Preferred Stock Investing-The Good , The Bad and The In Between 2021

[eniacpalm]

For holders of SNCRL
"April 11, 2025, Synchronoss Technologies, Inc. (the “Company”) issued a conditional notice of full redemption (the “Notice”) to the holders of its outstanding 8.375% Senior Notes due 2026 (the “Notes”) pursuant to which, subject to the Condition (as defined below), the Company will redeem all of the outstanding aggregate principal amount of the Notes (the “Redemption”) on May 11, 2025 (“Redemption Date”), payable on May 12, 2025 (the “Payment Date”), at a redemption price equal to $25.25 per $25.00 principal amount of such Notes, plus accrued and unpaid interest thereon, if any, to, but excluding, the Redemption Date (the “Redemption Price”). The obligation of the Company to redeem the Notes is subject to the consummation by the Company of a debt financing transaction (the “Debt Financing Transaction”) with an aggregate principal amount of at least $200 million (the “Condition”). In the Company’s discretion, the Redemption Date and related Payment Date may be delayed until such time as the Condition shall be satisfied or waived, or the Redemption may not occur and the Notice may be rescinded in the event that the Condition shall not have been satisfied or waived by the Redemption Date and related Payment Date or by the Redemption Date and related Payment Date as so delayed. This Current Report does not constitute a notice of redemption with respect to the Notes."

 

[Tacitus]

Limit order for WFC-Z to buy at 19.27 or better, will yield about 6.25%. Wells Fargo long dividend hx for common, good Tier I capital ratio, etc. Yield qualifies for preferential tax treatment. For a taxable account.

 

[Semi-Retyrd]

Limit order for WFC-Z to buy at 19.27 or better, will yield about 6.25%. Wells Fargo long dividend hx for common, good Tier I capital ratio, etc. Yield qualifies for preferential tax treatment. For a taxable account.

I have a warm spot in my heart for WFC preferred issues since WFC-L was the first preferred I ever bought. If you can handle a higher $$$ preferred, I suggest WFC-L as it is the highest yielding of the Wells preferred issues. It offers a qualified dividend like WFC-Z and is not callable, so one can buy it safely above par with no call risk. My target was minimum 6.5% yield, so I waited until WFC-L was $1148 or below. Since Wells is a systemically important bank founded in 1852, there is essentially zero default risk. I have since sold all of WFC-L as I got greedy and searched for a higher yield (accepting somewhat higher risk). Currently I hold SCE/PM yielding around 8% also with qualified dividends.

 

[Tacitus]

I have a warm spot in my heart for WFC preferred issues since WFC-L was the first preferred I ever bought. If you can handle a higher $$$ preferred, I suggest WFC-L as it is the highest yielding of the Wells preferred issues. It offers a qualified dividend like WFC-Z and is not callable, so one can buy it safely above par with no call risk. My target was minimum 6.5% yield, so I waited until WFC-L was $1148 or below. Since Wells is a systemically important bank founded in 1852, there is essentially zero default risk. I have since sold all of WFC-L as I got greedy and searched for a higher yield (accepting somewhat higher risk). Currently I hold SCE/PM yielding around 8% also with qualified dividends.

Thanks but WFC-L is convertible which is not something usually interested. From Quantum "The preferred shares were originally convertible any time at the holder's option into 32.0513 common shares of Wachovia Corp. (NYSE: WB), an initial conversion price of $31.20 per common share. After the merger of Wachovia into Wells Fargo, the preferred is now convertible into 6.3814 shares of Wells Fargo & Co. (NYSE: WFC) common stock, an initial conversion price of $156.71 (calculated) per common share. See exhibit 4.7 of the 8-K filed with the SEC on 12/30/2008 for further details on the current conversion provisions of this preferred.

On or after 3/15/2013, if the price of the common stock exceeds 130% of the conversion price for 20 of any 30 consecutive trading days, the company may, at their option, cause the preferred shares to be converted into common shares at the then prevailing conversion price."

 

[Mulligan]

Thanks but WFC-L is convertible which is not something usually interested. From Quantum "The preferred shares were originally convertible any time at the holder's option into 32.0513 common shares of Wachovia Corp. (NYSE: WB), an initial conversion price of $31.20 per common share. After the merger of Wachovia into Wells Fargo, the preferred is now convertible into 6.3814 shares of Wells Fargo & Co. (NYSE: WFC) common stock, an initial conversion price of $156.71 (calculated) per common share. See exhibit 4.7 of the 8-K filed with the SEC on 12/30/2008 for further details on the current conversion provisions of this preferred.

On or after 3/15/2013, if the price of the common stock exceeds 130% of the conversion price for 20 of any 30 consecutive trading days, the company may, at their option, cause the preferred shares to be converted into common shares at the then prevailing conversion price."

