TravelCenters of America Jumps

TravelCenters of America (NYSE:TA) has taken a big jump in share price today as they announced the sale of their convenience store business.  They will take about a $100 million in impairment charges on the sale.

Of course our only interest is the baby bonds the company has outstanding (TANNI, TANNZ, TANNL) with coupon ranging from 8% to 8.25% and maturities dated in 2028 through 2030.  All of these issues are up 2-4% today.

While we don’t currently have time to do an analysis of how this affects the company we may take a gander at it later and see if the baby bonds are now worth buying (we don’t currently hold any shares).

Thanks to Johnny for the heads up.

27 thoughts on “TravelCenters of America Jumps”

  1. Thanks grid. So it was effectively a carrot to force a favorable vote for the reincorporation. Makes sense.

    But that raises a question. Might not the price of the preferred already had the 7% coupon baked in? I question whether a 21-year term preferred from this company would sell near par with a 5% coupon.

    Just my thought.

    1. Bob, your thought could be spot on and it might very well be baked in already. Im going blind here. A little spice to my investing life! 🙂 But, being negative by nature I am fine thinking worst case that maybe it is, so I, at this point wont be too upset holding for a while.

  2. Any idea the rationale on the rate change? Usually, when you see a built in change its some kind of a penalty thing, for failing to do something a company promised to do. I don’t understand why reincorporation to Delaware would trigger a hike. I imagine the reason can be teased out of the docs but if anyone knows the answer I’d be grateful to know.


    1. Hi Bob–I found the data in filings by Liberty Media, but the info I read was not specific as to the reason. I suspect it simply could be that they were repriced to the level necessary if they were a newly issued security. Maybe Grid has the answer.

    2. Bob, this pretty much explains it best I can tell. This preferred was issued in anticipation of the “merging/acquisition” with Liberty. It appears to be part of a transition proceed to existing shareholders until it was certain the deal did close as anticipated. This came from GCI, SEC filings last year before the deal closed.

      Liberty will then effect a tax-free separation of its controlling interest in GCI Liberty to the holders of Liberty Ventures common stock in full redemption of all outstanding shares of such stock. Holders of GCI Class A Common Stock and GCI Class B Common Stock each will receive (i) 0.63 of a share of reclassified GCI Class A Common Stock and (ii) 0.20 of a share of new GCI Series A preferred stock in exchange for each share of their existing GCI stock. The exchange ratios were determined based on total consideration of $32.50 per share for the existing GCI common stock, comprised of $27.50 per share in reclassified GCI Class A Common Stock and $5.00 per share in newly issued GCI Preferred Stock, and a Liberty Ventures reference price of $43.65 (with no premium paid for shares of GCI Class B Common Stock). The Series A preferred shares will accrue dividends at an initial rate of 5% per annum (which would increase to 7% in connection with a future reincorporation of GCI Liberty in Delaware) and will be redeemable upon the 21st anniversary of the closing. The Transactions are expected to be consummated during the first quarter of 2018, subject to the satisfaction of customary closing conditions, including receipt of regulatory approval and the requisite stockholder approvals.

  3. Tim, on Aug 29, 2017 regarding TA and its babies, you stated: ” We believe that with current prices in the $17.50 area and current yields in the 11% area, these shares present a great opportunity for us.” How prescient!

    Based partly on your very detailed and thorough analysis at that time, I loaded up on TANNZ at various prices between 17.75 and 19.10. While I have sizeable gains, I plan to continue to reap the nearly 11% yield for the time being.

    1. Hi BMW–even a blind squirrel finds a nut on occasion. Honestly I think at those kind of prices it is no brainer–risk/reward. But as many mentioned the bonds are NOT high quality–but as long as one recognizes the inherent risk they are as good as many junky items out there trading at strong prices.

      1. Speaking of risk, Tim, I went in on 500 shares of GLIBP today at 24.66. A very unusual preferred. Its genesis was Liberty Media acquiring ownership by giving GCI assets. GCI is Alaska’s biggest internet provider controlling like 70% of the market. Anyhow the preferred started as a 5% issue but after Delaware incorporation happened it was turned into a 7% issue with this months dividend being paid at 7% rate. Since it hasn’t been declared market is seeing it as a 5% issue. Im expecting a bump later when its finally declared as this is an under the radar issue, but we shall see. Its a 21 year term dated preferred which is odd This was not an addition to my “widows and orphans” portfolio though. It also has a 2% bump provision if any 4 consecutive or non consecutive dividends are missed until the cumulatives are paid off. Though being acquired was asset accretive for GCI the debt was rated stable and the family debt rating is B2 so this needs to be monitored also if someone was interested in investigating this issue.

        1. Hi Grid–wow you pick some doozies. Talk about complicated paper trails. Finally I could track the info down of the reincorporation etc and yes as you said it goes from 5 to 7% as of 5/18/18. eTrade is still calling it a 5% issue.

          It looks like a good one for me–even without a pop. The only issue with the pop is the complications in paperwork etc etc sometimes keep folks from owning an issue.

          I’m going to do a bit more due diligence and consider a modest purchase.

