..........the yield would be maybe a couple of % less without the ARPS kicker - I believe that it is only a matter of time before Pimco has to do something - go the Nuveen route or stop using ARPS. Either way, the yield will probably take a hit.
Yes, you are correct. I stand corrected in that I previously thought only Muni's were associated with ARPS. I have learned that PHK is leveraged to the tune of $900 million on the whole PHK portfolio.
Even with that, Reuters reports (which you can by online for about $25) says that PHK is rated a "buy." Even with the ARPS issue. Why do you think that is?
Cuomo and other politicians are busy "getting the people's money back". If anyone owns ARPS in Pimco funds and wants their money - it is just a matter of time before a lawsuit IMO. I believe ARPS will become extinct due to the credit crisis - all my opinion.
ARPS are the preferred shareholders of PHK - over 40% of the owners of PHK is the preferred owners. Why are they satisfied with a 3% return? Because they are safer than the common holders and as long as the auctions were taking place, they could get out at any time at about the price they purchased in - sort of like a money market fund for them.
For the Muni's or Arps to contribute 1-2% to the yield, they would have to comprise 10%- 20% of the total holdings- Which they do not.
Anybody is welcome to do the math, but they comprise about 1-2% of the funds holdings giving less than 1% to PHK's bottom line.
Another factor is that institutional holders are having to sell shares in investments including PHK to garner funds to cover thier ARP loses. This is another factor of driving price of PHK down. Unloading of shares to get capital to pay back investors. You will not see this in print til the next quarters instutional holdings are shown for PHK. The glut or sell off is not a reflection of PHK's health, rather a raising of cash by the bank holders.
You probably will not see a reduction in divi. You will not see a Christmas time "bonus" divi this year. I thought that this would not be affected, but probably will.
I will be the first to admit however, anything can happen.
2.4% -- That's what Yahoo! reports as institutional holdings of PHK. Yahoo! statistics are often unreliable, but I doubt an institutional sell-off is the reason for the market price decline in PHK.
According to the latest "fund card"
the arps comprise 41% of portfolio. This contributes $45,000,000 per year to the common shareholders due to the interest rate spread. Without that the yield to common shareholders would be in the 7 to 8% range. I would think the pps would fall to the $7 to $8 range.
PTY and PFN have the market price below the NAV price. Of course, these 2 use ARPS also. Allianz has not said any statements in 3 months about the ARPS. There is over 2 trillion dollars in money market funds paying less than 3% so that it is a negative return after inflation and taxes - no doubt some of that money would like to yield chase.