It along with BAC-L are considered “busted convertibles”, meaning they will never be forced converted because they will never reach conversion strike price in decades if ever. There are several busted convertibles floating around the preferred universe, so they basically trade as noncallable perpetuals.
I dont follow the bank ones much, because I typically only own utility preferreds.

 

[Winemaker]

The chances of WFC -L of being called are slim to none in our lifetime. The common would have to be $203.84 for 20 consecutive days. It's at $69.73, 52 week high and record high is $81.50. If you think it will be called soon, arbitrage and by the common and make $130 in capital gains. WIN WIN in both situations.

 

[Semi-Retyrd]

The chances of WFC -L of being called are slim to none in our lifetime. The common would have to be $203.84 for 20 consecutive days. It's at $69.73, 52 week high and record high is $81.50. If you think it will be called soon, arbitrage and by the common and make $130 in capital gains. WIN WIN in both situations.

Here is some quickie math on when WFC-L might convert. The price appreciation from today would have to be 203.84/69.73 = 2.92. According to Morningstar the 15 year annualized total return of WFC is 6.65%. Subtracting the 2.22% dividend yields 6.65 - 2.22 = 4.43% annualized price appreciation over the long term which is typical for a big bank because they can't grow much faster than the US population. In Wells case they are still under a consent order from the Fed preventing them from growing through acquisition for the time being. But being generous if we assumed an average 5% price appreciation it would take 22 years for WFC's price to hit the convertible point. I am sure that Wells will be around in 22 years. I am much less sure I will be around then. Bottom line - unless you are a youngster, you needn't worry about conversion. As mentioned by Mulligan, the convertibility is "busted".

 

[Tacitus]

It along with BAC-L are considered “busted convertibles”, meaning they will never be forced converted because they will never reach conversion strike price in decades if ever. There are several busted convertibles floating around the preferred universe, so they basically trade as noncallable perpetuals.
I dont follow the bank ones much, because I typically only own utility preferreds.

It is the "then prevailing conversion price" that not quite clear to me as I assume distinguished from the initial conversion price of $156.71 (for which 130% would be $203.72). It is not clear to me how the conversion price keeps adjusting, perhaps can explain. I took a cursory look at the prospectus found this,
"On or after March 15, 2013, we may, at our option, at any time or from time to time cause some or all of the Series L Preferred Stock to be converted into shares of our common stock at the then applicable conversion rate if, for 20 trading days within any period of 30 consecutive trading days, including the last trading day of such period, the closing price of our common stock exceeds 130% of the then applicable conversion price of the Series L Preferred Stock. We will provide notice of our decision to exercise our right to cause the mandatory conversion within three trading days of the end of the 30 consecutive trading day period."
I assume it is referencing the table S-24 but decided to move on.
Anyhow I passed on it but am curious as to confirming exactly how the conversion price is adjusted.

 

[Mulligan]

It is the "then prevailing conversion price" that not quite clear to me as I assume distinguished from the initial conversion price of $156.71 (for which 130% would be $203.72). It is not clear to me how the conversion price keeps adjusting, perhaps can explain. I took a cursory look at the prospectus found this,
"On or after March 15, 2013, we may, at our option, at any time or from time to time cause some or all of the Series L Preferred Stock to be converted into shares of our common stock at the then applicable conversion rate if, for 20 trading days within any period of 30 consecutive trading days, including the last trading day of such period, the closing price of our common stock exceeds 130% of the then applicable conversion price of the Series L Preferred Stock. We will provide notice of our decision to exercise our right to cause the mandatory conversion within three trading days of the end of the 30 consecutive trading day period."
I assume it is referencing the table S-24 but decided to move on.
Anyhow I passed on it but am curious as to confirming exactly how the conversion price is adjusted.

The prevailing conversion price is just simply the price of common stock that Wells enacts conversion process. Remember this would have to be changed if for example Wells ever announced a stock split, a reverse split, or being acquired by another bank (not likely) such as why it already changed when Wells acquired Wachovia. The genesis from where the issue originated.

 

[Tacitus]

The prevailing conversion price is just simply the price of common stock that Wells enacts conversion process. Remember this would have to be changed if for example Wells ever announced a stock split, a reverse split, or being acquired by another bank (not likely) such as why it already changed when Wells acquired Wachovia. The genesis from where the issue originated.

Ok, thanks.

Did dig a bit deeper into prospectus, see page S-10 which goes into this with some more depth, it starts by the following and offers various other scenarios after it, so following not complete listing but fwiw:

"The conversion rate of the Series L Preferred Stock may not be adjusted for all dilutive events that may adversely affect the trading price of the Series L Preferred Stock or the common stock issuable upon conversion of the Series L Preferred Stock.

