Housekeeping – Reader Notes
By: Tim McPartland,
Tim thanked us for publishing notes on perpetuals versus term preferred. We just do our best with this ‘hobby’.
Glenn sent us a note to let us know we were missing the Seaspan Senior Notes (ticker:SSWN) from the list of debt issues maturing within 10 years. Thanks Glenn–we added it to the list-you were correct.
Kevin asked about the Star Bulk Carriers (ticker:SBLK) common issue which was floated lately. I’m not for buying any shipper common (except Ship Finance–because they have a long history in running a successful business)–SBLK is kind of special with giant Oaktree Capital backing them–but just the same I only would buy shipper common for a speculative flip. SBLK has a huge commitment for newbuilds so they will be raising lots of money in the next year or 2.
John asks about floating rate preferreds. We are curious as well to see how these perform when rates do finally rise. We would hold these before perpetuals if we knew for sure that rates were going to rise–but there is not solid data in recent history to know how these will perform. Your CHS issue is a great issue to hold regardless–just because they are quality operators. The RSO issue may be another story. I don’t know how these specialty finance and mortgage REITs will perform in a rising rate environment–we haven’t had one for so many years. I know 1 thing for sure–if I sniffed a recession I would exit quickly.
Scott writes about his portfolio mix between perpetuals and term preferreds. Concerned that folks may dump perpetuals just because we do. We try to let people know that we are really protective of our capital. This means that capital preservation is of utmost importance to us. For others that are just looking at a decent income stream they should pursue that goal–even if it is with perpetual instruments–just be mindful of your true tolerance for capital loss when/if that time arrives. We found with the MLP’s that some thought they could ride out any capital loss without experiencing pain–I feel sorry for some of those folks. No one loses 50% of their portfolio and has anything except a sick feeling for a long time.