Preferred Stock Investing-The Good , The Bad and The In Between 2015 - 2020

[Mulligan]

Preferreds just keep climbing. AGO -B doing just as I thought climbing nicely past few weeks into exD approaching date.. Really have bought quite a bit into bank trust preferred debt own 4 now. JBK was bought a couple days ago. YTM of
6.1% or so on 2034 maturity. Underlying bond of Goldman Sachs subordinate debt has a make whole provision mitigating call risk. The underlying bond trades at a yield under 5% at $117 so the relative value in owning JBK is there...An unrelated 3rd party made a recent tender for shares at 26.50.

 

[brokrken]

Preferreds just keep climbing.

You're right there. I'm tempted to sell my SPLP.A with over $2 gain and my SSW.G that now has over $1 gain. Problem is, what to buy in their place?

 

[Mulligan]

You're right there. I'm tempted to sell my SPLP.A with over $2 gain and my SSW.G that now has over $1 gain. Problem is, what to buy in their place?

Congrats Ken....What to buy? Well that is easy..Sell your overpriced ones and buy some other overpriced ones, lol.

 

[bobandsherry]

You're right there. I'm tempted to sell my SPLP.A with over $2 gain and my SSW.G that now has over $1 gain. Problem is, what to buy in their place?

Sometimes having cash sitting on the sideline isn't a bad thing. Wait for the next opportunity to get in on the dip.

 

[Coolius]

JBK was bought a couple days ago. YTM of
6.1% or so on 2034 maturity. Underlying bond of Goldman Sachs subordinate debt has a make whole provision mitigating call risk. The underlying bond trades at a yield under 5% at $117 so the relative value in owning JBK is there...An unrelated 3rd party made a recent tender for shares at 26.50.

JBK pays on a semi annual basis, in August and February. At today's bid of $25.96, takes 1 dividend and 2 months accrued interest to offset. Considering this as an "almost uncallable" issue, a buyer today will start realizing the 6.1% yield in April 2019.



And Goldman being the underlying company makes this a safe investment.


I hold a small position, average cost basis of $25.95. This has been added to the residents of my sock drawer. Might add more on any pullback to the $25.75 area.



Thanks to Mulligan and his incredible investigative prowess, for uncovering the secrets. Anyone scanning for investment prospects will see it as a low yield adjustable and most likely will pass over.

 

[Mulligan]

JBK pays on a semi annual basis, in August and February. At today's bid of $25.96, takes 1 dividend and 2 months accrued interest to offset. Considering this as an "almost uncallable" issue, a buyer today will start realizing the 6.1% yield in April 2019.



And Goldman being the underlying company makes this a safe investment.


I hold a small position, average cost basis of $25.95. This has been added to the residents of my sock drawer. Might add more on any pullback to the $25.75 area.



Thanks to Mulligan and his incredible investigative prowess, for uncovering the secrets. Anyone scanning for investment prospects will see it as a low yield adjustable and most likely will pass over.

Coolius, as you read on my post over on Tims site, the real prowess is the thieves who scalped them on a tender basically 3% over par (they scalped the 79 cent interest payment also), redeemed them to the trust and get the underlying bond at par value and them pocket an instant 17% premium on the bonds. If that supposed private 3rd party outfit can pull that stunt, we should be allowed to tender and redeem our shares too and collect the instant fat 17% premium on the bonds ourselves!

 

[Mulligan]

Research GLIBP if one is looking for plus 7%. It just moved from a 5% to 7% 21 year term dated preffered. Liberty (think Charter, QVC, etc) acquired it and immediately spun it off. They took control of GCI by giving it assests such as some Charter assets and Lending Tree stock in exchange for control of company.

 

[bobandsherry]

Research GLIBP if one is looking for plus 7%. It just moved from a 5% to 7% 21 year term dated preffered. Liberty (think Charter, QVC, etc) acquired it and immediately spun it off. They took control of GCI by giving it assests such as some Charter assets and Lending Tree stock in exchange for control of company.

Another interesting find by you Mulligan. My research tools obviously subpar to yours as I've found nothing yet on the change to 7% term dated.

