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

[Born2Fish]

If my math is right based on existing votes, about 22k out of the 50k ish yet to vote need to vote yes to maintain the 2/3 vote. PCG-A basically lived over $32 pre fire in late 2017 the previous two years. And that of course was with no $4 accrual in the pipeline. This could easily go near $35 before dispersement whenever that would come.

Late to the party.

What's a decent price to nibble in on PCG-A or is the game over?

Retired now and have time to focus on preferreds for a while. Learning as I go.

 

[bobandsherry]

Late to the party.

What's a decent price to nibble in on PCG-A or is the game over?

Retired now and have time to focus on preferreds for a while. Learning as I go.

Not as easy of a game to get into, best action was a month ago when Mulli first mentioned this. But was also more of a gamble. But may have some ability for some play time. Really depends on what return you want. For me, I set my site on buying to get a return (post div arrears payment) close to 7%. Prices on PCG preferreds popped today, especially on PCG-A and PCG-B. With latest prices PCG-A would have a yield of 6.4%, PCG-B is 6%, PCG-C 6.5%. If that's reasonable return then could buy today if you buy near the current share prices. As Mulli mentioned, these could have some possible upside on price for gains.

Nothing is coming close to 7% threshold for me today. Best strategy now is to put a GTC offer in on an issue or two, set at limit price that hits near 7% and wait to see if anyone unloads and hits that target. Both Mulli and I picked up shares last week on a dip.

My targets for a couple issues for 7%: PCG-A: $25.50, PCG-B: $23.50, PCG-C: $21.50

I'm sure Mulli may have some better words of wisdom to share.

 

[Mulligan]

Not as easy of a game to get into, best action was a month ago when Mulli first mentioned this. But was also more of a gamble. But may have some ability for some play time. Really depends on what return you want. For me, I set my site on buying to get a return (post div arrears payment) close to 7%. Prices on PCG preferreds popped today, especially on PCG-A and PCG-B. With latest prices PCG-A would have a yield of 6.4%, PCG-B is 6%, PCG-C 6.5%. If that's reasonable return then could buy today if you buy near the current share prices. As Mulli mentioned, these could have some possible upside on price for gains.

Nothing is coming close to 7% threshold for me today. Best strategy now is to put a GTC offer in on an issue or two, set at limit price that hits near 7% and wait to see if anyone unloads and hits that target. Both Mulli and I picked up shares last week on a dip.

My targets for a couple issues for 7%: PCG-A: $25.50, PCG-B: $23.50, PCG-C: $21.50

I'm sure Mulli may have some better words of wisdom to share.

Not really Bob, but I guess we need to reiterate, this isnt a Micheal Jordan slam dunk. The vote has to cover the 66% threshold and then the judge has to rubber stamp it also. Everybody else has fell into line though. I guess May 15 is about time we know the vote.

 

[Mulligan]

I had seen the mention in SA, but details seemed fuzzy so didn't give me enough details to calculate that, so I'll trust your math.

The other positive sign is that the CA Gov is dropping his opposition to the BK plan. He's been a continual pain in the backside with opposing just about everything (or so it seems). So getting him on board and the current vote, along with a favorable nod from the judge overseeing the case, are all positives.

I had looked at the various series like you did, what could share price pop to post emerging. I did a best and worst case, best being roughly what shares were in 2017 and worst being current price less the div arrears. Across the board, looking at XIRR at end of 2 years, the best case was around 16% and worst case was right around 6%.

Now if this pops to the high before the div arrears paid, I'd have to think long and hard on holding this vs cashing in and putting proceeds someplace else. I might look at what that could look like. Did you noodle over that prospect, thoughts?

Bob, the way I understand it was this..They said a couple major law firms represented about 31,500 of the 70k plus litigants. Two thirds of the 31,500 voted with 98% approval. So about 21,000 have voted and about 20,000 approved.. Two thirds in aggregate of the 70k ish must approve. So about 47,000 have to say yes. So about 26,000 of the remaining approx 59,000 have to vote yes.

