We have had a couple new issues lately that have many of the attributes that I like for a spot to ‘stash the cash’.
It seems like there has never been a time this year (and last actually) when I didn’t have too much cash in our accounts. Each time you turn around one of our holdings was being redeemed. It is frustrating and of course expensive (cash pays little to no interest).
I determined last week that I would ‘stash’ some of that cash in the Eagle Point Income Company new 5% term preferred (EICPP now) and in the Hennessy Advisors 4.875% baby bonds (HNNAZ).
The primary attribute for these 2 issues are that they have short maturity dates–both in 2026. Short dated maturities tend to be less volatile than their ‘perpetual’ peers. The closer the maturity date the less the movement.
Additionally, at least in theory, these 2 issues are reasonable quality. EIC while a holder of CLOs (collateral loan obligations) holds primarily the debt tranche of the CLOs–versus the more risky equity tranche. The issue is rated ‘BBB’ by Egan-Jones (for what that is worth). This issue is still trading on the grey market under ticker EICPP.
The Hennessy issue is rated ‘A’ by Egan Jones (again for what it is worth). Hennessy is a manager of mutual funds and their revenue is derived from fees from the funds. While the company has lost assets under management the last few years, it is likely they will adjust and start to grow assets again. The company has been around since 1989. You can read about them here. This issue is trading on NASDAQ under ticker HNNAZ.
I have positions in each issue and will add on price weakness as I did this morning when the EIC issue fell from $25.50 to $25.30.
In summary I am going to use these 2 issues to stash some cash. I will collect the dividends or interest while waiting for better opportunities–whether that be a panic or higher interest rates which reduced pricing in current outstanding preferreds or baby bonds OR force new issues to come to market at higher coupons.
A good rule of thumb I follow is… don’t invest in anything in which I don’t care if it drops 20% ( i dont own shippers, hotels). I think a majority agree with this rule, but few actually live by the rule. When the market drops 20, 30%+, many investors finally capitulate and throw in the towel because the fear becomes overwhelming. If you read the comments here during covid, the penmanship was full of panic. They look at the value of their accounts and remember what it was before. If an investor cant stomach a 20+% drop, then they should have a large % in cash, mm, cds, etc.
I just rotate out of pinned to par, illiquids, etc, and buy on the large drops on the way down. Keep a list of the ones that avg greater than 7-10%+ premium over par and that is your buy list.
I just took some of my spare cash and bought a motorcycle…eom
Everyone,
SP Plus just announced their Q3 results:
https://finance.yahoo.com/news/sp-plus-corporation-announces-third-200500977.html
They are just about back to pre pandemic normal. Unless a SARS/EBOLA/COVID/ASIAN BIRD FLU pandemic gets out of control again. Nice profits and positive cash flow. Their checkbook isnt straining to cover the ~$60,000 in annual interest payments of CRLKP that is certain.
Gridbird, do you know if CRLKP suspended their Jan. 1, 2022 dividend?
SNewman:
CRLKP is actually an interest payment on a bond, so there should be a legal liability to pay it. I have no position in this security.
But something is very, very wrong here. Yet another reason why I have swore off these low-yielding roach-motel illiquid investments forever.
Certainly hoping you all get paid.
This happens EVERY QUARTER with CRLKP. There is nothing wrong, much less “very, very wrong”. Just sit around and wait and you’ll get your interest.
Ya, 100% agree.. Owned it off and on,and currently on for 10 years. It has never missed a payment since it was issued in late 1990s. Has had 3 different owners too, lol….But its always late….
KC – Still no payment. One brokerage claims CRLKP did not declare a Jan. 1 payment….
LOL. I had that with my first contact. I had to explain to him debt is never declared and that is a total non issue. I failed to get him to understand interest payment 101.
Disagree … it’s now one month since the July 1 distribution was due and there’s been no payment posted … and at least one brokerage insists no distribution was made (second time in the past year for that) …. In my book, if a payment is always at least 2 weeks late, some quarters 3 to 4 weeks late, and other quarters result in arguments with the broker about if a distribution was even made => there IS something very, very wrong here.