 

[Mulligan]

Another interesting find by you Mulligan. My research tools obviously subpar to yours as I've found nothing yet on the change to 7% term dated.

I cant link on phone,Bob, but google...GCI Liberty Announces Reincorporation in Delaware, Yahoo Finance....The article should pop up. Its also in their SEC filings of their quarterly report too.

 

[Mulligan]

Another interesting find by you Mulligan. My research tools obviously subpar to yours as I've found nothing yet on the change to 7% term dated.

An online SA writer tipped me off to this one, as I would not have found it.

 

[bobandsherry]

I cant link on phone,Bob, but google...GCI Liberty Announces Reincorporation in Delaware, Yahoo Finance....The article should pop up. Its also in their SEC filings of their quarterly report too.

Found it and also why I couldn't find anything. I had my search criteria set to within the past 60 days and this announcement was released in May. Then found it on GCI Liberty's site:

http://ir.gciliberty.com/news-relea...ci-liberty-announces-reincorporation-delaware

 

[bobandsherry]

An online SA writer tipped me off to this one, as I would not have found it.

As it's been said many times, it's not what you know but who you know

 

[Mulligan]

As it's been said many times, it's not what you know but who you know

It definitely helps me....I am not smart enough to link an article on a phone app. I am more like this professional golf who was kept nameless in a Golf Digest article I read this week. He kept 2 cell phones on him because he had 2 different email addresses. He thought he needed seperate phones for each email address.

 

[Mulligan]

I have done some modest flipping and rearranging...Past several days any time AILLL was available under 26.70 I took them and have a hugely oversized position now..Also bought up a decent amount of CNIGP as I love the instant accretive value it brought me (1 share of CNIGP converts to 1.2 of common CNIG). Other issues I own now are CNIGO, GLIBP, OSBCP, BANFP, AGO-B, GGO-A, ASRVP, FIISO, HE-U, MSEXP, GLP-A, PFX.

 

[Mulligan]

A seller of JBK is out at $25.80. I bought 300 more at 25.78. That is plus 6% for Goldman Sachs debt. A recent 26.50 tender was offerred that some did not take. The actual bond yields under 5% so it has relative value.

 

[Coolius]

I bought a couple hundred shares of JBK at $25.80. A very safe investment with negligible default risk, and a nice yield as long as I can resist the temptation to flip it.

 

[Mulligan]

I bought a couple hundred shares of JBK at $25.80. A very safe investment with negligible default risk, and a nice yield as long as I can resist the temptation to flip it.

Im kind of at loss why so many shares in past month that were traded were not just simply tendered a month ago at $26.50. Maybe they didnt know...Though they got the interest payment it accomplished little in holding just to sell a month later.

 

[brokrken]

Im kind of at loss why so many shares in past month that were traded were not just simply tendered a month ago at $26.50. Maybe they didnt know...Though they got the interest payment it accomplished little in holding just to sell a month later.

Guys, I've tried to follow you on this, but I'm missing something. Are these shares you're buying not going to be part of the tender?

 

[Mulligan]

Guys, I've tried to follow you on this, but I'm missing something. Are these shares you're buying not going to be part of the tender?

Ken, the tender expired August 6. Roughly half the 25 million par float value accepted tender. About 13 million in par value or a bit over 500,000 shares remain outstanding. This was an unsolicited 3rd party tender offer.

 

[brokrken]

Ken, the tender expired August 6. Roughly half the 25 million par float value accepted tender. About 13 million in par value or a bit over 500,000 shares remain outstanding. This was an unsolicited 3rd party tender offer.

OK, got that part. Thanks. Also curious about this part I read on Quantum where it says, "After May 2004, the floating interest rate will be equal to the three-Month LIBOR plus 0.75% and will be equal to or greater than 3.50% but not greater than 7.50%." How are you guys figuring 6%+ YTM

 

[Mulligan]

Preferred Stock Investing-The Good , The Bad and The In Between

OK, got that part. Thanks. Also curious about this part I read on Quantum where it says, "After May 2004, the floating interest rate will be equal to the three-Month LIBOR plus 0.75% and will be equal to or greater than 3.50% but not greater than 7.50%." How are you guys figuring 6%+ YTM