The conversion rate of the Series L Preferred Stock is subject to adjustment upon certain events, including the issuance of dividends or distributions in common stock, subdivisions and combinations of our common stock, certain issuances of rights or warrants, distributions of shares of our capital stock (other than our common stock), evidences of our indebtedness or assets, certain cash dividends or distributions or certain tender offers or exchange offers for our common stock by us or any of our subsidiaries as described under “Description of the Series L Preferred Stock—Anti-Dilution Rate Adjustments.”

 

[Mulligan]

Ok, thanks.

Did dig a bit deeper into prospectus, see page S-10 which goes into this with some more depth, it starts by the following and offers various other scenarios after it, so following not complete listing but fwiw:

"The conversion rate of the Series L Preferred Stock may not be adjusted for all dilutive events that may adversely affect the trading price of the Series L Preferred Stock or the common stock issuable upon conversion of the Series L Preferred Stock.

The conversion rate of the Series L Preferred Stock is subject to adjustment upon certain events, including the issuance of dividends or distributions in common stock, subdivisions and combinations of our common stock, certain issuances of rights or warrants, distributions of shares of our capital stock (other than our common stock), evidences of our indebtedness or assets, certain cash dividends or distributions or certain tender offers or exchange offers for our common stock by us or any of our subsidiaries as described under “Description of the Series L Preferred Stock—Anti-Dilution Rate Adjustments.”

Your clip of prospectus alludes to what has happened with a few other busted preferreds. If you look at busted convertible LXP-C as an example over the years the conversion has gotten better due to what the company has done with the common shares over time.

 

[Tacitus]

Ok am sure you are correct. Just my preference to avoid the complexities of convertibles but maybe reconsider at some point. Thank you so much for your input.
Edit-will buy a few, the wording seems similar to others now that I have looked. Still don't like some complexities and the mandatory provision but will assume basically the conversion price is as relayed. Some other reasons too. Thanks for opening my mind to these.

 

[Mulligan]

Ok am sure you are correct. Just my preference to avoid the complexities of convertibles but maybe reconsider at some point. Thank you so much for your input.
Edit-will buy a few, the wording seems similar to others now that I have looked. Still don't like some complexities and the mandatory provision but will assume basically the conversion price is as relayed. Some other reasons too. Thanks for opening my mind to these.

I personally would never worry about the mechanics of purchasing a busted convertible or a strike price driven convertible as long as one isnt buying the preferred over the price of a possible conversion ratio…But, and this likely what you are referring to, I will NEVER buy a mandatory DATE DRIVEN convertible preferred…..If price of common is low at the conversion date you can really get screwed if you bought at IPO. These however tend to track the movements of the common because the market knows about the mandatory conversion date in relation to conversion terms, and current common stock price.

 

[Texas Proud]

Ok am sure you are correct. Just my preference to avoid the complexities of convertibles but maybe reconsider at some point. Thank you so much for your input.
Edit-will buy a few, the wording seems similar to others now that I have looked. Still don't like some complexities and the mandatory provision but will assume basically the conversion price is as relayed. Some other reasons too. Thanks for opening my mind to these.

The language is there so they can adjust for common stock splits, reverse splits etc. etc. that are artificial changes to the price...

IOW, the company cannot do anything to change what the pref has as a conversion price to the detriment of the pref shares...

 

[Tacitus]

New purchase, NEWTG, a baby bond, NewtekOne, matures in 6/1/2029, callable 6/1/2027, yield about 8.5%, selling just under par.

 

[tutan]

Bought some more HAWLM at $15. Hawaiian Electric perpetual preferred. 5.25% coupon rate at $20.

 

[Mulligan]

Bought some more HAWLM at $15. Hawaiian Electric perpetual preferred. 5.25% coupon rate at $20.

If you like OTC perp utes with a lower yield, but IG (A3/BBB+) and very safe there may be some NSARP still available at $67.50 ($100 par). I bought a few hundo today of it. I have a little love for these old subsidiary preferreds because they in effect sit above the cap stack of all parent bond debt.

 

[tutan]

I have some PCG-A too. I believe it is fairly safe now. PG&E has been burying power lines. And since emerging from bankruptcy, they won’t hesitate to shut down the circuits going to areas that are about to get a little windy. Southern CA Edison may have to go through the same to recover.

 

[tizod]

If you like OTC perp utes with a lower yield, but IG (A3/BBB+) and very safe there may be some NSARP still available at $67.50 ($100 par). I bought a few hundo today of it. I have a little love for these old subsidiary preferreds because they in effect sit above the cap stack of all parent bond debt.