There is something, but hanging it on the appropriate offender is the problem. The front line workers just see what they see which isnt much, so they are going spew info with no source. I tracked this thing down twice through communications of the trustee that deposits the money to the DTC from SP. And both times the kind lady responded that she had indeed sent the monies to DTC with the time wired. She even gave me the DTC number which is not supposed to be known by the public. And the dude who answered told me I shouldnt have got the number and they dont communicate with the public. Just the companies and the brokerages only.
SP is not the offender because they dutifully do what they are supposed to do. They send the money to the trustee. The trustee (which is a bank) then sends proceeds to DTC. DTC then sends to brokerage. There seems to be a coding breakdown between DTC and brokerage. From what a few here have noted the monies not coded correctly get dumped into a “general pot” at brokerage and sits there until they desire to figure it out.
Now the why this happens? These are just guesses. Maybe the coding error comes from the fact its genesis was it was actually a 144a issue. Or maybe because three different companies have owned this trust issue since issued and its delisted. Or maybe its just lazy nimrods in the back office of brokerages. But two things you can count on… The company does pay…. And the brokerages will deny they got the money even when they do in fact have it.
Yes Fidelity just told me they declared the April payment but not the July one so they have no idea when it will be paid. Said to contact the company. This is getting rather later than usual, how do we get this resolved?
There isnt a dividend to be declared. Its a trust debt contractual payment. The Kandy lady I believe was the person I contacted last year. She was pretty prompt via email last year when I emailed her.
Would you mind sharing the contact information for the Trustee so we can verify that the July dividend has been transferred to DTC? I was on the phone with Schwab this morning and they still have not been able to find the payment.
This is what SP Plus sent me for the trustee contact. I haven’t gotten any response from them.
Bank of New York Mellon Trus Company, N.A
Jacksonville Office Main #: 904-645-1900
Relationship contact: Kandy Williams
Tel#: 904-998-4747
Kandy.williams at bnymellon.com
Just had an ad pop up for the State Street high yield bond ETF…
Look at the holdings…”High” Yield must be relative….
https://www.ssga.com/us/en/intermediary/etfs/funds/spdr-portfolio-high-yield-bond-etf-sphy
CENTENE CORP 4.625 12/15/2029
KRAFT HEINZ FOODS CO 4.375 06/01/2046
CENTENE CORP 2.5 03/01/2031
I took a quick look. It appears that 99% of the holdings are below investment grade–true meaning of high yield. I will stick with CEF’s that have similiar dividends, but hold a significant percent of IG holdings.
Larry:
As long as you realize that almost all CEFs use leverage, while ETFs do not.
Owning leveraged bond CEFs while short-term interest rates start rising can be a recipe for disaster. Signs are pointing toward the Fed starting its increased interest rate cycle as early as June of 2022.
Of course, we are starting from a very low base!
a non-investment grade bond with a coupon of 2.5%….
Oy vey..
Rob,
Agreed. I allocate 15% of my investment portfolios to CEF’s. These investments have very good track records, and I have held many for 10+ years. It appears that they have access to some prefers/investments that I cannot access. I am more comfortable with the leverage + track record than I am with a fund primarily invested in below IGs.
PRIF-F is another one on the higher risk spectrum. It is trading around $25.3o and has a 6.625% coupon, which is the 2nd highest of the term preferred. The call date is 2/25/2023 which gives it a total return of 8% at the call date. It matures June 2027
Fred – Though you may be right that if you’re called out of PRIF-F on 2/25/23 you will have gained a total of 8% more than you paid for it over the time frame, that’s not the normal way of figuring out what you have achieved…. “Yield to call” would be the conventional calculation and at 25.30 today, that would be 6.078%.
Why not stash cash in Gemini coin or Stairs…just saying.
Not sure about the effect of future rate increases on this one EP.C. … Thanks! to this website I already have a couple hundred bought a year ago early October so I have some cushion.
But to buy more now — Can anyone give me some confidence?
Hard to believe QOnline still doesn’t have EICPP posted ( nor LFMDP).
They do have HNNAZ tho.
It is there under EICA.
stacking-
thx- I looked at EIC-A(duh) I also had tried EIC, and they show no preferreds, etc.
