Last week when we wrote about the new Sotherly Hotels new 7.25% baby bonds being issued with a 3 year maturity we stated we planned to purchase shares as it is not often you get a decent issue with such a short maturity date.
We did purchase 200 shares on Friday at $25.55. We had an order in for 500 shares at $25-$25.10, but with little volume trading we moved (2) 100 share orders up to $25.55 to see if there were actually shares available–there were a few and we filled the 2 orders. We did not re-enter orders for another 300 as we thought they might be available today at a better price.
Today shares are trading at $25.70–around 4 or 5,000 shares this far. Honestly we don’t think these will be trading much cheaper in the days ahead–the issue is too good–underpriced.
Note that the issue has an optional redemption period in 1 year so they could be redeemed at that time–thus it has a immediate call risk–BUT the early call would be at 101% plus accrued interest so at this moment the call risk is 45 cents. This means the yield to worst would be in the 5.5% area if early called.
We will lay back for a few days and see if we can garner a better price, although as mentioned above we don’t think it will get too much better.