Tuesday, March 24, 2015

Added 100 ELB at $25.17-Roth IRA

I published an Instablog giving a detailed discussion of why I added 100 ELB in my retirement account, pairing it with the purchase of a synthetic floater that I will discuss here later. 

That is a similar interest rate management strategy that I described in an earlier post, where I paired DPG with GYC: 

Bought 200 ACR_UN:CA at C$9.13/Sold 80 SANPRB at $21.81 (72.57% total return)

Stable Vix Pattern (Bullish):
Links to SeekingAlpha Instablog, Articles and Comments:

South Gent's Instablog | Seeking Alpha

South Gent's Articles | Seeking Alpha

South Gent's Comments | Seeking Alpha


Recent Developments:

CPI increased .2% in February and was unchanged Y-O-Y. Core CPI rose .2%. Consumer Price Index Summary

New homes sales in February rose at an annual rate of 539,000, the best month in seven years. The median sales price increased by 2.6%. The January number was revised up to an a 500,000 annualized rate. census.gov.pdfBloomberg

Markit's U.S. manufacturing flash PMI hit a five month high in March, rising to 55.3.


1. Sold 80 SANPRB at $21.81 (see Disclaimer): I reached the point where the profit was more important to me than the meager income.

Snapshot of Trade:

2015 SANPRB Sold 80 Shares at $21.81

Snapshot of History for this 80 Share Lot:

Dividends: $291.7

Snapshot of Profit:

2015 SANPRB 80 Shares +$561.77

Item # 2 Bought: STDPRB at $13 (8/10/11 Post)Item # 1 Added 50 STDPRB at $15.44 (11/1/11 Post)

This security formerly traded under the symbol STDPRB.

Total Return: $853.47 or 72.57%

Security Description: The Santander Finance Preferred S.A. Unipersonal Floating Rate Preferred Series 6 (SAN.PB) is an equity preferred stock that pays qualified and non-cumulative dividends at the greater of 4% or .52% above the three month LIBOR rate on a $25 par value Prospectus

Advantages and Disadvantages of Equity Preferred Floating Rate Securities

Prior Trades Include: 

Item # 1 Sold 100 STDPRB at $18.11 (8/26/2010)(profit snapshot=$265.01)-Item # 4 Bought 100 STDPRB at $15.3 (9/25/2009);

Item # 3 Sold 50 STDPRB at 19.64 in the Roth IRA (2/28/11 Post)-Item # 8 Added to STDPRB at 18.6 (3/10/2010 Post)

Item # 2 Sold 50 STDPRB at $20.2 (3/14/11 Post)-Fidelity Corrects Odd Lot Trade on STDPRB to $18.5 from $18.85 (April 1/2010 Post)

Item # 2 Sold 50 STDPRD at $20.34 (5/24/11 Post)(snapshot of profit includes previous trade= $143.16)-Item # 1 Added 50 STDPRD at $18.54 (3/9/2010 Post)

Item # 4 Sold 50 of 230 SANPRB at $20.77 (1/13/13 Post)(snapshot of profit=$124.58)-(no write up on the buy)

Item # 7 Sold 50 SANPRA at $21.72-ROTH IRA (4/23/13 Post)(profit snapshot=$225.47)-Item # 2 Bought 50 SANPRB at $16.93-Roth IRA (10/41/12)

Item # 1 Sold 50 SANPRB at $19.8 (1/28/14 Post)-Item # 6 Bought Roth IRA: 50 SANPRB at $19.35 (7/20/13 Post)

Item # 4 Sold Roth IRA: 50 SANPRB at $20.41 (4/18/14 Post)(snapshot of profit=$105.01)-Item # 4 Added 50 SANPRB at $18.24  (9/14/13 Post)

Total Realized Gains: $1,462.03  ($900.26 prior trades)

Rationale: I am satisfied with the 72+% total return in less than 4 years.

It does not appear likely that the minimum coupon will be increased for at least two more years.

Since I started buying this security in 2009, I have been presented with several buying opportunities, which are reflected in a ten year chart: SAN.PB Stock Chart

Future Buys: I am no longer interested in this security at a price above $20.

2. Bought 200 ACR_UN:CA at $C9.13 (Equity REIT Common and Preferred Stock Basket Strategy) and (Canadian Dollar (CAD) Strategy)(see Disclaimer)

Snapshot of Trade:

Prior Trades: None

Security Description: Agellan Commercial Real Estate Investment Trust (ACR.UN:TOR) owns office and industrial properties in the U.S. and Canada. As of 12/31/2014, this REIT owned 41 buildings in the U.S. containing 3.415M square feet of leasable space. The Canadian operation was smaller with 9 buildings containing 934,000 square feet of leasable space.

As noted below, the Board has authorized management to explore selling all or substantially all of Agellan's Canadian properties in order to focus on the U.S. One Canadian property, 20 Valleywood Drive, was sold for $8.5M before closing costs. I believe that sum would be in CADs.

Brad Thomas published a Seeking Alpha article discussing this REIT last October.

The market cap at my purchase price was slightly over C$216M.

Net Operating Income by Property Type:

Properties/Occupancy Levels:

Occupancy improved to 93.1% from the prior quarter's 91.1%:

Properties/Occupancy Levels as of 12/31/14
Top Ten Tenants with Credit Ratings When Available:

Property Descriptions


In February 2015, Agellan announced that it had acquired 6 industrial properties in Atlanta for US$12.9M before closing costs. Agellan is acquiring those properties from the U.S. REIT First Industrial. The properties are known as the Oakbrook Technology Center and are currently 95% occupied with 28 tenants, but the occupancy level is expected to decrease to 91% on 3/1/15. The "purchase price represents a going-in capitalization rate of approximately 8.4%". Agellan funded the purchase with cash on hand and the net proceeds realized from selling a Canadian property (20 Valleywood Drive, Ontario) at a 5.9% in place capitalization rate.

In January 2015, Agellan entered into a 20 year lease with Porsche Cars of Canada at Parkway Place, Ontario. The dealer will lease space at a new constructed building expected to be completed in 2017. The Board also authorized management to explore the potential sale of all or a portion of Agellan's land at Parkway Place, which "represents the REIT's single largest asset". The proceeds from any such sale would be used to acquire property in the U.S.  The Board also authorized management to explore selling the Canadian properties located at  240 Bank Street in Ottawa, Ontario and 195-215 Bellehumeur Street, Gatineau, Quebec. I looked at those properties using Google Maps and would agree with the Board's decision. Both properties have some age. The Bellehumeur property is Agellan's only retail property, and it is a typical strip mall. Google Maps

Toronto Stock Exchange Webpage for Agellan

Distributions: Agellan has paid a monthly dividend of C$.06458 per unit since April 2013. Dividends

Agellan Announces March 2015 Monthly Distribution

At a total cost of C$9.13 per unit, the dividend yield at that monthly rate would be about 8.49%.  

