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

[Texas Proud]

Yes, thanks for the heads up on this one... I got an additional 301 shares of B a few days ago at 25.50... wanted more but that was all I got...


On a side note I am a bit pissed at myself... at the end of April I was going to buy Boeing... I came upstairs and got into my kids account and sold something and bought her some... for some reason (still cannot remember what happened) I did not buy any for me...


Since purchase it is up 50%...


Now, I did get my DOW and it is up 77% with a current price divi of 6.7%...

 

[Mulligan]

Good trading Texas. I would need a “T” shot in the buttocks to make common stock trades, ha.
Hey an update on PCG. Nothing probably of immediate concern but my initial thesis was wrong so I locked in some gains on the golf course but keeping my A for a long hold still...PCG is in process of issuing debt. Clearly they are sending some junk debt to market. I assumed on initial reports all would be...Here is message...

PG&E (PCG +5.4%) is preparing an $11B debt financing package that may be sold to investors as soon as next week as it exits bankruptcy, Bloomberg reports.

The financing is said to include $4B of high-yield bonds, a $750M term loan led by JPMorgan Chase and an investment grade bond portion led by Bank of America, according to the report.

...Now I dont know if the HY debt is coming from subsidiary where preferred lies or the hold co...or both.. But we really have to lower the credit notch of preferreds based on this. At best the high yield would be BB.. So the preferreds could be in BB- or even B range. I dont think its any market shocker, just maybe unreasonable expectations on my end.

 

[aja8888]

Good trading Texas. I would need a “T” shot in the buttocks to make common stock trades, ha.
Hey an update on PCG. Nothing probably of immediate concern but my initial thesis was wrong so I locked in some gains on the golf course but keeping my A for a long hold still...PCG is in process of issuing debt. Clearly they are sending some junk debt to market. I assumed on initial reports all would be...Here is message...

PG&E (PCG +5.4%) is preparing an $11B debt financing package that may be sold to investors as soon as next week as it exits bankruptcy, Bloomberg reports.

The financing is said to include $4B of high-yield bonds, a $750M term loan led by JPMorgan Chase and an investment grade bond portion led by Bank of America, according to the report.

...Now I dont know if the HY debt is coming from subsidiary where preferred lies or the hold co...or both.. But we really have to lower the credit notch of preferreds based on this. At best the high yield would be BB.. So the preferreds could be in BB- or even B range. I dont think its any market shocker, just maybe unreasonable expectations on my end.

Interest rates are low, now's the time to issue debt (for a lot of companies).

 

[Mulligan]

Interest rates are low, now's the time to issue debt (for a lot of companies).

Aja, the issuance of debt wasnt the problem as that was a given per terms of bankruptcy provisions. They stated prior it would be IG debt. Seems they were meaning only some. And it isnt surprising as the company is taking on massive debt to help pay the claims. Their debt is double what it was prior to the fire. And they had high IG debt prior. This is slapping on double and with higher yields. It isnt a problem I suspect until it is a problem. There is a lot of financial engineering going on here. Such as assuming certain profits and forgone dividends for at least 3 years to get some of it paid down. They paid about a billion a year in dividends pre fire, so that will only take care of a small part of the debt.
Its just something I wanted to pass on. I suspect smarter people already knew they were going to issue junk debt being the math is where its at. I was just going by what company had said.

 

[Born2Fish]

Good trading Texas. I would need a “T” shot in the buttocks to make common stock trades, ha.
Hey an update on PCG. Nothing probably of immediate concern but my initial thesis was wrong so I locked in some gains on the golf course but keeping my A for a long hold still...PCG is in process of issuing debt. Clearly they are sending some junk debt to market. I assumed on initial reports all would be...Here is message...

PG&E (PCG +5.4%) is preparing an $11B debt financing package that may be sold to investors as soon as next week as it exits bankruptcy, Bloomberg reports.

The financing is said to include $4B of high-yield bonds, a $750M term loan led by JPMorgan Chase and an investment grade bond portion led by Bank of America, according to the report.

