Limited Partnership Ares Management Sells a Preferred Issue

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Alternative asset manager Ares Management LP (NYSE:ARES) has sold a new preferred issue with a rather tasty coupon of 7%.

ARES, with over $94 billion in assets under management, is a large, well run company and the new issue has a low investment grade rating from Standard and Poor’s of BBB-.  ARES has no other preferred stock or exchange trade debt outstanding at this time to which we can compare this new issue to, but based on other newer preferreds from other limited partnerships (KKR&Co sold a 6.75% preferred in March) it is priced at a level which is rather attractive.

You will recall that other financial companies such as Bank of America (NYSE:BAC) have issued non cumulative preferred stock at coupons much below this new issue.  BAC issued a 6% coupon series in April and shares have traded up to the $25.68 area.  BAC shares were junk rated.


The new preferred from ARES is non-cumulative and redeemable in 5 years which is typical for preferred issues.  What is not typical is that these shares will generate a K-1 at tax time instead of the more typical 1099.  This is because ARES is a limited partnership. We are aware that many investors shy away from issues that generate K-1’s and if you are one of those people this is not the issue for you.

Details of this new issue are here.

The issue is now trading on the OTC Grey Market under ticker symbol ARMGP.  Shares are trading around $24.80/share as of this moment and being a large issue (11,000,000 shares) they likely will trade at a discount to par for a couple of days.  We have a OTC Grey Market “primer”  here if you are not familiar with Grey Market trading.

It is our intention to purchase shares of this issue for our portfolio as the 7% coupon from a good quality company is a rarity in recent history.


Tim McPartland

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Tim McPartland
Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.
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