The next distribution will be payable on 4/15/15 to shareholders of record on 3/31/15.

Distribution Withholding Tax: Canada will withhold a 15% tax on distributions paid by REIT irrespective of whether the REIT is held in an IRA or a taxable account. I consequently own all of my Canadian REITs in a taxable account since there is no way to recover a foreign tax when the distribution is paid into a retirement account.

A ran a test to confirm that Canada will withhold a tax on REIT distributions made into a retirement account, buying 100 shares of three different Canadian REIT in three different retirement accounts. In every case, the tax was withheld. I took a snapshot of the withholding for 100 Artis 100 units in a blog: Scroll to Artis REIT I waited until I could sell that 100 unit lot for a profit and then jettisoned the position.

This Schwab summarizes the particulars about claiming a tax credit for foreign taxes.

Chart: Since becoming a public company in 2013, the shares have traded mostly between C$8.25 to C$9.25 with a lot of up and down chop in that channel. ACR-UN.TO Interactive Chart

The market price has slid from C$9.85 close on 2/23/15 to C$9.1 on 3/17/15. A small part of that decline can be attributed to an ex-distribution on 2/25/15.

The 4th quarter results were released after the market's close on Friday 3/6/15. The shares closed at C$9.39 that day and at C$9.1 on the next Monday, or about a 2.5% decline.  Most likely, the decline was attributable to the earnings report discussed below.

Recent Earnings Report: All amounts are in CADs.

For the 2014 4th quarter, Agellan reported diluted AFFO per unit of $.207 per unit, up slightly from $.203 in the 2013 4th quarter.  For 2014, AFFO per unit increased to $.855 per unit from $.795 per unit, or a decent increase of about 7.4%. Agellan paid distributions of $.775 per unit during 2014.

The annual FFO was reported at $1.146 per unit vs. $1.106 in 2013. When there is a material difference between FFO and AFFO, I will use AFFO in a valuation and dividend analysis.

The following table shows the deductions from FFO to arrive at AFFO:

At a total cost per unit of C$9.13, the TTM P/FFO would be 7.97, and the TTM P/AFFO would be 10.68. Agellan is reasonably priced using either FFO or AFFO as the valuation metric. It is certainly cheaper than U.S. REITs who have an aggregate P/FFO of 19.4 as of 2/28/15, see page 3 of Lazard's monthly real estate report.

Mortgage Debt/Maturities


Agellan Fourth Quarter 2014 Results

Management_Discussion Q4_2014 Final.pdf

Agellan_Commercial_REIT_Q4_2014 Consolidated Financials.pdf

Rationale: The price is reasonable based on a TTM P/AFFO or P/FFO.

The dividend yield is good, particularly in a world without risk free yield.

I am funding this purchase from a CAD stash that is otherwise earning nothing.

If the ordinary shares priced in CAD go up, and the CAD's value sinks against the USD, I will increase my CAD stash by selling at a CAD profit while reducing my reportable profits for tax purposes. For tax purposes, profit and losses are calculated by converting the cost and proceeds from CADs into USDs, so there is less of a taxable gain for a U.S. taxpayer when the CAD falls in value against the USD after the purchase until the security is sold, using CADs to pay for the purchase and receiving CADs as proceeds. It would also be possible to have a CAD profit and a reportable tax loss, or a CAD loss and a reportable tax profit. The I.R.S. does not want U.S. taxpayers reporting gains and losses in foreign currencies, but only in USDs.

The practical implications, involving two sales, can be found in Items 1 and 6 at SOLD: 300 HLP-UN:CA at C$14.17 and 300 AX-UN:CA at C$15.71 (9/26/14 Post)

Risks/Issues: I am a long term holder of Canadian Dollars, primarily for diversification purposes. I do not want all of my assets denominated in USDs. Consequently, I am not concerned about the up and down fluctuations of the CAD/USD exchange rate.

CAD/USD Interactive Chart

Given the weakness of the CAD over the past two years or so, it is cheaper now for a U.S. investor to convert their USDs into CADs to buy securities on the Toronto exchange.

The owner of a USD priced Canadian security has experienced a substantial headwind compared to the ordinary shares priced in CADs and traded in Toronto.

This can be seen by drawing a one year  chart comparing the USD priced Canadian stock with its the ordinary  shares priced in CADs.

I will illustrate that point by linking a comparison chart showing the relative performance of Suncor (SU), priced in USDs, and Suncor (SU.TO) priced in CADS over the past two years:

The only difference in SU and SU.TO is the currency in which the stock is traded.

If the CAD starts to rise against the USD, then the USD priced SU shares would outperform the ordinary shares traded in Canada and priced in CADs.

A continued decline in the CAD would result in the USD priced ordinary shares to underperform the CAD priced ordinary shares.

It does not matter whether the U.S. investor buys SU on the NYSE using USDs or converts those USDs into CADs to buy in Toronto and then convert the CADs back to USDs after selling SU.TO.

The only difference would be any fees charged by the broker for the currency exchange and any difference in broker commissions connected to international trading. Fidelity would charge me C$19 for a Toronto exchange trade and $7.95 for a U.S. exchange trade. If I did not already own CADs, I would have to pay a 1% conversion fee to buy CADs with my USDs in order to complete a trade in Toronto.

The Agellan ordinary shares trade on the U.S. Grey Market, a dark market, where bid and ask prices are not displayed and liquidity is unfavorable. Limit orders are a necessity. ACRVF Agellan Commercial Real Estate Investment Trust If I was inclined to trade in that market, and I try to avoid it, I would first convert the ordinary share price into USDs and then set a limit price.

The daily average volume for ACRVF is 213 units, but 3,300 traded on 3/20/15. The prices were in a narrow band between $7.2398 to $7.2645, with a closing price of $7.2645. The ordinary shares closed at C$9.19 which converted into about US$7.2357. The Grey Market price was a little high, but close to the ordinary shares priced in CADs. The price may be even closer by taking the CAD/USD exchange rate at the time of closing.   If one CAD could buy 1 USD last Friday, then ACRVF would have been priced closer to $9.19, the closing price in Canada, than at $7.26.

