulted in a crazy bid that resulted in someone buying 50 shares at $40 immediately after my purchase. So I threw 100 out at $33 and they were bought immediately. Very weird. That was the easiest and quickest $600 bucks I ever made in a few minutes time off a 100 share purchase though.

                    3. Some additional thoughts, the recently issued MET-F (BBB, non-cumulative) closed at 25.58. That yields 4.64% but the YTW is 4.2%.

                      PPWLM (BBB+ and cumulative) doesn’t trade a lot so it can be hard to acquire shares. Over the past couple weeks there has been a lot of volume. Specifically, 1,405 shares moved from 1/28 to 1/30 which represents 7.7% of all shares outstanding. The financials for PacifiCorp note that the company controls the majority of the outstanding preferreds too (“BHE controls substantially all of PacifiCorp’s voting securities, which include both common and preferred stock.”) so it’s hard to tell if and when these will be available at “market” prices again. Yesterday the ask was $184 and no shares moved so the selling may be done for now. In today’s environment, $152 for a 4.6% yield seemed like a fair price to me so I picked some up.

                      Here are some other illiquid utilities that traded Friday for comparison:

                      – AILIO (BBB-) – Shares bought for $100.60 (97.7% of redemption price) and 4.2% yield
                      – UEPEO (BBB-) – Shares bought for $109.99 (99.9% of redemption price) and 4.1% yield
                      – CNPWN (BBB+) – Shares bought for $51.50 (101% of redemption price) and 4.1% yield.
                      – HAWEL (Ba1 – non-investment grade) – Shares bought for $22.70 (108% of redemption price) and 4.4% yield. I tried to save the best for last with this one.

                    4. Tex, Holding companys (or the actual issuing subsidiary company) owning the majority of old non callables is basically a given for the few out there.
                      See most of these were issued by an independent company. When they got acquired typically the preferreds have to give their blessing too. So they would get a tender buy the majority of the float to get the approval. Plus many old preferreds have some very protective covenants. By controlling the float you control the wavering process.
                      Lets use CTPPO as an example. It is non callable but has a float of 2000 shares. The prospectus shows preferreds take over the board if 4 non payments occur. Lets say I own 1001shares ($101,000 par value) and somehow Central Maine or Avangrid got into trouble and didnt pay the preferreds for 4 quarters.
                      Do you think they are going to let a ~ $1 billion in sales subsidiary ute be totally controlled by Gridbird and his $101,000 investment? Hell I would never declare a dividend again, control the entire company myself. Then when Im 80, I would declare all the past dividends the past 25 years and step away. 🙂 But that wont happen because the 2000 float isnt the amount available. The company never retires the preferreds they repurchase, they keep them for ownership control.

                    5. To further Camroc’s post, I add my gratitude & thanks to Grid for introducing me to the mystical world of Illiquid Ute Preferreds several years ago – probably 2015 or 2016, no longer remember.

                      A whole new language appeared out of the fog, that I had to learn quickly. Terms like TRUPS, ring-fenced, underlying bond collateral, Tier 1 capital, and others.

                      I called Grid the Jedi Master of Illiquid Utes, and a well deserved title, for sure.

                      Would have been far better off today if I had just bought everything he mentioned at that time, and hung on thru thick & thin, ignoring the noise of battles near and far.

                    6. Gridbird – Here’s the weekly volume of PPWLM over the past few weeks:

                      – 3,950 for the week of 1/17
                      – 7,748 for the week of 1/24
                      – 1,479 for the week of 1/31

                      In total, that’s 13,117 shares that moved. The week of 1/24 was the heaviest volume week in the past 10 years. We know that 18,046 are outstanding and the company controls the majority. I get curious about what the activity represents. It looks like at least some portion of these were being flipped over the past several weeks. Perhaps some portion is coming out of someone’s estate that is being liquidated for heirs?

                    7. Tex, yes that is an interesting amount of roll over on the float isnt it. PPWLO hasnt followed in kind though I see. One never knows the source, so your guess is as good as any. Logic would lean your way wouldnt it. Im mean whats the odds of a bunch of people with 200 odd share lots all deciding to sell at the same time on one of these types?
                      I havent looked but has there been enough price volatility for any of the shares to be recycled during this stretch?
                      Its hard to tell..Take CNIGO I own. It has about 255k float but less than half that available. But last couple years it really was just a very small amount of shares being recycled over and over. The reason I know is either me or another online friend were either directly buying or selling on one end of the transaction probably 90% plus of all the transactions. So in essence just a few thousand were really rolling around and the rest never were being traded.

  13. An example of esoteric happenings in my vault concerns recent trades in SBNCM.

    Somebody dumped a bunch on 21 Jan @ 15.02 ask, which never changed as a few of us gobbled it up.

    A couple days later, the 15.02 ask was still showing but there were no shares available in level 2. So I put up 100 @ 20 just to change the scenery. It did.

    Then the bid began slowly increasing until it hit 15.56. And on 27 Jan someone bought 25 of mine @ 20. The shares disappeared and the $ hit my account, but I don’t see the transaction anywhere else and there’s no time & sales data for it either, at least not anywhere that I can see.

    So. This is day 2 after my little surprise trade and the transaction is not showing up anywhere.

    Grid tells me this is not that unusual and that it might take a while to show publicly. Then he posted some of the arcane tactics he’s had to use to shake these illiquid things free without a tree falling on him. Wow.

    Anyway, that’s a recent tale from my vault. I’m still waiting and trying very hard to learn patience and caution with these delicacies because they do seem to fit my timeline and personality to a T.

    JMO

    1. I believe internalized transactions don’t have to be reported to the tape. So if the buyer & seller are at the same brokerage and the brokerage can internally match shares, the beneficial owner doesn’t change so it doesn’t get reported.

      1. Tim. The fruit isnt always there. And it doesnt always work either. Remember they usually are illiquid for a reason. Either a very low available trade float, or nobody is willing to sell. The SBNCM was just a gift laying there for everyone to see. I bought 800 plus on the beach of Mexico and remembered Camroc was wanting some so I messaged him. By the time I waited I was only able to get 200 more. Fortunately he got his. I sold some to him over a year ago in a “private placed transaction” and regretted it ever since, ha. So I was pleased to get more this time than I originally had.

      2. It was a different stock and different circumstances, Tim. I think he posted about his tactics on another thread here, but I haven’t figured out how to find all of anyone’s posts here. I’m not sure you can on this site’s configuration.

        JMO

    1. SDMarc–issued so long ago I think they have forgotten it–or maybe as sometimes happens an insider owns a huge chunk of it so they don’t want it disturbed. Honestly they could call it tomorrow if they wanted.

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