...Now I dont know if the HY debt is coming from subsidiary where preferred lies or the hold co...or both.. But we really have to lower the credit notch of preferreds based on this. At best the high yield would be BB.. So the preferreds could be in BB- or even B range. I dont think its any market shocker, just maybe unreasonable expectations on my end.

Does this mean the shares of preferred PCG-A, B, etc... are going to have junk bond status?

Are they going to postpone paying the PCG preferred series dividends that are in arrears or does this mean that we don't know?

 

[Mulligan]

Does this mean the shares of preferred PCG-A, B, etc... are going to have junk bond status?

Are they going to postpone paying the PCG preferred series dividends that are in arrears or does this mean that we don't know?

Nothing has changed at all per where everything is. Last stop is bankruptcy judge approving and his decision should be this week. If he approves everything will unfold as planned. What I mentioned in above post has nothing to do with whether the preferreds will get paid. They will sometime...That sometime hasnt been specifically mentioned but assumed this year, my guess is the Oct. payment. Because PCG said they wouldnt “officially exit bankuptcy” until around Sept. 1 (that date isnt firm).
I might not expressed it correctly but my only point was some of the debt is going to be issued HY. This just means my “guessitmate” of preferred credit is probably lower than I thought. And when I was selling some yesterday and Friday, the stripped yield was already down to 5.7% which I dont view as high for B rated preferreds even though its ute.. Keep in mind I didnt sell everything, I just reduced to my long term core hold position, all which are in the A series. I had an over exposed position flip trading and needed to tone it doen anyways to take the profits.
Im certainly not scared holding what I have.

 

[Mulligan]

Born, in other words its just a valuation call. If they drop back some, I will have no problem trading them again.

 

[Born2Fish]

Born, in other words its just a valuation call. If they drop back some, I will have no problem trading them again.

Thanks, Mulligan - I took it that way.

I reduced my "C" series holdings as the price rose.

 

[Mulligan]

Thanks, Mulligan - I took it that way.

I reduced my "C" series holdings as the price rose.

Born, I need to clarify again...It wasnt a “valuation call”. It was an amateurs valuation call based on a limit set of evaluation metrics with limited cerebral power to interpret them.

 

[Born2Fish]

Born, I need to clarify again...It wasnt a “valuation call”. It was an amateurs valuation call based on a limit set of evaluation metrics with limited cerebral power to interpret them.

You're not fooling me.

I wouldn't have had a clue about the PG&E preferred opportunity if you hadn't done all of the discovery and due diligence and then shared it with the group!

 

[Mulligan]

Got a little vague update on the new credit for PCG..

PG&E wants to go to the public debt markets for $10.7B of bond financing - including $5.9B of investment grade bonds issued by the utility and $4.75B of high-yield bonds at the corporate level - and seek buyers for $5.75B worth of shares.

So the HY bond will be at Hold Co level and IG at the Ute level. The preferreds are at the Ute level so on surface this is good...Provided of course it isnt BBB type senior secured. If its senior unsecured debt we would be looking at PCG preferreds having a similar credit profile to SCE preferreds.

 

[Mulligan]

Dissenting litigants approved a new offer for more PCG shares for settlement Friday. This pretty much ended all objections to exiting bankruptcy plans. Bankruptcy approval is now all but assured.

 

[brokrken]

SPLP-A just paid the divy in shares. May be time to let this one go.

 

[Sunset]

I have 804 shares of SPLP-A

It seems to me I should have gotten 25 shares, but only 12 showed up

12 seems too low, and my activity history looks weird:

06/15/2020 06/15/2020 Stock Dividend Due Bill
show activity detailsSTEEL PARTNERS HLDS LP NEW MONEY SE...
SPLPPRA -12 $0.00

06/15/2020 06/15/2020 Dividend
show activity detailsSTEEL PARTNERS HLDS LP NEW MONEY SE...
SPLPPRA 12 $0.00

 

[bobandsherry]

SPLP-A just paid the divy in shares. May be time to let this one go.

