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Cohen & Steers Reit and Preferr Message Board

  • aluminumken aluminumken Nov 15, 2008 10:04 AM Flag

    Question for Group....

    What happens if total NAV of portfolio falls below the $726,000,000 of outstanding preferreds?

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    • 55% of the preferreds were redeemed in Oct. Additionally C&S redeemed millions more when the nav slipped below its debt covenants.Federal law prohibits debt of more than 50% of nav.If nav falls below that fund cannot declare or pay a dividend until it gets back to the required ratio by selling assets to buy debt.The preferreds and banks may require a higher level of coverage than 50% but I don't think that info has been released.As assets are sold to pay down debt,the dividend will decrease.See FFC for how this works.RRW

      • 3 Replies to wilsonrusty2
      • Does federal include preferred stock as debt? Maybe mutual funds are different than regular corps. with respect to preferred stock. I have not heard of defaults with respect to corporate preferred stock when NAV falls only when interest is not paid. And those defaults do nor require the selling of assets. They only require the payment of dividends to the preferreds prior to the payments to the common.

      • Where do you find the federal law that prohibits debt of more than 50% of NAV. I could not find it in the financials or any press releases. The press releases seem to indicate that the preferreds were redeemed because there is no liquidity. And the market sets the rate. If there is no market, I believe a default rate is paid thus providing the incentive to redeem.

      • I really appreciate your answer. Day after day of decline in price and yet daily sales of less than 1/2% of outstanding shares makes me believe I should stand pat on my position. I have no problem with a dividend cut. I am a long term investor and don't mind hanging in as long as I feel reasonably comfortable that fund will not go insolvent and my patience was for no reason. Once again thanks for your reply.

 
RNP
19.08+0.19(+1.01%)Dec 19 4:02 PMEST

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