 

[Mulligan]

Not really Bob, but I guess we need to reiterate, this isnt a Micheal Jordan slam dunk. The vote has to cover the 66% threshold and then the judge has to rubber stamp it also. Everybody else has fell into line though. I guess May 15 is about time we know the vote.

Plus I guess we better add. Even if it gets through proceedings and out of bankruptcy, there is no definitive fact I have read that the preferreds would be made whole this year. If they start distributing common dividends in 3 years as projected, they could continue accruing and pay everything out right before that time if they wanted to. That may be a concern for someone wanting the income...I can wait no problem, provided I eventually get it, ha.

 

[Mulligan]

Well, I bought PBI-B a couple times all the way down to about $10. I didn't have the cajones to keep buying down to $7.59. Thank goodness it is back up over $17 now. I was sweating this one big time.

Great play Ken! The bounty goes to the brave! Its on my tracking list and I watched it. But never had the courage.

 

[Born2Fish]

Not as easy of a game to get into, best action was a month ago when Mulli first mentioned this. But was also more of a gamble. But may have some ability for some play time. Really depends on what return you want. For me, I set my site on buying to get a return (post div arrears payment) close to 7%. Prices on PCG preferreds popped today, especially on PCG-A and PCG-B. With latest prices PCG-A would have a yield of 6.4%, PCG-B is 6%, PCG-C 6.5%. If that's reasonable return then could buy today if you buy near the current share prices. As Mulli mentioned, these could have some possible upside on price for gains.

Nothing is coming close to 7% threshold for me today. Best strategy now is to put a GTC offer in on an issue or two, set at limit price that hits near 7% and wait to see if anyone unloads and hits that target. Both Mulli and I picked up shares last week on a dip.

My targets for a couple issues for 7%: PCG-A: $25.50, PCG-B: $23.50, PCG-C: $21.50

I'm sure Mulli may have some better words of wisdom to share.

Not really Bob, but I guess we need to reiterate, this isnt a Micheal Jordan slam dunk. The vote has to cover the 66% threshold and then the judge has to rubber stamp it also. Everybody else has fell into line though. I guess May 15 is about time we know the vote.

Bob, the way I understand it was this..They said a couple major law firms represented about 31,500 of the 70k plus litigants. Two thirds of the 31,500 voted with 98% approval. So about 21,000 have voted and about 20,000 approved.. Two thirds in aggregate of the 70k ish must approve. So about 47,000 have to say yes. So about 26,000 of the remaining approx 59,000 have to vote yes.

Plus I guess we better add. Even if it gets through proceedings and out of bankruptcy, there is no definitive fact I have read that the preferreds would be made whole this year. If they start distributing common dividends in 3 years as projected, they could continue accruing and pay everything out right before that time if they wanted to. That may be a concern for someone wanting the income...I can wait no problem, provided I eventually get it, ha.

Thanks, bobandsherry and Mulligan,

I put in a few GTC orders for PCA-A and PCA-B.

I don't need the income right away but it would be a nice addition.

Mulligan - do you still feel good about EP-C? Thought about adding more.

 

[Mulligan]

Born, EP-C has been an odd play for me. Made some several $1-$2 flips several times past 6 months or so. Then when hell broke loose mid March, I my slug at about a 15% loss to buy other preferreds like PPX that just got bombed even harder like 30%. I gambled and it paid off. I only recently bought a few hundred again of EP-C in $45 range last week.
KMI is more a nat gas piper so that is a much better relative safer MLP play than oil. KMI in fact just raised common div last week or so a smidge so they appear to be in decent shape. But, this is the only energy play I own now, so I am not a big player here now. About everything but utilities make me nervous now...Which is about normal anyways I guess, ha.