Since this Canadian REIT is weighted in U.S. properties, there is also a currency risk for it.

Agellan is an externally managed REIT and completed an IPO during 2013. C$134.6 Million IPO at C$10 per unit 

Agellan discusses risks incident to its operations starting at page 33 of its last earnings report: Management_Discussion_Analysis.pdf

Future Buys/Sells: I am not likely to buy more. I do not have a target price. I would be content to harvest a 10% annualized total return based on CADs. Most of that total return can originate from the dividend. 

Sunday, March 22, 2015

Bought Back 50 of the Synthetic Floater GYC at $21.67/Bought 50 DPG at $19.54/Averaged Down: Added 50 CIZN at $17.62/Bought 100 CSH_UN:CA at C$12.125

I have published an Instablog that has excerpted the following discussion of the DPG purchase (Item # 4). The difference is that there is a long introduction prior to that excerpt in the Instablog. 

Duff & Phelps Global Utility Income Fund: Bought Back Of 50 Of 100 Shares Recently Sold - South Gent | Seeking Alpha

Stable Vix Pattern (Bullish):
Links to SeekingAlpha Instablog, Articles and Comments:

South Gent's Instablog | Seeking Alpha

South Gent's Articles | Seeking Alpha

South Gent's Comments | Seeking Alpha


Recent Developments:

For the week ending 3/19/15, the 30 year mortgage rate averaged 3.78% with an average .6 point. The 15 year mortgage average was 3.06% with an average .6 point. Freddie Mac - Mortgage Rates

CoreLogic estimates that 1.2M borrowers moved into positive home equity in 2014.

The Federal Housing Finance Agency (FHFA) estimated in February that 652,000 homeowners were eligible to refinance through the HARP program and had a "strong financial reason to refinance". Starting in 2009 through the 2014 4th quarter, Fannie and Freddie have refinanced 20,409,043 mortgages. 4Q14-Refi-Report.pdf That total does not include privately owned mortgages.

The refinancing tsunami at historically abnormal rates has led to a substantial decline in the DSR ratio led by the decline in the mortgage payment to disposable income ratio:

Mortgage Debt Service Payments as a Percent of Disposable Personal Income-St. Louis Fed

Mortgage debt is by far the largest component of household liabilities.

DSR Ratio Chart: Household Debt Service Payments as a Percent of Disposable Personal Income

U.S. Household Debt to GDP

Washington Trust Bancorp (WASH) increased its quarterly dividend to $.34 per share from $.32. At the new rate, my current dividend yield is about 8.87% based on a total cost of $15.34 per share:


1. Bought Back 50 GYC at $21.67 (see Disclaimer):

Snapshot of Trade:

Security Description: The Corporate Asset Backed Corp. CABCO Series 2004-102 Trust SBC Communication Inc. Floating Rate Certificates (GYC) is an Exchange Traded Bond. GYC is a Synthetic Floater in the Trust Certificate form of legal ownership.

For this security, UBS created a grantor trust, administered by an independent trustee, and sold to that trust senior unsecured SBC Communication bonds (now AT & T). Those bonds are commonly referred to as the underlying security. The AT & T bonds mature on 6/15/2034 and have a 6.45% coupon.

The grantor trust raised the funds to pay UBS through the public sale of trust certificates, each with a $25 par value. The owners of the trust certificates are the beneficial owners of those bonds.

UBS also entered into a swap agreement with the trustee. As a result of that agreement, the trustee delivers to the swap counterparty, originally identified in the GYC prospectus as UBS, the interest paid by AT & T, and the swap counterparty delivers to the trustee the amount owed to the GYC owners.

For as long as the swap agreement remains in effect, the owners of GYC are entitled to receive quarterly interest payments at the greater of 3.25% or .65% over the 3 month Libor rate, with a 8% per annum cap, on a $25 par value. GYC Prospectus

Assuming no early termination of the swap agreement and/or the trust, GYC matures at the same time as the underlying bond which is 6/15/34.

Prior Trades:

Item # 2 Bought GYC at $15.5: Synthetic Floating Rate Bond (May 2009 Post)Item # 3 Added 50 GYC at $21.60 in Roth IRA (2/10/11 Post)Sold 100 GYC at $22.22: Ongoing Reassessment of Synthetic Floaters (7/28/12 Post)(profit snapshot $357.45)

I also had a 40 share flip in the regular IRA: Item # 4 Sold GYC at $22.3 in regular IRA (11/22/2010 Post)-Bought TC GYC at $21

I have flipped more flipped some shares in the Roth IRA:Item # 8 Sold 50 of 100 GYC at $20.8 (10/31/13 Post) and Item # 5 Sold Roth IRA: 50 GYC at $22.3 (12/31/13 Post)(snapshot of profit on 100 shares, two 500 share lot positions=$167.98)-Item # 1 Bought Roth IRA: 50 GYC at $20 (9/7/13 Post) and Added 50 GYC at $18.66 (10/24/13 Post)

Total Prior Trading Profits GYC: $587.54

Rational: This type of security does contain some deflation/low inflation and problematic inflation protection in the same security. It consequently provides some interest risk protection that the underlying fixed coupon AT & T bond does not provide.

I suspect that the FED is underestimating inflation pressures building in the economy now. The strong USD and the dramatic decline in energy prices have masked a buildup of inflationary pressures elsewhere. Businesses are finding it increasingly difficult to find employees to fill job openings. The NFIB's last survey showed that 29% of small businesses could not fill job openings, with the unfilled job openings near 40 year highs. Over the past several weeks, there are been a number of news stories about retailers voluntarily hiking their wage levels. On the day of Yellen's news conference, where she stated that "we may not see wage growth pick up" and there was no "broad" based wage pressure, the WSJ ran a story that Target was going to raise the pay for all workers to at least $9 per hour next month and to $10 next year, "as competition heats up for lower wage workers, and following on the foot steps of pay raises announced by Wal-Mart and many other companies. The WSJ story was originally published last Wednesday.

