We Knew it Had To Happen and It Has

CEF Kayne Anderson MLP (KYN) has announced the redemption of their KYN-F 3.50% Mandatory Redeemable Preferred.

I hate to see it go–but we all knew it was coming–by 4/15/2020 at the latest as that is when it was mandatory.

The announcement is here.

The redemption date is 2/13/2020. So with this date the issue has a value of about $25.10 ($25 plus a January payment and 12 days in February).

The company will use proceeds from a private placement of preferreds to redeem the shares.

Disclosure–I hold somewhere around 1100 shares of this issue unless a GTC executed today (no such luck I am sure).

23 thoughts on “We Knew it Had To Happen and It Has”

  1. Did anyone else “get skipped” on KYN-F’s parent (KYN) March 31 distribution on KYN itself?

  2. I used to love the similar TYG-B/C issues for the same purpose that Tim liked KYN-F – as a very safe and stable place to stash funds in the short term. Unfortunately they got called in the great MLP meltdown of 2015. Now the KYN alternative is gone. Most of the term preferred out there now are far more volatile than the KYN/TYG issues. Anyone who finds a good alternative, please let us know!

    1. Not as good as KYN-F but better than money market rates I use an ultra-short term bond ETF for stashing cash: PULS. Pretty stable.

    2. RJ–those were the days. I remember writing a Seeking Alpha article on the Tortoise issues– before anyone paid attention to them–I wrote on 12/15/2013–“Our Favorite Conservative Preferred Stock – Tortoise Energy Infrastructure”. At that time TYG-B 4.375% mandatory preferred was trading with a current yield of 5.23% and a yield to worst of 6.12%. Those were the days–I miss them.

      1. Yes, I discovered the Tortoise preferreds from your article! Too bad we don’t have something like this available now. I guess the closest are the Gabelli preferreds, but they are way more price volatile, not term preferred and don’t pay monthly. They do have the CEF leverage restrictions though. Hopefully someone will see the light and issue something similar soon.

  3. Considering FLOT as a (mediocre) alternative for KYN-F.
    Pays 2%+ and aims to track a “floating rate note <5 years index" of IG notes.
    Most of its top holdings mature before 2022. It moves very little at around $50.90 (today it's at $0.01 from its all time high of $50.02) In the interest rate scare in Dec 2018 it had a dip down to $50.40 (hinting on what may happen when interest rates start raising again – if at all).

    How bad an alternative do you think this is ?

    1. FLOT or SPSB are good places for the short term, especially now that there are no commissions for buying and selling.

  4. To all:
    I am relatively new in investing in preferred stocks, so can you tell me what was attractive about this non-investment graded preferred stock with a 3.5% coupon that traded over par? It seems to me that there are many higher rated issues with better yields.

    1. Tom–it was simply a place to stash idle cash with extreme safety and a date certain for redemption. If you review the chart—here is a chart–change it to show 5 years–


      You can see that the volatility was extremely small–a great place to stash excess cash holdings. While the 3.5% was meager it was 1, 2 or 3 times or more than a money market (depending on time frame).

    2. Tom – Being new to preferreds it might be worth mentioning that not all preferreds are perpetuals and the yield comparisons are not necessarily always “current yield” but rather “yield to maturity” or “yield to call.” I suspect you might be attempting to compare an issue like KYN-F with its 3 1/2% coupon to the more common type of preferred that either has no maturity or a very long one that are now coming out in the 4 3/4% to 5 1/4% range for investment grade issues, cheaper still for below investment grade… In investing in preferreds keep in mind the differences in maturities. Issues like KYN-F with its short maturity serve a different purpose than a perpetual or long dated preferred and, therefore, should not be thought of in the same breath as the longer dated preferreds or baby bonds. They appeal for other reasons and are comparable to different securities than long dated preferreds. As Tim’s mentioned, they might serve as alternatives to money market returns for example so if you want some safety funds, it’s great to find something like KYN-F (before it was called) that provides you with 3.50% returns when your money market’s paying you 1.50%.

    1. Thx for the heads up. I have 7,000 shares and will need to do some homework this week/weekend. Who would have thought that 3.5% needs to be called and replaced asap.

      1. A4I – Not going any further than cefconnect to look at these 2 what I see is 2 funds with essentially longterm 20-30 year maturity holdings masquerading as short term funds because of their target dates… Using IHTA as an example, it seemingly has 95% of its holdings in securities with 20 or more year maturities… Does that bother you at all? So imho they’re taking on risks a 2024 maturity issue shouldn’t be shouldering and with a 9.835 target payout and a current NAV of 10.54, you could argue that you’re paying the equivalent of 108 1/2 vs a 100 par 4 year piece of paper. So they’ll either use that cushion to continue taking these long term risks for the next 4 years or they’ll radically alter what their portfolios look like in the near future thereby making their returns going forward very unpredictable vs what you see today. Am I missing or misinterpreting something? The only one of these type target maturity cef funds that seems different from this pattern has been EHT whereby it’s portfolio holdings match up with their target maturity but they’re 2021 target makes them relatively uninteresting now..

        1. I’m not in love with IHTA or IHIT and have traded both since we talked about them on here quite some time ago. When they were yielding around 6% (if I recall correctly), they worked well for the niche I had them in. Not now, so they’re gone. Sold the last of them within the past few weeks. Their price action is only going to continue to rot until maturity. I only brought them back up as a response to some shorter, term dated alternatives to KYN-F, which I also sold out of way back when after trading it like crazy. Overall, I detest target date securities, but that’s just me.

        2. The long-term maturity bonds for short term funds also bothers me, though I liked the idea of these type of funds. iShares has a series of ETFs which match up bond maturity with fund maturity and are fully investment grade. I have small positions in IBDR and IBDS which I got below original issue NAV – now are a little pricey but for me they serve a useful purpose for safety and some protection against rising rates if held to maturity. Also, some shorter term cap gains can be had if rates keep dropping.

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