Well it looks like another bullish day–at least to start with since things could reverse quickly.
Futures are up over 1% (S&P500) while interest rates (10 year treasury) have tumbled by 12 basis points from yesterdays 4.07% close–now at 3.95%.
It seems like Jay Powell will need to ‘thread the needle’ tomorrow to satisfy the high expectations of the marketplace–1 misstep and markets will tumble–and maybe that would be ok with the Fed Chair. I can’t imagine that Powell is too happy with the huge equity rally in October–as I mentioned before he doesn’t want to be seen as a ‘lackey’ for the markets.
Today Oxford Lane Capital (OXLC) released earnings and while I haven’t dissected them the headlines seem decent. I am most interested in this as I own 2 term preferred they have outstanding and I own other CLO owners (collateralized loan obligations) so OXLC in and indicator of what’s to come from others. The company’s net asset value only fell by 14 cents/share–I would have guessed more. Their press release is here.
While the last number of days have been quite positive for income issues there remains giant numbers of ‘bargains’ out there. While I have little cash I will have various treasury’s hitting maturity in the next few months as I own issues maturing starting next month and continuing for the next 2 years.
No action today for me – just laying low until we get through the Fed announcement tomorrow at 1 pm (central).
News released that a few minute ago that should positively impact the Seaspan / ATCO preferred shares:
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Seaspan Announces Summons for Bondholders’ Meeting
LONDON, Dec. 1, 2022 /CNW/ – Seaspan Corporation (“Seaspan” or the “Company”) a wholly owned subsidiary of Atlas Corp. (“Atlas”), has today instructed Nordic Trustee to summon a bondholders’ meeting for 16 December 2022 for the Company’s senior unsecured bonds maturing in April 2026 (ISIN NO 0010981939). The purpose of the meeting is to consider a proposal for certain amendments to the bond terms (the “Amendment Proposal”). The summons for bondholders’ meeting including details on the Amendment Proposal is attached together with this press release.
https://ir.atlascorporation.com/2022-12-01-Seaspan-Announces-Summons-for-Bondholders-Meeting
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From the presentation prepared for the Bondholders’ Meeting:
Seaspan’s reporting obligations and standards remain unchanged (continue to file with SEC) (Bullet 3, page 4)
https://ir.atlascorporation.com/download/2026+6.5%25+Seaspan+Sustainability-Linked+Senior+Unsecured+Bond+Proposal+%28FINAL%29.pdf
If this isn’t good news for the ATCO preferred shares, I don’t know what is. There’s zero risk of delisting when / if the proposal is approved. If nothing else it’s another indication that ATCO will continue to file financial disclosures with the SEC and keep the preferred shares listed on the NYSE (see my post above for a longer summary of the reasons I believe they’ll stay listed).
It gets better. From the “Summons to Bondholders’ Meeting” document (for some reason linked as an image in the PR emailed by ATCO IR):
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“The Parent’s preferred shares will continue trading on the NYSE under current terms.” (Top of page 2.)
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Mechanics of how they get this done:
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2. Proposals
…
Removal of the De-Listing Event: The Bondholders Put Option following a De-Listing Event shall be removed and thereby the de-listing of the Parent’s common shares from NYSE shall not trigger a Put Option.
3. Up-Front Fee
As consideration for the Bondholders’ approval of the Proposal, the Issuer offers to pay a one time UpFront Fee of 8% of the Nominal Amount of the Bonds, provided that the Proposal is approved (to be shared among the Bondholders on a Pro Rata basis) (the “Up-Front Fee”). The Up-Front Fee is payable no later than 5 Business Days after the De-Listing Event occurs, following a 5 Business Days prior written notice from the Issuer to the Bond Trustee and with record date on the end-of-business 2 Business Days before such payment.
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Timing:
8. Bondholders’ Meeting:
Bondholders are hereby summoned to Bondholders’ Meeting:
Time: 16 December 2022 at 13:00 hours (Oslo time),
Place: The premises of Nordic Trustee AS, Kronprinsesse Märthas Plass 1, 0160 Oslo – 7th floor
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Link to Summons:
https://mma.prnewswire.com/media/1960239/Atlas_Corp__Seaspan_Announces_Summons_for_Bondholders__Meeting.pdf?p=original
Thanks to everyone for their response to my question. I said here months ago that I thought we could see SPX down to 3505 and we’ve hit that target. I now think it’s probable we hit 3200 with a VIX at 40+. I also think the fed funds rate will be at 5% or higher and that will depend on core PCE. With rates going higher most preferreds are going lower. I’m a large buyer above 40 VIX. ATB
Tim-
Rates must not have fallen for long- seems even more stretched. The only ones not inverted are 10/30 yr.
Even the 3mo is more than the 10 and 30 – wow.
I read that there must have been a lot of disappointed I-Bond buyers yesterday- the site was continually crashed. One writer tried for 11 hrs to try it out- finally got in at 10pm- and then it crashed.
6.89%
I want to ask everyone where do you think your preferreds and BB will be when the 3m & 2y treasury are sitting at 5%+. I expect the 10y will follow to some degree. I suspect most of these issues will be lower but it will be a case by case basis. Thanks for your response.
I guess, I would ask how long you expect us to be there. Because as soon as a recession hits the 10yr can see 3.5% quickly!
Expect a flight to safety and fast
SJC—you’re assuming it is not going to be an inflationary recession (stagflation), but a more typical recession. I’m not sure that’s a reliable assumption. I hope you’re right, but hope and $5 buys a double large latte.