The last reported median CPI was at a 2.2% annual rate. Current Median CPI

I know now my minimum and maximum interest yield. The minimum coupon assumes the continued payment of the 3.25% minimum coupon while the maximum coupon is 8%. Since those coupons are paid on a $25 par value, my effective yield will be higher at both the minimum and maximum levels:

Assuming $21.67 Total Cost Per TC:
Minimum 3.25% Coupon=  3.75%
Maximum 8.00% Coupon=  9.23%

Depending on the future 3 month Libor rate, the yield will fluctuate between the minimum 3.06% to the maximum of 9.23% based on a total cost per share of $21.67.

An increase in the coupon will occur when the 3 month Libor rate exceeds 2.6% during the relevant computation period.

At a 5% Libor rate, the coupon becomes 5.65% and the effective current yield at a total cost of $21.67 per TC would be about 6.52%. The effective yield at a 4% 3 month LIBOR, with the same assumptions, would be about 5.36% (.0465% x. $25 par value=$1.1625 annually dividend by $20 cost per share=5.36%)

Assuming no redemption prior to maturity, there would be a $3.33 profit per TC on 6/15/34. It is certainly possible that most or all of the current discount could be harvested before maturity.

The owner of the trust certificate is exposed to the credit risk of the underlying bond. I am currently comfortable with the credit risk. The underlying bond is currently rated Baa1 by Moody's and BBB+ by S & P, Bonds Detail. The underlying bond prospectus can be found at the SEC website: Final Prospectus Supplement

{There has been one example where the swap counterparty declared bankruptcy. That entity was Lehman. The trustee took the position that the bankruptcy filing was a swap termination event, not a trust termination event, and consequently started to pay the owners of JBK the payments made by the underlying security whether then the synthetic floating rate, see Item # 2 Bought 50 of the TC JBK at $16  (7/9/09 Post); Item # 5 Bought 100 JBK at $16.15 (7/20/09 Post)}

Risks: This security has a low minimum coupon that is not likely to increase, as intermediate and long term rates rise due to interest rate normalization. The recent decline in the share price is probably due to that rise in rates.

GYC hit $25 in May 2013 before hitting the skids, again, and falling to near $19 per share. Over the past year, GYC has traded mostly in the $21 to $23 price range. The price plummeted to $11 during the Near Depression. GYC Interactive Stock Chart A long term chart will frequently highlight the risks.

At some future time, the 3 month Libor rate may rise sufficiently to trigger an increase in the coupon. The increase will occur when the 3 month LIBOR rate rises above 2.85% during the relevant computation period.

A 4.5% to 5% 3 month LIBOR has historically been an average range, sometimes higher or much higher, and substantially lower now and for at least the next several years

Daily Data-Federal Funds Rate Since 7/1/1954
Daily Data-3 Month Libor Since 1/2/1986

A rise in the coupon above the minimum 3.25% level will not happen for as long as the FED continues ZIRP and for an uncertain period thereafter. A lot depends on future inflation numbers that will impact both the size and the pace of Fed tightening. The 3 month Libor rate will be linked to the federal funds rate.

In the prior tightening cycle, the federal reserve raised the federal funds rate from 1% to 5.25% between June 2004 to July 2006. The 3 month Libor rate followed in tandem the increases in the federal funds rate.

Currently, I do not anticipate that the FED will start a tightening cycle by raising the federal funds rate prior to 2015. Unless there is a significant pick up in inflation and inflation expectations, I would further anticipate a much slower rise in the federal funds rate compared to the prior tightening cycle.

(2) The second risk involves what I will generally call the GJN problem. There is a NYT article describing what Wells Fargo did to the mops and pops who owned GJN. NYTimes.comStocks, Bonds & Politics: GJN-Wells Fargo-New York Times I brought this matter to the attention of Floyd Norris at the NYT.

In a prior post, I discussed this potential risk in great detail. Stocks, Bonds & Politics: Sold 100 GYC at 22.22: Ongoing Reassessment of Synthetic Floaters

I am not going to copy or repeat that lengthy and frequently complicated discussion. Instead I will just briefly summarize this complicated issue and emphasize the importance of both reading and understanding the prospectus prior to making an investment.

There is an important difference between GYC and GJN.

AT & T can not redeem the underlying senior bond and avoid a make whole payment.

In the now infamous GJN situation, J P Morgan relied on an escape hatch that purportedly allowed it to avoid a make whole payment. I am surprised that no one has challenged JPM on whether or not it invoked that escape clause in a timely manner. Stocks, Bonds & Politics: District Court Decision in Turkle Trust v. Wells Fargo (N.D. Cal)/Summary of Argument: JPM Potential Obligation to Pay Make Whole for its Recent 2035 TP Redemption/Other JPM Capital Trust Preferred Securities: Language on Make Whole Payment and Capital Treatment Event (July 2012).

A make whole payment made by AT & T could be used to pay the swap termination fee triggered by an early redemption of the AT & T senior bond.

Another possibility is that the owner of the call warrant will redeem the certificates at par value plus accrued interest when and if AT & T redeems the bonds. That would occur when the make whole payment would exceed the swap termination fee.

The swap termination fee is payable after certain trust termination events that do not involve a redemption of the underlying bonds by AT & T, Prospectus at pp. S-7, S-32-33. Those events include the bankruptcy of AT & T; an AT & T payment default without a bankruptcy; a legal change that makes it unlawful for the trust to perform; and a SEC reporting failure by AT & T. Any of those occurrences listed in the prospectus, while unlikely, would be disastrous for the owners of GYC, since any such event would trigger a swap termination fee without a make whole payment being received from AT & T. At the present time and for the foreseeable future, I am not simply not concerned about AT & T filing for bankruptcy or defaulting on its debt,  and I can not reasonably foresee a law change that would cause the trust to default. Those are black swan type of events/risks.

While I can not say with certainty that a make whole payment for an early redemption would be sufficient to cover the swap termination fee, both amounts would be calculated by taking the principal amount and all future interest payments and then discounting to present value. The major difference is that there is a specific provision in the AT & T bond prospectus that specifies exactly how that calculation has to be done.

The existence of a make whole payment would also make it highly unlikely that AT & T would redeem the underlying bond for the foreseeable future. It was the redemption of the underlying bond that triggered the swap termination fee payment in the GJN situation.

While it is just my opinion, nobody in their right mind would redeem a long term bond with a 6.45% coupon when the optional redemption requires a make whole payment.

The make whole payment would just be huge, at least until shortly before the maturity of this bond. It would consist of the principal amount of the bond ($1,000) and all interest payments from the time of redemption until the scheduled maturity date on 6/15/34, discounted to present value using the rate of a comparable maturity treasury security plus .2%. A low discount (3%) rate juices the make whole payment, compared to a higher rate. (see underlying security prospectus at page S-11 to S-12).

