No. of Recommendations: 0
So I admit, I can't find where I got the idea, but after thinking about it I decided to pass it along here (and maybe a couple other boards).

Just before Christmas, Brookfield Asset Management announced that Cincinnati Bell is being purchased by BIP (A Brookfield Company). It was a good day for Cincinnati Bell stock holders (after suffering for some time). It is interesting because they have a preferred (CBB-B) that pays about 7% on the redemption value of $50 and was selling for well under that. Prior to the purchase announcement, it was selling for $36 or so and paying a very nice dividend but had a lot of risk associated with the company. As soon as the buyout was announced, the price went to 46 and change and has slowly climbed since.

My immediate thought when reading about this was that the risk on this has almost gone away (hence the price increase). I also own and believe strongly in BAM's management abilities which (I believe) also transfers to BIP to some extent. In addition, this preferred is very small, like $7.5M total, which almost doesn't register against the market cap of BIP at $14B. Therefore, I think this 7% preferred is very safe (no way they default on this) and with a very nice dividend. I immediately started buying some shares around $46-47. My thinking is this is so small that it just doesn't show up on any radar and it also looked like the big money was made, but I think it is still a very nice purchase, even here.
There are really only two possible paths going forward.

1) they just basically forget about this inconsequential preferred and keep paying the dividend (I am quite happy with this) or

2) they decide to call it (anytime after April 2020) and you get whatever dividends accrue plus a couple buck kicker.

Not the most exciting idea out there but it is hard to see anyone losing on this. Thus, I have bought a nice position to park some money in for now and have been happily watching it slowly climb almost every day. The slow climb makes me feel that my theory is sound. My guess is this will continue to climb to $50 or so and then float there....

Anyway, I want to thank whoever talked about this on the boards as it seems like a safe port in a very frothy market for at least a small portion of my money.

Long CBB-B and BAM.
Print the post  


What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.