 

[bobandsherry]

Bob, the way I understand it was this..They said a couple major law firms represented about 31,500 of the 70k plus litigants. Two thirds of the 31,500 voted with 98% approval. So about 21,000 have voted and about 20,000 approved.. Two thirds in aggregate of the 70k ish must approve. So about 47,000 have to say yes. So about 26,000 of the remaining approx 59,000 have to vote yes.

I have read the section on SA several times, here's the relevant section, and it's probably some of the most poorly written material I've seen in a while.

In recently filed documents with the court, more than 98% of the victims who have voted regarding PG&E's bankruptcy plan have voted in favor, with roughly 2/3 of the votes of the major law firms representing ~31.5k claims received (only ~47k of the 70k claims' votes need to be received).

It never states how many total votes have been received, only that from law firms.

with roughly 2/3 of the votes of the major law firms representing ~31.5k claims received

So as I read that the only represented total is the ~31.5K (2/3) from law firms, or therefore law firms represent ~47.25K of the votes. So it's clear how many votes from law firms there are still outstanding (~15.75K).

This would then say there are ~22.75K other voters (non-law firm). But I don't see how many of those have voted.

So, with ~31K votes voting "for" from law firms (~31.5K *.98), that means all other votes outstanding total 38.5K (15.75K /law firm + 22.75K / others).

With 47K required and 31K voted, that leaves 16K still needed, or that would mean 42% (16K / 38.5K) of the other votes would need to be cast in favor.

I haven't looked, but not clear if someone abstains from voting, does that then get counted to "accept" or "reject".

https://www.bankruptcyobserver.com/document/PG-AND-E/6340

In reading that, it seems it's not a straight 2/3 vote.

Or perhaps I'm misunderstanding the details from the article.

I need the Cliff Notes release

 

[bobandsherry]

Thanks, bobandsherry and Mulligan,

I put in a few GTC orders for PCA-A and PCA-B.

I don't need the income right away but it would be a nice addition.

You meant PCG-A and PCG-B, right? I don't know if there's a PCA or not. You might look at PCG-C. This is closer to target price for 7% div yield, it's also non-redeemable. It also shows the most possible upside vs it's 2017 level.

PCG-D and PCG-E are same coupon rate as PCG-C, just they are redeemable however I don't see these being on a redemption radar anytime soon, if at all.

 

[Mulligan]

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

Bob, it is beyond poorly written...I have read it several times to try to figure it out...The key I think is to break this down..Or at least my interpretation which I take no responsibility for....
“With roughly 2/3 of the votes of the major law firms representing 31.5K claims”...I take that as two thirds of their votes are in....And out of that 2/3rds, 98% approved it. 31,500 times .67 = 21,500 votes counted.. 21,500 times 98%= 20,682 have voted approval so far..But we will no soon enough...
separate thought...I THOUGHT I read somewhere else 2/3 in aggregate must approve the deal. But I havent rechecked to confirm that so I could be wrong.
There is about 70,000 claims, but only about 47,000 are needed... Does that mean if all 47,000 are voting yes...Or just 47,000 need to vote to meet legitimate threshold?

 

[bobandsherry]

Plus I guess we better add. Even if it gets through proceedings and out of bankruptcy, there is no definitive fact I have read that the preferreds would be made whole this year. If they start distributing common dividends in 3 years as projected, they could continue accruing and pay everything out right before that time if they wanted to. That may be a concern for someone wanting the income...I can wait no problem, provided I eventually get it, ha.

Perhaps, but the plan they submitted in their exit plan showed the preferred issues as being made whole in current year and then payment on preferred issues each subsequent year for that year only. Have you seen any revision to that plan.

 

[Mulligan]

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

Are you referencing the plan link I posted the other day? I have not seen anything else updated from that, but admittedly havent looked. This was not a guaranteed plan though just a projection...I always assume the worse. Well kind of the worst, as if I was assuming the real worst I wouldnt have bought the preferred to begin with, ha.
Turn of century bankruptcy had preferreds dispersed a bit longer out post bankruptcy, and ultimately a year before common was reinstated. For me it is not really an issue. As the price will continue to bake in the dividends as it accrues. Especially after the proceedings officially show they will indeed be paid.