Still, the GJN situation has put a damper on my enthusiasm for these currently low yielding securities. I will tread cautiously with 50 share nibbles here and there.

Future Buys: Given the risks and current low yield, I am not likely to buy more. I will likely sell the 50 shares at a price north of $23. This security has a limited purpose in my IRA, which involves an effort to create some balance and interest rate sensitivity to the heavier weighted fixed coupon bonds and bond funds that are owned in those accounts.

2. Averaged Down: Bought 50 CIZN at $17.62 (REGIONAL BANK BASKET STRATEGY GATEWAY POST)(see Disclaimer):

Snapshot of Trade:

Prior Trade: This is an average down from a 50 share lot purchase made shortly before the quarterly ex dividend date. Item # 2 Bought Back 50 CIZN at $18.76-Regional Bank Strategy (3/12/15 Post) I did mention that I would not buy more. However, I thought the price drop to $17.62 was too tempting to pass up and so I added 50 more shares. If and when I can sell the higher cost lot at a profit now, I will consider doing so and then keep the lower priced shares using FIFO accounting.

At a total cost per share of $17.62, the current dividend yield is about 5.22%, and the TTM P/E is about 11.52.

I have nothing else to add to that recently published post.

3. Bought 100 CSH_UN:CA at C$12.125 (Equity REIT Common and Preferred Stock Basket Strategy) and (Canadian Dollar (CAD) Strategy)(see Disclaimer)

Snapshot of Trade:

Prior Trades: None

Company Description: Chartwell Retirement Residences (CSH.UN:TOR) is an unincorporated trust which owns and manages a portfolio of senior housing communities. It is the largest participant in the senior housing segment in Canada.

Two Canadian brokers, GMP and Scotia, lowered Chartwell to neutral from outperform/buy after the company announced a definitive agreement to sell its U.S. properties to HCP and Brookdale Senior Living for $849M (capitalization rate at about 6.6%). Chartwell Announces Sale of Its U.S. Business

Chartwell owned 33 properties, with 4,792 suites, and leased two others (91% assisted living; 5% "memory care" and 4% skilling nursing) Those properties are encumbered by US$439M, which Chartwell will be netted with the purchase, along with about $24M in repayment penalties, at closing. Chartwell expects to net C$410 after costs and taxes at the then current exchange rates. The transaction is currently expected to close during the third quarter.

The U.S. properties were about 20% of the total portfolio as of 12/31/14:

The proceeds will be used in part to fund Canadian expansion projects.

Photos of Some Properties: Chartwell Cité-Jardin résidence pour retraitésChartwell Robert Speck Retirement ResidenceChartwell Cedarbrooke Retirement ResidenceChartwell Deerview Crossing Retirement Residence

Chartwell Seniors Housing REIT-Financial Documents

Chart: At the time of my purchase, the units were selling at above their 50 and 200 day SMA lines: CSH-UN.TO Interactive Stock Chart

The long term chart highlights risks. The units were selling at one time over C$17 back in 2007 and then cratered to near C$3 during November 2008. Since smashing into that low, the units have been rising in a fairly steady 45º angle with some chop.

Distributions: Distributions are paid monthly in Canadian Dollars.

Chartwell's distribution history is viewed by me as entirely unsatisfactory and a major drawback to any meaningful investment.

Chartwell cut is monthly distribution from C$.0875 to $.06167 effective for the March 2008 payment.

The distribution was slashed again to $.045 effective for the August 2009 payment. The monthly rate was unchanged at $.045 until the company raised it $.0459 effective for the March 2015 distribution

Chartwell Seniors Housing REIT - Distribution History

Recent Earnings Report: I will simply include a snapshot of the results:

For a Canadian REIT, the 2014 AFFO payout ratio of 78.9% is low. Many of them are over 90%, with some close to a 100%.

The occupancy levels need to improve some IMO:

Interest Coverage Ratio=2.37

Mortgage Debt:

A chunk of that debt will be removed when the U.S. operations are sold, as noted above.  It is possible that mortgage debt maturing in 2015-2017 may be refinanced at lower interest rates.

Chartwell Earnings Release
Chartwell Financial Statements

Rationale and Risks: The primary reason for purchasing this security is diversification in my REIT basket. Chartwell is the largest owner of senior housing in Canada. I view the dividend yield as barely satisfactory and the dividend history to be unsatisfactory.  It remains to be seen whether Chartwell will be better off after selling its U.S. properties and reinvesting the proceeds into new Canadian properties. There is a lot of debt on the balance sheet, even after adjusting for the liquidation of the U.S. related debt.

For a U.S. buyer, there is significant currency risk. That risk is not avoided at all by using USDs to buy a Canadian security. The USD price will reflect the ordinary share price in CADs converted into USDs. The decline in the CAD/USD has been a major negative for USD priced Canadian securities for a year or so.

CADUSD Interactive Chart

The ordinary shares do trade in the U.S. "Grey Market" where bid and ask prices are not displayed and liquidity is practically non-existent. CWSRF Chartwell Retirement Residences The last trade was a 100 share lot on 5/6/13. Some brokers add a significant fee to trades in that market over and above their regular commission rates. I would not fool with it.

The company describes risks starting at page 51 of its last earnings report: Chartwell.Pdf.

4. Bought 50 DPG at $19.54-Roth IRA (see Disclaimer):

Snapshot of Trade:

Security Description: The Duff & Phelps Global Utility Income Fund  (DPG) is a leveraged closed end stock fund that invests in electric, gas and water utilities, telecommunication companies and MLPs.

DPG Page at Morningstar (currently rated 3 stars; leveraged at 22.5%; ROC support for the dividend originating mostly from ROC MLP distributions)

Data Date of Trade (5/19/15):

Closing Net Asset Value Per Share: $22.05
Closing Market Price: $19.45
Discount: -11.79%

Average Discounts:
One Year: -11.44%
Three Years: -8.9%

Sourced: CEFConnect

Last SEC Filed Shareholder Report: Duff & Phelps Global Utility Income Fund (period ending 10/31/14/cost of common stock and MLP assets at $906.535+M with the then market value at $1.175+B)

Note 8 of that shareholder report contains details about the fund's borrowing costs. For the F/Y ending in October 2014, the average daily borrowings and the weighted average interest rate were $260M and .95%. respectively. The rate was at .89% as of 10/31/14.

