CBRE Clarion Global Real Estate Message Board

I could be way off on this, but I think in reference to auction rate preferred securities, these are issued by IGR as long term interest bearing securities, probably backed by certain gaurantees or limits requiring they not exceed a certain equity in the fund. The fund issues these preferred shares to provide liquidity.

I think in this case that the Redemption for Auction-Rate Preferred Securities refers to a repurchase of these types of debt.

While it may simply be because in today's market, the fund can repurchase at a lower rate, it could also be a sign that the loss of equity of the fund, exceeded that required to cover their outstanding preferred securities, therefore triggering a repurchase. The first explanation I gave is what the company stated. The second if true is not a good thing at all.

I'm no expert, but I think this means that they are going to pay off some of their outstanding ARPS and use existing cash and existing lines of credit that have lower interest rates to do it. The problem is that the auction rate securities market has been frozen for months. These were being pushed on high income investors and institutions as short term money fund like instruments. They aren't. I think, IGR was issuing these ARPS as a way to raise short term cash so they can pay our monthly distribution and remain liquid. Sadly, the ARPS market just stopped and they really had no access to cash.
I don't know, but maybe with the gov't bailout IGR is hoping they can get out of some of these securities who's interest rates fluctuate all over the place on a daily/weekly basis and they can lock in something more fixed.
I don't know how this affects the NAV of our shares, but this is not a redemption (I think) of the fund's shares...but rather, a redemption of some short term debt.
The key will be what will the auction market be like? Will there be bidders? What will they be willing to pay? It's possible that the recent crumbling of IGR's share price reflects the market's perception that these ARPS are not worth much and that IGR may take a bath when they try to sell them back into the market.
Again, I am not a financial professional..this is just my interpretation of what I think these securities are and what IGR is trying to do. GLTA.