 

[Born2Fish]

You meant PCG-A and PCG-B, right? I don't know if there's a PCA or not. You might look at PCG-C. This is closer to target price for 7% div yield, it's also non-redeemable. It also shows the most possible upside vs it's 2017 level.

PCG-D and PCG-E are same coupon rate as PCG-C, just they are redeemable however I don't see these being on a redemption radar anytime soon, if at all.

Yes - placed orders for PCG-A and B.

 

[Mulligan]

Yes - placed orders for PCG-A and B.

Born, if you are comfortable doing the math, I would take Bobs earlier advise he had mentioned and widen your net all the way to the Series I. They can all trade “off” by a buck or more on trades and get out of sequence. If your watching you may actually find better value at the lower coupons if they trade down.

 

[bobandsherry]

Are you referencing the plan link I posted the other day? I have not seen anything else updated from that, but admittedly havent looked. This was not a guaranteed plan though just a projection...I always assume the worse. Well kind of the worst, as if I was assuming the real worst I wouldnt have bought the preferred to begin with, ha.
Turn of century bankruptcy had preferreds dispersed a bit longer out post bankruptcy, and ultimately a year before common was reinstated. For me it is not really an issue. As the price will continue to bake in the dividends as it accrues. Especially after the proceedings officially show they will indeed be paid.

I had found same info in bankruptcy filing for the proposed reorganization. So yeah, a projection but seems to be more serious than something done on back of napkin. Given everything that's gone on, even issues by other companies not in BK could defer their dividends. So nothing guaranteed.

https://restructuring.primeclerk.com/pge/Home-DownloadPDF?id1=MzI4Njk2&id2=0

 

[Mulligan]

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

Bob, I think the preferreds will be dispersed quickly if this is approved...Look at the terminology around “effective date”...New common stock has to be issued at this time for the company to be off an running...So it would look like it would come almost instantly...But again, I know nothing and would be more qualified for custodial cleaning work than legal work...

6.15 Issuance of New HoldCo Common Stock. On and after the Effective Date, Reorganized HoldCo is authorized to issue, or cause to be issued, the New HoldCo Common Stock in accordance with the Plan and the Plan Documents, all without the need for any further corporate, limited liability company, or shareholder action. All of the New HoldCo Common Stock distributable under the Plan shall be duly authorized, validly issued, and fully paid and non-assessable.
6.16 Exit Financing. On the Effective Date, the Exit Financing Documents shall be executed and delivered. The Reorganized Debtors shall be authorized to execute, deliver, and enter into and perform under the Exit Financing Documents and to consummate the Exit Financing without the need for any further corporate action and without further action by the holders of Claims...

4.33 Class 11B – Utility Preferred Interests.
(a) Treatment: On the Effective Date, all Utility Preferred Interests shall be reinstated.
(b) Impairment and Voting: The Utility Preferred Interests are Unimpaired, and holders of Utility Preferred Interests are presumed to have accepted the Plan.

4.34 Class 12B – Utility Common Interests.
(a) Treatment: On the Effective Date, all Utility Common Interests shall be reinstated.
(b) Impairment and Voting: The Utility Common Interests are Unimpaired, and the holders of Utility Common Interests are presumed to have accepted the Plan.

https://restructuring.primeclerk.com/pge/Home-DownloadPDF?id1=MzM4Nzk4&id2=0

 

[bobandsherry]

Good sleuthing. I guess we'll see how this plays out. Just first need to see how voting and judge approval goes, PG&E have all incentives to get this done and behind them. Get them out of BK and the rest should take care of itself.

 

[pb4uski]

.... Nothing is coming close to 7% threshold for me today. Best strategy now is to put a GTC offer in on an issue or two, set at limit price that hits near 7% and wait to see if anyone unloads and hits that target. Both Mulli and I picked up shares last week on a dip.