Sponsor's Website: Duff & Phelps Global Utility Income Fund

I took a snapshot of the top five holdings in each "utility" sector:

The largest weighting in the oil and gas infrastructure sector was Kinder Morgan (KMI) at 5.1$ as of 1/31/15.

Prior Trades: I sold earlier this year 100 of the 200 DPG shares owned in a taxable account. Item # 1 Sold 100 of 200 DPG at $20.74 (2/17/15 Post)(realized gain snapshot= $200.07). I sold my highest cost shares bought at $18.58 and kept the lower cost lot purchased at $17.3.

I have several other trades in the Roth IRA: Item # 1 SOLD 50 DPG at $22.42-Roth IRA (11/29/14 Post)(snapshot profit $124.99)-Item # 2 Bought Roth IRA: 50 DPG at $19.64 (10/20/14 Post)Item # 8 Sold 113+ DPG at $21.19-Roth IRA (8/19/14 Post)(snapshot of profit=$403.07; total return $662.61 or 38.15%)-Item # 3 Swap Trade Roth IRA: Sold 100 of 150 GYB at $18.03 & Bought 100 DPG at $17.31 (12/12/14 Post)

Total Realizing Share Profits (excluding dividends)= $728.13

Snapshot of Recent Roth IRA DPG History:

Dividend History: The fund has been paying a $.35 per share quarterly dividend since its IPO in 2011. Dividend & Distribution

Due to the ownership of MLPs, the fund's distribution has been supported by a return of capital:

Rationale: The recent corrections in the MLP, telecommunications and utility sectors have made this leveraged CEF slightly more palatable on a risk/adjusted basis. I only nibbled with a 50 share purchase, however.

Net Asset Values/Market Price:
2/3/15: $24.04/$20.95
3/11/15: $21.85/$19.38 (day prior to ex dividend date for the quarterly distribution)

Without an ex-dividend, the net asset value per share declined 9.11%.

The dividend yield is currently about 7.16% based on a total cost per share of $19.54. That income is tax free in the Roth IRA.

I have managed, so far at least, in creating decent total return numbers trading this fund.

While I view the U.S. electric utility stocks to be overvalued, and have no opinion about the foreign ones, their overall weighting in the portfolio is not large. The MLP infrastructure companies have been weak over the past several weeks due in part to fears that energy prices and/or future decreased production will adversely impact them.

U.S. crude production continues to increase even as the rig count plummets:

Weekly U.S. Field Production of Crude Oil (Thousand Barrels per Day)

North America Rig Count-BakerHughes.com

EIA Natural Gas Weekly Update

Risks: The risks are fairly typical for a leveraged closed end sector fund that buys securities worldwide. There will be some currency risks, the normal CEF risks (e.g. expansion of discount after purchase), price risk due to valuations of owned securities, interest rate risks to the prices of bond substitute securities, and the risks associated with leverage (e.g. borrowing costs, buying assets which decline in price with borrowed money adding to the woes, etc.) The sponsor discusses risks at its website and in the Prospectus starting at page 46.

As of 3/19/15, the Utilities Select Sector SPDR ETF (XLU) had a forward estimated P/E of 16.68 and a dividend yield of only 3.35%. The estimated 3 to 5 year E.P.S. growth rate was 5.64%. The P.E.G. ratio is elevated due to the low growth rate and high P/E.

This sector is vulnerable to a correction precipitated by even a modest rise in rates that diminishes the allure of a 3.32% yield and further calls into question such a high P/E for a sector growing earnings only in the low single digits.

A P.E.G. of 2  to 2.5 would be closer to a fair value range with rates rising, an estimated 3 to 5 year E.P.S. growth rate of 4% to 5%, provided the rise in rates ebbs below the average historical norms.

I go into more detail about the rationale in a recent SA Instablog: A Word Of Caution About New Purchases In The Utility Sector - South Gent | Seeking Alpha

The Vanguard Utilities ETF (VPU) has another set of data that is even more concerning than the XLU valuation information:

As of 2/28/15,  this Vanguard fund owned 78 stocks, with a P/E of 18.4.8 times and a 2.5% earnings growth rate. Portfolio & Management That P/E and growth rate simply does not compute for my Left Brain who views it to be at best irrational, a description used whenever it decides to be pleasant about something viewed as nutty.

Wednesday, March 18, 2015

Sold 100 of AINV Roth IRA-Near Break-Even on Price/Bought 100 WARFY at $12.75

Stable Vix Pattern (Bullish):
Links to SeekingAlpha Instablog, Articles and Comments:

South Gent's Instablog | Seeking Alpha

South Gent's Articles | Seeking Alpha

South Gent's Comments | Seeking Alpha


Recent Developments:

The Federal Reserve removed the word "patient" from its press release, but clearly indicated that no increase in the federal funds rate was imminent. The FED specifically stated that it was unlikely that there will be an increase at its April meeting. The following statements indicates to me that the FED is going to be very cautious in raising the FF rate:

"The Committee anticipates that it will be appropriate to raise the target range for the federal funds rate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium term . . .

The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run."

FRB: Press Release--Federal Reserve issues FOMC statement--March 18, 2015

In other words, when the FED finally raises the FF rate to .25%, it would not be reasonable for investors to anticipate a steady flow of increases thereafter occurring after every FED meeting. The raises will likely be small and spaced out over a long period of time.

The Fed members also lowered their year end 2015 FF forecast to .625% from 1.125% and the year end 2016 forecast to 1.875% from 2.5%.


That was consistent with the FED lowering their projections for GDP growth and inflation:

FRB: March 18, 2015: FOMC Projections materials, accessible version

The downgrading of GDP growth and inflation estimates, plus the cautious tone of the FOMC's statements, caused interest rates to decline and for the USD to fall. Prior to the release, the consensus opinion was that the removal of the word "patient" would lead to a rise in rates, but the FED found a way to delete that word while expressing both patience and caution.

I discussed the FED's dovish releases today in a comment to this SA Article.

I also copied that comment in the introduction section for the Instablog that excerpts the Wharf purchase discussed below: Bought Back Wharf Holdings (WARFY) - South Gent | Seeking Alpha

Ray Dalio, the founder of Bridgewater Associates, believes that the FED could engineer a market rout by raising rates too far and too fast. No one can put a number on those two words, and consequently the vagueness allows Dalio to claim prescience after the fact.

