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I expect this to be redeemed either at first call or as they execute non-core investment sale. Currently this is below par and has 8.5% coupon. I am thinking of putting some of my significant cash into this.

Anyone seeing any risk? Any thoughts?
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low risk.
pays dividend on common.

Debt is 40% - which is reasonable.

So it should be a good buy.
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Yeah, I bought some of the Series J on Monday. It's well below par and pays a similar yield now. H and J have dipped on expected rate increases, while some of the other series with higher yields are near par. This suggests to me that the market is not pricing the preferreds for any kind of impairment (good!), it's just adjusting for the lower coupon. I'll probably shift some of my other investments into the J/H over the coming weeks.

The parent is attempting to liquidate a huge chunk of the portfolio (and expects $1.9 bn in net equity to be released.) I'd expect the rest of the B series to be called and the Es are callable in May next year, so I expect they'll be gone, too. That would leave the company with nothing higher than a 7.5% coupon, which is not too bad.

Jim
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I am looking at B/ E as a means to park my significant cash and earn a decent yield. I am actually looking for the redemption, not locking my cash for the long-term. Thanks for bringing B I completely missed it, due to earlier redemption's I have mentally marked it as redeemed. :)
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So how much of the B is still open, and how much of the E? Compared to the $1.9B figure...?
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http://www.quantumonline.com/search.cfm?tickersymbol=CLNY-B&...

Here are the details on B. IIRC, the other has 9 mn shares out. Pretty big for a preferred offering.

Jim
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Both B & E together has $400M face value outstanding and it makes sense for Colony to redeem them since they are 8.25 and 8.75% coupons.
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Thanks for the heads up Jim!

* The B/E scenario makes sense as they are higher and will likely be called consistent with CLNY's direction.

* Why the J & H though? They have dipped down significantly and the risk is low. Here's a quick look at the reward:

At 20.30 per share, you'll make 4.70 or about 23% if called or if it returns to par.

Plus dividends:
J-9/2022 about 3 3/4 years x 7.125% = 27%
H-4/2020 about 1 1/4 years x 7.125% = 9%

Giving total/annual returns of:
J-50%/13.3%
H-32%/25.6%

I like the low risk/reward combination.

The risk comes into play if they DON'T call them or they don't return to par due to rising interest rates.

This is very similar to the SSW preferred scenario a while back. However the SSW's were at higher interest rates. Do you see a reason why they would be called or increase to par?

-srockaz
No CLNY common or pref positon
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Yes, I think the decline of those preferreds is due just to rising interest rates. So I expect when rates fall again, they'll come back up. I don't expect CLNY to do better on financing than those ~7% coupons. I don't anticipate them moving closer to par in near term.

Jim
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I better way to think about J&H is, you think CLNY is solvent and they will be able to pay the dividend on the preferred's and you really don't want them to be called and lock a higher yield for a longer time.

The company may not achieve investment grade, and may not redeem the preferred but will survive. I have allocated some portion of my portfolio on such investments, sort of high yield investing. Spread them across multiple industries and companies. Over time they actually out perform. Just don't swing for the fences and keep the individual issue/ company exposure to no more than 1% of your portfolio, so that your risk is contained.
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Thanks for the quick reply Jim!

To quote you "...when rates fall again...". Does that mean when the recession hits next year as you also mentioned, the FED will about-face and re-lower interest rates?

If so, that kind of makes this almost a 'hedge' investment that pays 8% or so while you wait...

-srockaz
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Thank you also Kingran!

I am looking at this as a trade vs income/yield perspective.


I really like your point though about diversification and the return of long term dividend collections.

-srockaz
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Late 2019 or 2020, or whenever the recession hits. I'm just watching and waiting, not set on any fixed date, just when I suspect it may happen.

Yeah, your math looked ok, but don't forget to include any dividends between now and a close of the deal, too. That's 15 cents a quarter (ha!), so you might be able to eke out a couple more there, too.

Jim
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