Tim McPartland

Bonds, long-term horizon, medium-term horizon, long only
Tim McPartland
Bonds, long-term horizon, medium-term horizon, long only
Contributor since: 2008
pouellet--thanks for your inputs.
AlphaChuck3--thanks for chiming in. Probably the reason investors are anxious to own these even with the various ratings agencies (s&P and Moodys) showing them a bit inferior to Wells Fargo. Wouldn't be the first time they missed.
Hi Denislav - thanks for stopping by. Yes I aware there are accrued dividends on these issues and will be trying to include those in the future, although when all issues are nearly equal with the same dividend dates this is mostly just a math exercise without actionable results--but just the same I will be trying to include in the future.
Yes I am aware that IB doesn't have (or doesn't give) access to the OTC Grey Market and the only suggestion I have is to have multiple accounts as most income investors do.
Also we are aware (intimately) with other arbitrage opportunities that are superior to this one, but our focus here is simply the new issue. There is a "swaps" listing on The Yield Hunter website focused just on these types of opportunities. It has preferred issues divided by issuer.
Thanks for your input.
Hi Mr_Lucky--thanks for reading and the compliment. We have trouble writing "fluffy" stuff so just kind of stick to the facts. I am awaiting publishing on a new article for tomorrow--and then hopefully many more to follow--I hope I have to the time to keep it up as I like writing.
Hi brutalhonesty--thanks for reading. For Finra you start at the home page--then under "industry professionals" you navigate to the page Regulatory Filings and Reporting--then under "market transparency" you click OTC Bulletin Board. Next scroll down to "daily list"--that is the list you are after. For new issues you want to choose "additions" in the left menus. If you choose "deletions" you will have the list that will show any preferreds moving to permanent trading on the NYSE or Nasdaq.
Alternately you can simply watch The Yield Hunter website here--
http://bit.ly/I81bHK where most of the info is provided for you (for free of course).
Hi IncomeYield--thanks for stopping by and reading. Am in complete agreement with your comment and agree that PGX would be a decent ETF to own in these times.
Hi pjg69ny--as you may have noticed many, many debt issues of unrated issuers have been taking a bath. There is a lot of fear in the air. The highest quality issues have stayed flat or even moved higher as folks moved to lower risk. My suspicion is that these issues will move back higher (toward par).
Thanks for reading and commenting pouellet!
Thanks for reading and commenting Rantz.
Hi again alaw35--I submitted a correction request. Thanks again.
Hi alaw35--thanks for reading and catching that error. That should read the new issue which is the E issue.
Thanks for reading puck49.
Thanks puck for reading (both here and the website). I hope to write here more often if I can find the time.
Hi metameta--thanks for reading and commenting.
Hi hcir--BAC preferred coming to OTC today with ticker BKRRP and both are QDI.
Hi Meta and DIA. I can speak to the question---CEF's (which includes BDC's) did have some near violation experiences after the financial crisis. I wrote on an article on here 5 years ago which included a breakdown of the experience of various Gabelli funds. The article is here.
Most recently Kayne Anderson has been buying back Term Preferreds as has Tortoise (both MLP CEF's) even though the coupons were very low (3.95% to 4.6%) because of potential violations of the leverage requirement.
Actually these are perpetual preferred issues and there are no maturity dates on these issues.
Just be cool Brad--this is the life of making buy, sell calls. I appreciate your work--like most of your readers (I am guessing) sometimes I agree with you, sometimes I disagree, but in the end each and every individual must make their own decisions based upon on many factors of which your opinion is just 1. I read your article, but then do my own due diligence--if someone looks at your article and pulls the trigger simply based on that level of due diligence that is just too darned bad.
Don't spend too much energy on articles like this one--it just isn't worth the time to rebut the occasional squeaky wheel.
Hi Crunching--we will just have to wait and see how this plays out. I sold my BGS in late October after holding it or a former hybrid security they had for many years. I liked the company, but am way too familiar with the Green Giant business to think it will be easy in the future, but as I noted it will take a year (or maybe even 2) before one will be able to determine the viability of the deal.
Good luck.
Crunching numbers--thanks for your thoughts. Relative to GG I think there is likely an underestimating of the difficulties of operating this business profitably.