The analogy being made by Dalio and others is to 1937, when the FED tightened after a prolonged period of zero short term interest rates and QE that started in 1933. Those abnormal central bank policies, coupled with large scale fiscal stimulus by the government (e.g. the New Deal), led to one of the most robust stock market gains in history and an economic recovery. The FED tightened in 1937, as explained in this article, and fiscal stimulus was withdrawn as politicians became increasingly concerned about the budget deficits. The SS tax started to be collected for the first time that year too. That mixture resulted in a 50% decline in the stock market (1937 peak through March 1938) and a continuation of the depression. The FED had to reverse course and renewed stimulus was provided by the deficit spending related to WWII.

A number of hedge fund managers and bond managers like Jeffrey Grundlach, who recently called the FED a bunch of blockheads for contemplating a raise in the FF rate, have a powerful economic interest in the FED keeping short term rates at zero forever. So, I am more than just a little bit skeptical about their warnings of Financial Armageddon resulting from a rise in the FF rate after 6+ years at zero.


1. Bought 100 WARFY at $12.75 (see Disclaimer):

Snapshot of Trade:

I bought the USD priced ADR traded on the pink sheet exchange. Wharf Holdings Ltd. (WARFY) For securities traded on the pink sheet exchange, a symbol ending in "Y" indicates that the stock is an ADR. A symbol ending in "Y" denotes that the investor is buying the ordinary shares using USDs.

1 ADR= 2 Ordinary Shares

The ordinary shares closed in HK prior to placing my trade. I converted that price of HKD49.75 into $6.4084.

I multiplied that sum by 2 which gave me $12.8168 per ADR share. I then entered a limit order to buy 100 at $12.75 which was filled several hours after entry. I basically paid for the commission by entering that limit order below the then existing ask price.

HK pegs its dollar against the USD so there is only minor fluctuations in the currency conversion rate. USD/HKD Chart

It remains to be seen whether China and Hong Kong will join the currency devaluation parade. That is a risk, as noted below.

Company Description: Wharf Holdings (WARFY) is a Hong Kong based conglomerate operating in four business segments primarily in HK and mainland China: property investments (retail, office, apartments and hotels); property development; logistics including terminal operations; and CME (communications, media and entertainment).

The three significant properties located in Hong Kong are Harbor City, Times Square and Plaza Hollywood with Harbor City being the most important of those three developments.  As of 12/31/14, Harbour City was valued by the company at HK$160B or about 38% of Wharf's assets (page 2).

About Harbor City (shopping area of 2 million square feet; 499  apartment units; and hotels-Marco Polo Hong Kong Hotel, Gateway Hotel and Price Hotel)

Times Square Hong Kong (900,000 square feet of retail space; one million square feet of grade A office space)

Plaza Hollywood

Peak Portfolio and Other HK Properties

With google maps, I can see these developments and take a tour of the neighborhood, something that I will do when buying a stock with significant real estate holdings.

Harbour City Hong Kong - Google Maps

Times Square Hong Kong - Google Maps

Plaza Hollywood  Hong Kong- Google Maps

Wharf also owns property in mainland China, including International Finance Square and the Shanghai WHEELOCK SQUARE. A summary of the mainland China properties can be found here Wharf

Wharf owns 67.6% of Modern Terminals Limited, a leading operator of container terminal services in the south China region.

Wharf also has a variety of other investments in HK including, communications, media, entertainment and public transportation.

Wharf TTM P/E: 11.86
Estimated 2015 P/E: 12.3
Estimated 2015 E.P.S.: HKD 4.046 (ADR=HKD8.092)
P/B: .4935
P/S: 3.95
Dividend Yield: 3.64%

Sourced: Bloomberg (based on the HKD49.75 share price as of 3/17/15)

Another HK conglomerate, Wheelock & Co Ltd, controls Wharf. As of 6/30/14, Wheelock owned 54.8% of Wharf, up 2.66% from 12/31/13. Wheelock Group Results Highlights.pdf HK billionaire Peter Woo calls the shots at both companies.

In the past, I have owned Hutchison Whampoa that is majority owned by another conglomerate called Cheung Kong Holdings The boss for those two companies is the HK billionaire Li Ka-shing.

A few months ago Hutchison Whampoa jumped in price when Cheung Kong Holdings made an offer to acquire the shares that it did not already own. 0013.HK Interactive Stock Chart

There was some speculation that Wharf might be the next one rolled up, Wheelock Next?-Barrons.com However, nothing has yet to materialize. I would not buy Wharf based on the possibility that Cheung Kong would acquire the remaining shares.

Some of the firm's history is described in its 2013 Annual Report.pdf.

I took a snapshot of some historical data from page 13 of that report:

Prior Trades: I have not yet lost money trading Wharf. In 2014, I flipped a 50 share lot three times:

2015 WARFY 150 Shares (3 fifty share lots) +$187.94
SOLD Taxable Accounts: 50 WARFY at $14.82 (6/21/14 Post)-Bought: 50 WARFY at $13.08 (5/24/14 Post)Item # 6 Sold 50 WARFY at $14.51 (4/26/14 Post)-Item # 1 Bought 50 Wharf Holdings at $12.2 (4/1/14 Post)

On the last trade, I held onto the shares long enough to receive a semi-annual dividend payment. That distribution of HK$1.2 per share went ex-dividend on 5/26/14. Since 1 ADR=2 ordinary shares, that payment would have been HK$2.4 per ADR share or HK$120 for 50 shares.

Needless to say, the profits being generated by my Wharf trades are not going to pay for my nursing home expenses.

Dividends: Wharf has been raising the dividend some since 2010. I am showing the amounts paid per year below rather than the year in which the company attributes the dividend. It is fairly typical for foreign dividend paying companies to pay a dividend in one year and attribute that payment to profits earned in the prior year.

Annual Payment (paid in two semi-annual installments):
All Amounts are in HKDs
2014: 1.75
2013: 1.7
2012: 1.15
2011: 1.
2010:   .97
2009:   .8
2008:   .8
2007:   .8
2006:   .8
2005:   .72
2004:   .6075

Sourced: Dividend History

The remaining dividend for 2014 was declared when Wharf announced earlier this month the final 2014 results. The final 2014 dividend will be HK$1.26 per share, payable on May 15, 2015 to stock holders on record as of 5/4/15. That is a raise from HK$1.2 paid in May 2014.