I think (guessing) and I hope that most of these issues will be lower but nowhere near as bad as the 2008-2009 debacle in Pfds. I’ve been able to stave off the lion’s share of my losses, so I hope to be able to continue to acquire more shares at higher yields. My cost of living surely isn’t going down.
TimH,
I am convinced of three things: Rates/yields will go higher, equities will go lower than the SPY October low, and thus Preferreds prices will go lower.
When, how low and for how long I have no clue. IMO there are way to many variables to venture a guess with any conviction.
Big money is made during the major turns in the economy and markets. Because I believe equites are going lower and rates higher, I am sitting on my cash. I will not try to time the bottom, instead I will buy equities and preferreds in tranches( the size of the tranches and time between deployment of each tranche will be determined by market conditions) As a result I may average into the bottom or average out of the bottom. Where my portfolio ends up relative to the bottom is less important than knowing that I got in cheap and over time I will be rewarded.
I’d rather be nimble and able to react to any move than sit on the sidelines doing nothing. Though if sidelines money gets to 5% again the sidelines won’t look so bad.
MG, I understand, and everyone’s situation and strategy is different.
My “cash” is in very short-term CDs. It is my wife’s IRA which rolled over this past May. My bones will not allow me to buy into a declining market. Cheers! Windy
MG – But what about we, the feeble, instead of you, the nimble? What are we sloths supposed to do??? lol Toe in here and there seems to be the answer right now..
Dollar cost averaging. Gradually buying as rates rise. That’s what I do with all kinds of trades. Ever since they dropped commission I often trade in small increments as thre price moves. Don’t know if it’s the best strategy but it reduces the anxiety about missing out either way.
Windyducat,
My wife retired in Sept 2021 but waited to convert her 401K until Sept. 2022 so in a similar situation. After many discussions ( heated at times ) I finally agreed to get involved. The market is what persuaded her. Since Jan. her Costco stock and 3 growth funds lost 21% She no longer wanted to stress wondering what was happening to her retirement, being up 8% one week then down 10% the next.
We transferred to the IRA and got rid of the growth funds and replaced them with Treasury mm and ultra short term Treasury combined bond funds and I persuaded her to let me sell half the Costo stock as long as I promised to buy it back some day. Then I sold the other half without telling her. Still married.
The IRA is up 3% and not experiencing the extreme swings.
Maybe the difference between my wife and yours is my wife is now starting to withdraw from the IRA. I need to invest to generate about $2,000.00 a month or more with the hope of not touching the capitol. So far I am a long way from that goal as to this point I have about 600.00 a month coming in.
So I am not sitting on the sidelines waiting for a bottom. I know my principal in the short term will decline but as long as I don’t sell and it generates the desired income we should be in good shape long term.
Each recession is different than the last. But if you look at charts on the stocks your looking at and can see as far back as 10 to 15 yrs and see the low points and see that the stock has recovered then I am picking an entry point I would be comfortable with getting the yield I want. This requires me to put in multiple low ball bids that not all will hit.
An aside on my account, I am back to even after today. But for the past year I am up 21%. I take more risks with my own money but been trying to force myself to take less risk.
I am depending on my wife to support me. : )
Since I own a lot of live Libors, and next year resetters, Im hoping I will feel pretty good as they have done well so far since I got in them. I like your scenario as I could be bagging 10% plus on IG ute resets.
ATCO…
Upon the closing of the transaction, Atlas common shares will cease trading on the New York Stock Exchange (“NYSE”). Atlas preferred shares will continue trading on the NYSE under current terms.
The company is being taken private and would no longer be required to file financial statements. There is a fee to list on exchanges that they wold save if they delist after closing the deal.
@Jerrymac: Here’s more precise information about the ATCO preferred shares, from the 6K filed today:
“Each share of preferred stock of the Company issued and outstanding immediately prior to the Effective Time will be unaffected by the Merger, will remain outstanding and continue to trade on the NYSE, and no consideration shall be delivered in respect thereof.”
https://www.sec.gov/Archives/edgar/data/1794846/000119312522274489/d353336d6k.htm
@Charlesm: Earlier this month I did a delisting risk assessment for the ATCO preferred shares. Bottom line, I believe that ATCO will continue to file with the SEC and keep the preferred shares listed on the NYSE. There’s very little cost savings to be achieved by delisting and a lot of benefits to keeping them listed. Here’s my reasoning:
https://drive.google.com/file/d/1yiBYSkhWiO_Nt-xYzNynsxjCCGM1EEhj/view?usp=share_link
ESW
Thank You! I appreciate from reading this all the work you put into it.
What I get from your report is the PF and Bonds are safe, for now and as long as rates continue to be this high. I assume at some point in 2yrs or longer they would re-finance and take these out.
Understood, I lifted that line from this morning’s PR final terms of acquisition by Poseidon. We shall see if they will make good on their word…
Not just the fee there are disclosure requirements that cost money to produce. Big increase in delisted stocks after those requirements were increased.
Tim, with my sale of ATCO today and TEN yesterday I am back to 1/3rd cash.
Cash maybe trash, but only until there is a crash.
Just sitting back and see what happens Wed. and Thurs.
Nice, Charles – I have to wait until 11/7 for my Tenneco bonds to be called to close out TEN participation…. It’s been an interesting ride but sure will be nice to have a Caa1 5.375% bond due 2024 called at almost 100.896… Fingers still crossed though……