It is very difficult to command a premium price for a product that is no longer different from the competition and that is where Green Giant is at. This is not a new problem--it has been around for 20-30 years--this has been true throughout the entire self stable industry. Just last night when I was doing my grocery shopping I noticed the canned Green Giant corn at 1.59 for a 10 ounce can, when I can buy the same quality product all day long for a buck. Now there was a time when the particular varieties of corn used by Green Giant commanded a premium, but a part of the value was also the workmanship of the product--for instance the age of the corn at harvest. Green Giant also has a good variety of small peas, but generally the sweet peas and green beans were just so-so. No longer is the workmanship of the product worthy of the premium price. The Green Giant canned brand was deemed a 'milker' by Pillsbury 20 years ago-with interest almost entirely in growing the frozen business. The frozen is also now a 'milker' (by milker I mean to milk what profit you can, stop marketing support, and unload the business when you can). Part of this strategy was executed 21 year ago when Pillsbury decided to outsource the manufacturing of the canned business to Seneca Foods, which meant that some plants were sold to Seneca and a number of old plants were closed. Frozen vegetables continued to be produced by Pillsbury in Illinois and Mexico.
Seneca always ran a tight operation. While Seneca is a public company it is controlled by family. If you want to have an idea of how difficult this business is you can review Seneca Foods financials--even under the leadership of the same person for 50 years they have difficulties making a consistent profit. Seneca produces the lions share of Green Giant canned vegetables--mainly in Minnesota, Wisconsin and New York. Under pressures to produce a profit (or at least breakeven) I think the quality has suffered under these pressures and without a product that can be differentiated it is tough to command that premium price.
All the above is not to say that BGS can't make a profit---but it is not a given. Since 1979 when Pillsbury bought the business the selling, general and administrative costs have been high for GG. BGS can shine if they can lower this load on the business. On the other hand BGS says they are going to up marketing expense--which could turn out badly.
It will be very interesting to see what happens here and it will take a year to truly understand how the deal performs and there is a need to go through a full year which includes planning and harvesting.
Hi Eric--thanks for the article. We do need to remember that those that bought on the panic lows 6-7 years ago were able to reap massive gains as even the most solid investment grade issues fell into the $5-10 range. Of course most of us only deployed modest amounts of cash as we were too damned scared to go all in.
I would suggest the investors peruse the baby bond offerings (which offer many of the same features as preferreds) as well as the term preferred where they may find something of their liking. There is a sacrifice to be made on the yield, but sometimes a date certain maturity date is much more comforting in times of distress.
Thanks David--I haven't followed this story in years, but your info motivates me to take another look at it.
Likely there is some tough sledding ahead for FPI as they renegotiate some earlier contracts, but if they can survive somewhat intact until the next upswing in commodity prices (that lasts for a few years) they could do very well.
I do like FPI--but only at lower prices--maybe $9, but no matter how bullish one might get on this REIT you best plan for a very long term holding (maybe 10 years) to garner potential profits.
Certainly every corporation should squeeze all they can out of their assets, but no one should hold their breath waiting for energy to be more than just a footnote. Paul Pittman is a showman and tries to trump up every tiny event.
Good point on the fixed to floating rate issues--it is very much a 'someday' event before they float as many of the new fixed to floating issues are fixed for 10 years.
I note that in your chart you have lumped the trust preferreds with the standard preferreds. Given that trust preferreds are almost always higher rated than the standards is it appropriate to compare them side by side? I would think that it would be more apples to apples to eliminate the trust preferreds.
Thanks for your work.
Thanks for the article on this good issue Downtown.
Prospective buyers shouldn't be put off by the thin volume--most of us are buy to hold folks anyway. The only caveat it to make sure to us tight limit order and be patient (and realistic). On these I try to pay par or less, although I will go a interest payment above if the issue has a number of year to first call or maturity. No use being penny wise an pound foolish on a good issue.
Thanks for this issue Richard--even with my conservative nature I may pick up a small position tomorrow. Risk/reward seems to be pretty reasonable.
Hi Gregg--one item you are overlooking is the 'leverage' that CEFs carry--if their asset values fall too far they will be in violation of Section 18 of the SEC Act of 1940. This is already close to happening in many CEF's--in particular in the MLP arena.
CEFs must maintain a 300% asset coverage ratio on debt or they are not allowed to declare distributions. Falling values mean they may have to liquidate holdings to pay down debt which only adds to the issue as it drives values down. A vicious circle of sorts. I just covered this issue on my website.
This tends to become a problem just in panic situations--although in 2008 and 2009 it did become an issue and caused bunches of pain
thales23--all dividends of REIT preferreds are taxed at ordinary income tax rates (non qualified for preferential treatment).
Thanks for the article Brad. The SOHO issues are debt though and not preferreds. I understand that folks use the word 'preferreds' interchangeably, but clearly there is quite a bit of difference--in particular with maturities and duration risk.
Take care.
Nice article Justin. It, of course, remains to be seen how the preferreds will react in the potential rising rate environment which lays just ahead (maybe). We certainly know that the perpetuals have almost breathtaking interest rate risk, in particular if we were to get a inflation in the years ahead--but crystal ball forecasts on this potential have been cloudy at best.
Keep up the good work.
You got it Archman.