Monday, November 24, 2008

GRTPRF: A WALK ON THE WILD SIDE/ KTN add

I discussed the possibility of buying a cumulative preferred issue from Glimcher Realty (GRT) and I elected to buy a few shares with a market order late  this afternoon at 2.90. This REIT owns malls; and, judging from the price action recently, investors seem to think it is toast. I am not so sure. This cumulative preferred has a $25 par value and a 8.75% coupon, payable quarterly. I do not need too many quarterly payments to recover my $2.9 cost. Who knows? It is worth a very small gamble for me when the yield at my cost is 75%.

The company has way too much debt and is not exactly in a favored business, leasing space to retailers. Nonetheless, it does not appear hopeless to me-or beyond all hope beyond a reasonable doubt. GRT did refinance its debt coming due in 2008 which is more than GGP has been able to do to date. I have previously discussed this REIT. MARKET OBSERVATIONS: LNC, M, GE, C, GRT, GRTPRF AND LEVERAGED CLOSED END FUNDS Needless to say, a total loss would not have any impact in me.  I am just seeing if I can find a gem or two in the garbage being thrown out by the street.  If it works out, having a 75% annualized return seems worth a small risk of capital.  The dividend is cumulative and has to be paid as long as GRT pays a common dividend which it very well may cut again having trimmed it earlier this year. I also read the S & P report on GRT. Nonetheless, this is an extremely speculative buy, more speculative than the extremely speculative Hertz senior bond that I bought a few weeks ago in TC form, DKR.   

I also bought more of an AON junior subordinated bond in a TC, KTN, when it fell below 14 today. It has a $25 par value and a 8.205% coupon which give me an effective yield of over 14%. At a 14 cost, the yield is about 14.73% plus the spread between cost and par value at maturity on 1/1/2027.  I have already discussed this one at length in an earlier post. 


The prospectus can be found at the sec web site. SEC 

(One feature about this bond that I may have not mentioned is that it has an enhancement feature in the event of a downgrade. AON has to pay $. 50 per certificate in the event its debt is downgraded. This is explained in the prospectus.  I simply do not know if this has ever happened and whether the payment has already been made.  If no payment has yet to be made, then this is some protection for a debt downgrade. It is investment grade. The CUSIP for the underlying bond is 037388AE5.  I believe this junior debt issue is rated BBB- by S & P and   BAA3 by Moody's.)

I am likely to trade these AON TCs, and this one will be sold if I can do it in the 17 to 21 range which I have already done this year before we entered phase 2 of this bear.

I have discussed also the dangers of long bonds and the issues unique to TCs on many occasions. Trust Certificates: Issues with Long Term Corporate Bonds
 I am not a financial advisor but an individual investor trying to navigate my way through a difficult market. In these posts, I am acting as an unpaid financial journalist and an occasional ornery political commentator.   I am also aggregating financial news stories that I view as important and providing any reader of these posts, assuming there are more than a couple, with links to those articles, sort of a filtered, somewhat intelligent, free search engine for financial news.  Any discussion made by me of particular securities  is not a recommendation to buy or to sell.  Trade at your own risk.  Consult with your financial advisor prior to making any purchase or sale. I will try to identify my sales too but it may take a few minutes after I implement them to create a post explaining my reasons.  The sale may before or after the post.  Before buying or selling any stock, even one recommended by a trusted financial advisor,  please research it and make up your own mind which is what I always try to do.  Research would include reading reports, reviewing financial records, earnings estimates, sec filings and prior earnings releases and news.  In this post, and all others by me, I am merely describing my reasons for purchasing  or selling securities, and the potential pitfalls that I identified prior to purchase or the reasons for a sale.  The securities mentioned in this and all posts written by me may not be suitable for others based on their unique financial position and risk profile.  Always read the prospectus before buying a Trust Certificate, bond, preferred stock or other bond or bond like investments.