Ken, this was a synthetic adjustable issued by Lehman with the Goldman Sach debt held in trust. Since the adjustable rate was below the fixed yield the brokerage pocketed the difference. However Lehman went bankrupt in 2009. Since then they have had nothing to do with it as the trust now administers the payouts. When they get the bond interest they distribute it to JBK certificate holders (administered by US Bank if memory serves) and per terms of the preferred, it reverted to its fixed 6.345% coupon rate of the actual bond held in trust. This Goldman Sachs bond is listed uncallable with 2034 maturity. Technically its a “make whole” callable which leaves little incentive for Goldman to call it so they haven’t. Various tenders have been issued through the years reducing the actual bond value from over 2 billion to a little over 1 billion. The actual bond does trade alone and last week was trading around $118 with a YTM of under 5%. Since JBK cant be called its YTM at $25.80ish puts it around 6.05% I believe..Its been a few weeks since I put it in calculator but its a hair over 6%.

 

[Coolius]

Ken, the tender expired August 6. Roughly half the 25 million par float value accepted tender. About 13 million in par value or a bit over 500,000 shares remain outstanding. This was an unsolicited 3rd party tender offer.

Now that Origen has 1/2 the float in its possession, they need never sell the shares, but instead put them up for redemption and get the underlying bonds.


So, would it be reasonable to assume that the shares tendered and bought by Origen will likely never be traded again?

 

[Mulligan]

Now that Origen has 1/2 the float in its possession, they need never sell the shares, but instead put them up for redemption and get the underlying bonds.


So, would it be reasonable to assume that the shares tendered and bought by Origen will likely never be traded again?

Coolius, I already found that out perusing the recent JBK, SEC filing from the trust...They were immediately REDEEMED! The trust is cut in half roughly...So basically they bought JBK at $26.50 which equates to $106, to get $100 in 6.345% par bonds, and they are worth $118 or so on open market. So either they took possession of the bonds and sold them for a quick 12% no risk profit. Or they bartered a side deal to sell them to Goldman to reduce the uncallable float of the actual bond. But those bonds in JBK trust are GONE. I wouldnt be surprised if Goldman has something to do with Origen.

 

[Coolius]

Coolius, I already found that out perusing the recent JBK, SEC filing from the trust...They were immediately REDEEMED! The trust is cut in half roughly...So basically they bought JBK at $26.50 which equates to $106, to get $100 in 6.345% par bonds, and they are worth $118 or so on open market. So either they took possession of the bonds and sold them for a quick 12% no risk profit. Or they bartered a side deal to sell them to Goldman to reduce the uncallable float of the actual bond. But those bonds in JBK trust are GONE. I wouldnt be surprised if Goldman has something to do with Origen.

Oh wow - they move fast !!


Well, now that the float is reduced, there should be good possibility of support, hopefully around this $25.80 price. And a safe and reliable 6% yield is acceptable to me.



Those who did not tender were likely holders willing to hold onto a "guaranteed" 6% yield, and not deceived by the $26.50 Origen offer knowing it was effectively $25.73 after div.


I do wish, however, that was a quarterly payout schedule instead of bi-annual. Would be better for the cash flow.

 

[Mulligan]

Well think of it this way....Getting paid every since months proves you got the bonds interests as that is how its distributed from Goldman every 6 months, lol...
Ken, I suspect you are wondering why a bond yielding 4.8% or so is yielding over 6% and its the exact same thing....In a level playing field world, JBK should be at $29 or so now....Why isnt it?
Well first like you saw from Quantum its listed incorrectly and that may weigh on it....Secondly a big cloud was hanging over JBK until earlier this year...Lehman bankruptcy creditors were reaching from the grave trying to claw it back. See if Lehman was around, they would have redeemed and pocketed the difference (the bonds were under par back when they went bankrupt so no redemption was possible.) on a redemption. If successful they probably could have forced a redemption well under par do to the costs of the hedges for the cross swaps to make it an adjustable. So this weighed heavy on JBK. But the courts and court of appeals ruled against them so its over. But many may not know this, or are worried about a vanilla call, but there is no agency that can...The trust cant, Goldman cant...So they just sit there most likely until 2034 redemption .