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Resource Capital Corp. Message Board

  • alf58206 alf58206 Aug 19, 2013 1:48 PM Flag

    Pref. fall hard.

    I added preferred B at 22.40. Pays about 9.2%.

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    • for better or worse...probably worse (smile), I just got some at $22.36....is what it is...should put the yield on that mula around 9.3%?...I'll take the cash flow...and let the stock price do what it wants.

    • tulsadevlin@sbcglobal.net tulsadevlin Aug 19, 2013 2:57 PM Flag

      I bought today @ $22.70.
      Do not know why RSOpB is tanking.

      • 1 Reply to tulsadevlin
      • RSO used to have highly dilutive common offerings to fund their continuing loan operations. But in answer to protests by common shareholders, ie in order to protect share value, but still increase their capital base, management started issuing preferreds & increased their bank based lines of credit. If you had a chance to review the last conference call, you might have caught on to the fact they have been selling prefereds into the market "at-market". (lines of credit are usually subject to interest rate increases, unlike the prefereds). Basically, the A & B prefereds will not be called in a rising interest rate environment, they prefer to pay the low fixed interest of the prefereds rather the variable lines of credit & it's not a bank trust prefered that might affect capital ratios & true solvency of the company. Which means, that if there is a perceived weakness in the company, then the high yield prefereds associated with the company will deteriorate along with the other weak high yielders. And it was implied on the call, book value has not held, nor has cash flow enough to pay the div. ie, common is being paid a div of more than 100% of cash flow - not good. I think the A & B's won't hold their price until the market starts recovering for all high yielders...so it's risky to start buying right now...unless you think the market is going to turn around after the Fed releases it's notes this week; but that kind of speculation is still not a solid reason to buy.

 
RSO
12.86-0.04(-0.31%)Jun 30 4:02 PMEDT