Uncertain about the effect of future rate increases on this one EP.C… Thanks to this website! – I already have a couple hundred bought a year ago early October so I’ve got some cushion, but to buy more, now? Could someone lend me some confidence? ~
I am sitting fairly heavy on EP-C. What gives me confidence (for what it’s worth)-
-Partial Investment Grade
-Relatively strong parent company pedigree
-Callable at any time (tends to anchor to par)
-Matures in ~7 years (not perpetual or overly long duration)
The good thing about the defined maturity of EP-C is if it drops for some crazy
reason its YTM will rise higher, and that will force an eventual price anchoring. I dont own it, but will again. I actually bought KMI common stock in $16s recently so I still have my fingers in the pot.
I had some cash today and looked at it, but when I saw CRLKP become available at a price would buy at, I added to it.
I noticed that CRLKP is a convertible, Central Parking has been bough and sold a couple of times since the preferred was issued. Would you know what the conversion rate is? I believe CP is now owned by SP+ (Standard Parking).
King, It lost its conversion back with KKR purchase. It was replaced with the anytime owner optional conversion at $19.18 (basically a floor put, ala, SLMNP style). Look down a few more posts below, and you will see a more detailed explanation and most recent 10k filing explanation.
I just stashed some more cash on CRLKP as more shares are still there at $24. 5.25% 25 par, trust debt from SP Plus (parking lots) that matures in 2028.
Hi Gridbird,
Do you have a link to CRLKP parent company? Thank you!
SP Plus Parking.
Hi Shareholder… Brief history. Central Parking issued a trust debt convertible in 1998 that matured in 2028, with a convertible feature. An affiliate of KKR I believe bought CP about 10 years later. Many of the shares were tendered or redeemed at that time.
So the conversion was dead at merger, but a legacy owner optional anytime redemption at $19.18 was put in force from the buyout. SP Plus then a few more years later bought Central Parking from KKR outfit. So this original $50 million issue has been whittled down to about $1 million in par value left outstanding today. So not many shares left. Here is latest 10k filing from SP Plus about CRLKP…
Subordinated Convertible Debentures
The Company acquired Subordinated Convertible Debentures (“Convertible Debentures”) as a result of the October 2, 2012 acquisition of Central Parking Corporation. The subordinated debenture holders have the right to redeem the Convertible Debentures for $19.18 per share upon acceleration or earlier repayment of the Convertible Debentures. The Convertible Debentures mature April 1, 2028 at $25 per share. There were no redemptions of Convertible Debentures during the periods ended June 30, 2021 and December 31, 2020, respectively. The approximate redemption value of the Convertible Debentures outstanding at each of June 30, 2021 and December 31, 2020 was $1.1 million.
I have monkeyed with this issue off and on for 10 years, got a bit gun shy when SP had the above terms all butchered up and implied it was to be redeemed at $19.18 which made zero sense. Someone on forum here got on their arse and they got the terms written right which now match exactly what KKR had it after they had acquired it. I bought a bunch in $22 range, flipped for $24.50, but some back a bit under $24 and regretted not having my full stash. So I got them all back today plus some more. There appeared to be some shares left for taking at $24 at market close. That is right around a 6% YTM.
Grid-
Sorry to ask more- but you seem to be saying there is no conversion? SP Plus
is over $31…so, is it dead or still open to a conversion?
thanks
Gary, there is no conversion anymore. You can tender anytime at 19.18 which is the busted conversion strike point. Or wait for 25 maturity or 25 company call which doesnt seem likely.
Only about 40k shares outstanding. Oddly about 10% of float is trying to roll over past 2 days.
Grid:
Are you worried about CRLKP ending up on the dreaded “Expert Market”? I blew out of most of mine at $24.65 for this very reason.
I already have more than enough de-listed, non-traded, and Expert Market positions to keep me up at night!
It enters my mind, lol.. This issue is “piggy backed” and current. Notice SP filings are posted on OTC so that makes it good to go.
Tomm. who knows.. But 2028 maturity makes it fine by me.
Thanks to those who bought 3,006 of my CRLKP today. I bought these in dribs and drabs over the years at much lower prices and I hope they bring you happiness in these low-yielding times. I still have a decent chunk left, but I will use these proceeds for more interesting opportunities.
Karma, your welcome! I suspect that was your shares at 25 then 24.60 before dropping to 24 ask?
I dumped 400 at 24.50 and regretted it a while back. Glad to get them back at 24.