They announced they were paying in shares back on May 22. Guess it's just a forced DRIP. I've steered clear of this based on all the peculiar conditions in the issue, but guessing you've done OK with long hold on this.

https://www.marketwatch.com/press-r...on-on-its-series-a-preferred-units-2020-05-22

 

[Sunset]

They announced they were paying in shares back on May 22. Guess it's just a forced DRIP. I've steered clear of this based on all the peculiar conditions in the issue, but guessing you've done OK with long hold on this.

https://www.marketwatch.com/press-r...on-on-its-series-a-preferred-units-2020-05-22

So based on this, I calculate I should have gotten 17.71 shares

0.375×804 / $17.0245 ea = 17.71

 

[bobandsherry]

I have 804 shares of SPLP-A

It seems to me I should have gotten 25 shares, but only 12 showed up

12 seems too low, and my activity history looks weird:

06/15/2020 06/15/2020 Stock Dividend Due Bill
show activity detailsSTEEL PARTNERS HLDS LP NEW MONEY SE...
SPLPPRA -12 $0.00

06/15/2020 06/15/2020 Dividend
show activity detailsSTEEL PARTNERS HLDS LP NEW MONEY SE...
SPLPPRA 12 $0.00

From the press release, it seems $25 is the basis used to compute shares paid. Ugh! What a total hose job.

In accordance with the Company's Eighth Amended and Restated Agreement of Limited Partnership, such distributions will be made in kind, such that holders of Series A Preferred will receive additional units equal to the product of units held and the $0.375 per unit quarterly dividend divided by the Series A Preferred liquidation preference of $25.00 per unit.

804 * $0.375 = $301.50 / $25 = 12. 06 (you should see payment for the fractional shares as well, $1.50.

 

[bobandsherry]

So based on this, I calculate I should have gotten 17.71 shares

0.375×804 / $17.0245 ea = 17.71

Nope, 12 shares seems right based on my above reply. So looks like you'd have to hold until maturity, 2/2024, to get your full value.

 

[Sunset]

Nope, 12 shares seems right based on my above reply. So looks like you'd have to hold until maturity, 2/2024, to get your full value.

You are right I posted before reading all the way down (was called to lunch so was rushed ).

CRAP...
So really it's a dividend Cut, as if it was cash I could buy about 25 shares at todays price, and then get full value as well at 2/2024

 

[brokrken]

From the press release, it seems $25 is the basis used to compute shares paid. Ugh! What a total hose job.

Yes, total hose job. At this point I'm inclined to wait it out and make them give me par at maturity. Hope it makes it that long.

 

[brokrken]

Question about maturing issues and when to sell for some of you more experienced Pref investors. Example, I bought LANDP a while ago for a premium and have enjoyed, what I would consider, semi-low risk dividends since. However, it matures in September of 2021 and I don't want to lose that premium to the maturity. I can sell now for about what I paid. My question is, how long before maturity do these issues start to trade back towards par? Should I sell now? Wait 6 months?

 

[bobandsherry]

Yes, total hose job. At this point I'm inclined to wait it out and make them give me par at maturity. Hope it makes it that long.

You got me looking at it again. I calculated this has an 20% total return (18% XIRR) if I bought today. So has me looking at this now for long term buy/hold. Will need to spend some time on due diligence, look at the financials to see if SPLP will remain viable until then and have the means to pay for the redemption.

 

[brokrken]

You got me looking at it again. I calculated this has an 20% total return (18% XIRR) if I bought today. So has me looking at this now for long term buy/hold. Will need to spend some time on due diligence, look at the financials to see if SPLP will remain viable until then and have the means to pay for the redemption.

They have a real strong CEO and I expect them to remain viable. But, you never know.

Bob, did you calculate the IRR assuming you get divies paid out as the were today, only to receive the full divy equivalent payout at maturity?

 

[bobandsherry]

They have a real strong CEO and I expect them to remain viable. But, you never know.

Bob, did you calculate the IRR assuming you get divies paid out as the were today, only to receive the full divy equivalent payout at maturity?

I took the divs as being paid at the 37.5 cents/sh, so a buy and hold until maturity to be made whole. I thought about trying to get fancy by calculating the reduced div and made whole at the end, but then thought for purpose intended it's directionally correct enough.

 

[Sunset]

So basically SPLP-A now pays a 6% dividend. Not as good as it used to be.
The fact that the shares have a redemption price is really just a red herring.