Withholding Tax: It is my understanding that Hong Kong does not withhold "taxes on dividends".

No foreign tax was withheld when I received a Wharf dividend in May 2014, but I was charged an a fee paid to the ADR custodian:

Chart: The Wharf ADR started to trade in 2010. The stock has mostly gone nowhere in that five year period, though there has been some up and down chop. The best up move started in May 2012, near $10, and peaked in a year near $19.5. WARFY Interactive Stock Chart  The shares then slid to around $12 by March 2014 and been swinging up and down between $12 and $16 over the past year.

Yahoo Finance has a longer term chart for the ordinary shares going back to 2000 when the price was around HK$15: 0004.HK Interactive Stock Chart

Recent Earnings Report: The DJ News Service claimed that Wharfs 2014 net profit jumped 22%. That number includes a valuation adjustment for its properties. With that upward adjustment, net profit did rise to HK$35.93B (roughly US$4.62B) from HK$29.38 in 2013.

However, core profits without that adjustment fell by 7% to HK$10.47B or HK$3.46 per share (HK$ 6.92 for each ADR share)

I view the operating profit to be more important. The valuation adjustment for the owned properties is relevant in placing a valuation on the enterprise in case the company is sold.

Total assets as of 12/31/14 "amounted to HK$445 billion (2013:HK$415.1 billion)" (page 16).

The decline in core operating income caused a decline in the stock price.

Wharf 2014 Final Results.pdf

Rational: I am keeping this section simple and will focus just on the core reasons underlying a purchase.

Wharf is one of the HK listed companies that I will periodically buy. It has a strong presence in HK and is a play on the parabolic growth in China's middle class consumers through its extensive retail shopping properties.

There is some dividend support and recent dividend growth.

The shares had fallen by over 20% from a recent high when I made my purchase.

Based on the historical data snapshot, this firm looks like a decent long term hold, though that would not be readily apparent by looking at a five year chart.

I suspect that a good part of the sluggish retail sales growth was due, as the company notes, to the "Occupy Movement" and the strength of the HKD (pegged to the USD) against competitor's currencies. Those adverse items may prove temporary.

Risks: In addition to the disappointing earnings report, J P Morgan downgraded Wharf Holdings to underweight after that report and lowered its price target to HK$45. The focus of that downgrade appeared to be a "post-land appreciation tax EBIT (earnings before interest and tax) margin" of around 7% compared to JPM's estimated industry average of 21%. JPM also estimated that the return on assets for the China properties was around 2.1% compared to other developers covered by that firm of 1.7% to 6.3%. In other words, JPM is critical of Wharf's decision made in 2007 to become more active in mainland China. The shares had already corrected from HD$63 (1/30/15) to HD$49.75 when I made my purchase. That decline was 21.03%. So, even if JPM is right, a lot of the risk has been taken out by that decline.

Needless to say, there is an abundance of country risks associated with a property firm operating in China and Hong Kong. Who knows what the communist party may do?

There is at least a possibility that China and/or Hong Kong will devalue their currency. WSJBloomberg View While I do not view that as likely, at least during the next year, a devaluation of the HKD would adversely impact the value of the ADR share price.

There are legitimate concerns about over building in mainland China.

Future Buys/Sells: Given the risks, and the dour assessment made by JPM, I am not likely to buy more than 100 shares. I will frequently control risk by limiting the amount of my exposure/investment. As shown in my trading history for this security, I flip this stock for small profits, hopefully capturing a semi-annual dividend payment here and there.

2. Sold 100 AINV Roth IRA Near Break-Even on Price (see Disclaimer):

I am not going to discuss this trade at length. Rather than making a snapshot of the trade, I only made a snapshot of the profit/loss calculation made by Vanguard for this trade:

2015 Roth IRA 100 AINV -7.51
With the dividends, I did eke out a positive total return.

I discussed one 50 share purchase in this SA Instablog: Added 50 AINV At $7.94 - South Gent | Seeking Alpha I later averaged down with another 50 share purchase: Item # 3 Added 50 of AINV at $7.4-Roth IRA (1/1/2015 Post) I was critical of this BDC's external managers in both posts, pointing out the dividend slash history and the net asset value per share destruction:

Net Asset Value Per Share: 
12/31/14: $8.43
9/30/14: $8.72
12/30/07: $17.71
3/31/07: $17.87
Sourced: 10-Q Filings

I was hoping that the shares would be rebound some after tax loss selling finally exhausted itself. Subsequent to my last repurchase, AINV reported 4th quarter results showing another decline in net asset value per share. More importantly, I have become more concerned over the past few weeks about AINV's exposure to energy loans. As of 12/31/15, that exposure amounted to a 13.6% weighting, Page 20 AINV-2014.12.31-10Q

For example, AINV had outstanding a "second lien" loan to Miller Energy Resources in the principal amount of $87.5M, which it valued at $85.75M as of 12/31/14 with a $85.804M cost basis. Is the FMV reasonably accurate under the circumstances?

Miller Energy Resources Inc. (MIL) is a publicly traded company whose share price is having trouble staying over a buck. For the 9 months ending 1/31/15, the company reported a net loss of $345.803M, see page 2 MILL Q3 10Q. That debt and a first lien credit facility is described starting at page 14 of the last filed 10-Q. The first lien bank credit facility has KeyBank, CIT, Mutual of Omaha Bank and other financial institutions as lenders.

As of 1/31/15, Miller had drawn $44.M from that first bank lien facility. The total first lien reserve based credit facility was then $250M but the availability of draws depends on a variety of factors.

Under the circumstances, what is the likelihood that both the principal and interest will be paid on AINV's second lien loan? Is the recovery of almost 100% of the principal amount, either through timely payment by Miller or a recovery in BK, the most reasonable current future forecast? I leave it for each investor to form their own opinions.

There are some other energy loans that cause me to have concerns about future write-downs/losses.

I have seen BDCs value loans at close to their principal amount shortly before the company filed for BK and then they would write the loan down. A case in point is shown by the BK of a public company called UniTek Global Services. With the stock trading near zero, and a BK virtually assured, three BDCs were valuing the loans to that company at close to their principal amounts, as of their 6/30/14 filing, and took write-downs only after a BK filing (e.g. NMFC: New Mountain Finance Share Offering Today Illustrates Multiple Risks Inherent In BDC Stocks - South Gent | Seeking Alpha)