Mulligan (hard to get used to calling you that), just what I was looking for! And ticking down...Thanks. Even better knowing this:
QUANTUMONLINE.COM SECURITY DESCRIPTION: NSTAR Electric Co., formerly Boston Edison Co., 4.25% Series Cumulative Preferred Stock, $100 par value, redeemable anytime at the company's option at $103.625 plus accrued dividends, and not mandatorily redeemable.
Distributions are paid quarterly 2/1, 5/1, 8/1 & 11/1. Dividends paid by this preferred security are eligible for the preferential income tax rate of 15% to a maximum of 20%

 

[Mulligan]

I have some PCG-A too. I believe it is fairly safe now. PG&E has been burying power lines. And since emerging from bankruptcy, they won’t hesitate to shut down the circuits going to areas that are about to get a little windy. Southern CA Edison may have to go through the same to recover.

I tend to agree. And I owned and traded them during the post fire/suspended accrual phase, but presently out.

Mulligan (hard to get used to calling you that), just what I was looking for! And ticking down...Thanks. Even better knowing this:
QUANTUMONLINE.COM SECURITY DESCRIPTION: NSTAR Electric Co., formerly Boston Edison Co., 4.25% Series Cumulative Preferred Stock, $100 par value, redeemable anytime at the company's option at $103.625 plus accrued dividends, and not mandatorily redeemable.
Distributions are paid quarterly 2/1, 5/1, 8/1 & 11/1. Dividends paid by this preferred security are eligible for the preferential income tax rate of 15% to a maximum of 20%

Yes, its very old, but very safe. Its one of those rare near extinct birds that allow the preferred shareholders to take majority control over the board of directors if 6 dividends are missed. Being its low risk profile, that would likely never happen. And Eversource would never allow it to get to that point either.

 

[tizod]

@Mulligan What is your current take on ESGRP? I like it, but not sure of the parent reinsurance risks with the current climate and political situations. Your take on it? I can use the 8.4%....

 

[Mulligan]

@Mulligan What is your current take on ESGRP? I like it, but not sure of the parent reinsurance risks with the current climate and political situations. Your take on it? I can use the 8.4%....

My biggest concern is what is Sixth Street doing with them after they acquire it? They are a private equity firm, so its possible the preferreds could get delisted and sent to expert market. Unless they willing provide financials and pay to keep them on the exchange. I suspect that is why they already are dragged down some. The worst case scenario keeps me away. Its possible they could tender at a lower price. Some companies have done that after they delisted issues, but there is no guarantee.
I also am aware I am very biased and thickskulled too. I think I have somewhere a little over 30 bonds, sub debt, and preferreds in total. And only 5 are not some utility. So I dont play much in insurance or banks. One of those I did buy today. I bought some MBINL at 8.15%. A bit of a small ball shameless yield chase play.

 

[tizod]

I looked at that as a positive, since it is insurance the options seem to stay more limited? Like AFFT. My guess is it goes dark, but they either pay forever or buy out @25. I think it is the backend having to keep insurance listings that limit them. I wonder what LeJeune thinks about it. Was thinking of subscribing there....

I may put a bit into Merchants...hate the market but think it is safer than many and I do want that magic 8% for a few more to ride out the common stock market beta: I think 8% might be better than the market the next 2+ years....

 

[Mulligan]

I looked at that as a positive, since it is insurance the options seem to stay more limited? Like AFFT. My guess is it goes dark, but they either pay forever or buy out @25. I think it is the backend having to keep insurance listings that limit them. I wonder what LeJeune thinks about it. Was thinking of subscribing there....

I may put a bit into Merchants...hate the market but think it is safer than many and I do want that magic 8% for a few more to ride out the common stock market beta: I think 8% might be better than the market the next 2+ years....

That becomes a personal viewpoint. If one just views it as an annuity with some unknown and very possible lower residual value for heirs to deal with and just collect the high coupon, that shouldnt be a risk. I tend to play the middle collecting income while keeping an eye on the resale value.
….And its possible it goes dark and untradeable, but at a later time, maybe the company gets sold back as an IPO and it winds up on the exchange again.
….Here is another example of an ESGRP situation that is in 2042 senior note form. Pays over 8% most likely for same reason.

ARGD Search Results - QuantumOnline.com

QuantumOnline.com offers complete income investment security information for individual investors seeking regular returns on investments.

www.quantumonline.com

 

[aja8888]

Just a note on KTH today as it paid it's 8% dividend and is now down to near liquidation value ($27.10). Might be a good time to pick some up.

Structures Products Cp 8% CorTS Issued by Peco Energy Cap Tr II Preferred Stock (KTH)​

KTH Search Results - QuantumOnline.com

QuantumOnline.com offers complete income investment security information for individual investors seeking regular returns on investments.

www.quantumonline.com