          1. Definitely not a bet the farm issue, but its assets are very interesting. They even have their hand in Evite which is some sort of popular dating meeting site (I dont know anything about that), some Charter assets, and Lending Tree investment. This approaching Sept. dividend has not been declared yet and will be the first 7% rate. Damn parculiar company/preferred but it piqued my interest. An SA member who also shares my interest in the oddity issues tipped me off to it, as I would have never heard of it.

            Dividends on each share of Preferred Stock accrued on a daily basis at an initial rate of 5.00% per annum of the liquidation price, and increased to 7.00% per annum of the liquidation price effective July 16, 2018 as a result of the Reincorporation Merger in the State of Delaware in May 2018.

            Accrued dividends are payable quarterly on each dividend payment date, which is January 15, April 15, July 15, and October 15 of each year, commencing on the first such date following the auto conversion, which occurred immediately after the market closed on March 8, 2018. If GCI Liberty fails to pay cash dividends on the Preferred Stock in full for any

            Notes to Condensed Consolidated Financial Statements

            four consecutive or non-consecutive dividend periods then the dividend rate shall increase by 2.00% per annum of the liquidation price until cured. The Company paid a special cash dividend of approximately $0.13 per share of Preferred Stock on May 3, 2018. On June 21, 2018, the Company declared a quarterly cash dividend of approximately $0.31 per share of Preferred Stock which was paid on July 16, 2018 to shareholders of record of the Preferred Stock at the close of business on July 2, 2018.

          2. I took a look at this issue and decided to jump in with 400 shares which filled at $24.65. Grid is right about the increase to 7% not being reflected. Fidelity still shows it as a 5% issue. I’m all for weird issues.

        2. I pretty much don’t bet the farm on most anything–but I have ordered a couple hundred.

          1. One thing is certain….I have never heard of a 21 year term dated preferred before. I usually buy veteran preferreds knowing when buy/selling imbalances occur to purchase…. Unless I am just adding to long term keepers. GLIBP I am flying blind here with price reference points. Since it was just issued this year and started with a brief 5% rate its hard to gauge how it will move/trade in the future.

          1. Retired, nice patience on getting a better deal! Admittedly I am still a bit in dark on what the relative value is here.
            MP, I have checked and checked…. It is not listed in the capital section of their balance sheet, so I strongly suspect its non qualified. The company website in reference to the preferred mentioned “dividend” and then “interest” in reference to payment. It clearly is not a bond though, so I am going with assumption it is non qualified, but I cant get a complete beyond a shadow of a doubt certainty that it is. See this appears to be one of those preferreds that was giving to existing shareholders and never was issued by an underwriter. These types of preferred issuances always have “goofy” reading prospectus, instead of the more standardized format preferreds use when they are underwritten and issued to the public.

  4. I just saw your note on the TANNL bonds being up and I too bailed. I have been wanting out for awhile. Every earnings report made me cringe! I travel a lot and find the TA truckstops for the most part to be run down.Im glad to be out at a small capital gains profit.

  5. New CEO, unloading an unprofitable segment, FCF YTD is +13.89M.

    These changes may turn this puppy around.

  6. I look at TA and their baby bonds as a complete stretch for yield/too risky and as a very conservative investor do not feel comfortable with their management or credit issues. Selling their convenience store operation and take a $100 loss is not surprising as I believe that management is inept (I have spoken to executives numerous times) and that TA will continue to lose money. Their leveraged free cash flow was/is a negative -$52.05 million. I’m glad someone else owns these and not having the worry in my portfolio. Just my opinion, Nomad

    1. Hi Nomad–generally I tend to agree with you, but have owned the bonds off and on over the years. The company is set up to never make money to speak of but to toss off money to RMR.

      1. Tim, it seems like RMR seems to suck the life out of the entities/companies they control and the shareholders, bondholders and preferred stock holders are always at major risk. RMR controls stock symbols: TA, HPT, SNH, SIR, GOV, ILPT, TRMT and FVE (my Dad lives in a Five Star (FVE) property). Buyer Beware ☠️ and do your own deep due diligence before investing!
        Wishing you profitable investing, Nomad

        1. RMR, controlled by the Portnoys, has only their self interest in mind. They try to increase AUM as that is what their management fees are based on, NOT shareholder value.

          I would be very wary of investing in any company managed by RMR.

  7. TANNI (8.25%)and TANNL (8.0%) are past call. TANNZ (8.0%) callable as of 10/15/2018. $330M worth of bonds, with perhaps one more dividend this year.

    Gross sales price of $330M, with proceeds used to reduce leverage or expand operations.

    I have a sell order in for par+1 dividend+a few cents at $25.60 on TANNI, but no sale yet.

    TANNZ price still below par ($24.87) with ex-div later this month.

    Company presentation link:

  8. A very welcomed bit of good news regarding TA, and I sold TANNZ at $24.88 today after being underwater for a couple of years. The interest payments have been nice along the way but TANNZ has been a stressful one to hold so glad to be out. I’m still holding TANNI in another account but for some reason it has always traded stronger than TANNZ and TANNL. I wouldn’t mind buying TANNZ again at around $23 so I’ll be on the lookout for a better entry price in the future.

    1. Just unloaded TANNI at $25.45 for a small capital gain after holding for a couple of years. Can’t complain about the outcome but it was not an easy one to watch in the portfolio. All TA holdings gone as of today so it will probably keep going up.

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