My targets for a couple issues for 7%: PCG-A: $25.50, PCG-B: $23.50, PCG-C: $21.50

I'm sure Mulli may have some better words of wisdom to share.

Bob, trying to understand your prices above... I'll use PCG-C for example... $25 par and 5% dividend. As I understand it they are 9 quarters in arrears (1/1/2018 to now) on the dividend... so that is $2.81 ($25 * 5%/4 *10 quarters).

So if I bought it for $20.66 today and real soon received my dividends in arrears of $2.81 then my net investment would be $17.85... and an annual dividend of $1.25 ($25 * 5%) in relation to a $17.85 investment would be a 7% return.

Or put another way, if I want a 7% return then I'm only willing to pay $17.85 plus the present value of the dividends in arrears.

What am I missing? How do you get $21.50?

 

[bobandsherry]

Bob, trying to understand your prices above... I'll use PCG-C for example... $25 par and 5% dividend. As I understand it they are 9 quarters in arrears (1/1/2018 to now) on the dividend... so that is $2.81 ($25 * 5%/4 *10 quarters).

So if I bought it for $20.66 today and real soon received my dividends in arrears of $2.81 then my net investment would be $17.85... and an annual dividend of $1.25 ($25 * 5%) in relation to a $17.85 investment would be a 7% return.

Or put another way, if I want a 7% return then I'm only willing to pay $17.85 plus the present value of the dividends in arrears.

What am I missing? How do you get $21.50?

You have twisted around some things above. You mention 9 div in arrears, then 10 quarters, but then calculate arrears $$ using 9 quarters.

As I understand it they are 9 quarters in arrears (1/1/2018 to now) on the dividend... so that is $2.81 ($25 * 5%/4 *10 quarters).

10 quarters would be $3.125. You only calculated only 9 quarters.

As I understand it, there are 10 dividends in arrears, not 9 as you mentioned. 4 for 2018, 4 for 2019 and 2 for 2020. Ex-Div is 1/4/7/10. Last div paid was Ex-Div 10/30/17.

There will be one more for July, so I use 11 dividends in arrears as that would cover mostly the BK period. So that would be $3.44 paid in the dividend arrears.

If I use my $21.50, that's then $18.06 left invested after collecting the arrears. With div of $1.25/yr, that's 6.92%, close enough to 7% for gov't work as they say. To be slightly over the 7% target then hit $21.25. If you were able to buy at $20.66 I calc it would be 7.26% div %.

 

[pb4uski]

The 9/10 confusion was because at first I thought they were 10 quarters behind and then changed it from 10 to 9 and missed changing one 10 to a 9.

So with $3.44 for the arrears, plus the $17.85 that is $21.30.... which lines up reasonable well your $21.50. Got it.

 

[Mulligan]

The 9/10 confusion was because at first I thought they were 10 quarters behind and then changed it from 10 to 9 and missed changing one 10 to a 9.

So with $3.44 for the arrears, plus the $17.85 that is $21.30.... which lines up reasonable well your $21.50. Got it.

PB, I personally assigned an approximate 7% when I bought to assign a risk premium into this incase it doesnt go through. But if I get lucky and find out it passes, I am going in on 500 more if I can at up to about $27.50 on A as I dont need the risk premium then. And then I will wait for the bounty or price to go up to reflect it...I could use any of the series’ though if the opportunity is there.

 

[Mulligan]

PB and Bob, here is a question to see if you can answer....Name one QDI regulated utility preferred with a current 6% yield or greater...

 

[pb4uski]

None that I know of.

 

[bobandsherry]

PB and Bob, here is a question to see if you can answer....Name one QDI regulated utility preferred with a current 6% yield or greater...

Is there a prize? How about NI-B? Currently 6.06% yield. And would you include SCE-H and SCE-J at 6.04% and 6.14% respectively. These all go floating rate in several years, but fixed for now.