Yeah, I had a limit out there at $25 just in case someone came along, but there are some other things I’m looking to buy lately.
I sold at $24.25-24.40, all today. I first moved my ask down to $24.25 yesterday, then someone else immediately came in and sold at $24. A few more went for $24 today, but not from me.
I think CRLKP is still a fine hold with about 6% IRR to maturity, but I might be able to do better than that elsewhere.
I can relate, Karma. I kind of view everything as pieces to a puzzle. Sometimes I get overloaded with too many of the same pieces and need to move around. I was a little light in the mid range yield which for me is a 6% ish, and a somewhat limited duration.
GRID-
Thanks again.
One problem with any of this type that is seemingly ‘safer’ as a place for cash, is the way they can drop ( even if less than others) when the market does a dump- just when it is time to deploy the cash. Seems like a holder would have to have a lucky trigger finger to get out before the drop gets too big– then having to wait a few months for it to return to near purchase price. Take your chances I guess.
Gary, personally I agree. I took Tim’s “stash the cash” phrase as to mean a place to put money to work. Not as meaning a cash like holding substitute investment. Absolutely zero of any of these issues should be viewed as a cash holding substitute investment to me other than money market, tbills, cds, or ibonds.
But in terms of 6% YTM at $24 for 7 years risk /reward yes, I really like this issue.
Maybe- but it sounds like a holding place for cash:
“I will collect the dividends or interest while waiting for better opportunities–whether that be a panic or higher interest rates which reduced pricing in current outstanding preferreds or baby bonds OR force new issues to come to market at higher coupons.” (Tim)
But, aren’t we all waiting for some better opportunities- even with some sock drawer stocks?
I think he is assuming people know the risk. March 2020 proved that. I assume nothing (absolutely nothing) is cash equivalent except for the few I mentioned above. Anything can entail risk…market risk, sector risk, duration risk, interest rate risk… And more I forget, lol..
That is why everyone has to evaluate what they really need and know what they are buying. I really have zero need for cash equivalent. I have a great pension that is going up 5% in Jan. I also have some nuts squirreled away in saving account that is my emergency, and an undrawn home equity credit line, so I can hold long term on any issue I buy. In fact I usually assume that risk that I may be forced to if I buy.
Tim, not sure if here is the right place but I think it will be very interesting if you can share with us one educational article on how you determine if a company is stable (from a fixed income holder perspective). Some ratios such as interest coverage etc. My idea is when I see a baby bond or preferred which is not rated to be able to determine how risky is the company.
One way is to judge their earnings and future earnings. Another way is to look for normal bond ratings. Another is to see if they pay a stable div to the common. One can inspect their balance sheet for free cash flow and liabilities. Basic things like that.
You can learn ratio analysis for free here;
https://www.principlesofaccounting.com/chapter-16/statement-analysis/
If this doesn’t make sense, start at Chapter 1 and work your way forward.
What a great site this is. No need to dip your Preferred oar in anywhere else.
Have had an order in for the EICPP for a while now @$25. even. What it’s worth to me.
Should be a good move – not sure what tapering will do to interest rates but I doubt the Fed will make any moves this year off the 0 – .25% short term interest rates.
ECCC almost looks attractive for the higher risk bucket.
Pronto: go to “Preferreds” at the top of the front page, and click on Preferreds-CEF.
That page will have a list of CEF preferreds, including an estimate of the coverage ratio.
Pronto: go to “Preferreds” at the top of the front page, and click on Preferreds-CEF.
That page will have a list of CEF preferreds, including an estimate of the coverage ratio.
Thank you! I need to do a better job at seeing what’s in front of me (at least that’s what my wife tells me).
Hennessy lost assets under management? Because mutual funds are a dying breed.
Absolutely right Martin.
Tim – on a related note, is there a consolidated list of coverage ratios of the various CEF’s that have preferred issues. I guess I am being lazy not wanting to dig through the various filings but thought i would ask.
All in all, I’ll add to my EP-C 4.75% due 3/31/28 with its Baa3/BB+ ratings from real rating agencies and now trading at a slight premium of 50.18 vs these.
Good idea 2wr–will look at that one.
@2whiteroses
Thank you for the EP-C reminder…I just bought some.