Most of the time the common stock will rally first and the preferred issues will follow when a company has good news like positive well results. We also had buying in some other oversold energy preferred issues yesterday (despite oil trading lower). For example GDP-PD also rallied and the seller in ESCRP got taken out. The rally wasn't specific to the mill preferred issues, although they were among the best performers (perhaps because they were so oversold). The gap between mill-pd and mill-pc is starting to close as the Panick Report had been predicting. Another group of preferred issues with a weird "gap trade" is the SB pref issues. SB-PB is trading above par. SB-PC-PC is nearly identical and trading at 17.40. Another weird preferred stock "inefficiency" likely to correct that's being covered in the Panick Report.
Suppose the Japanese and the Koreans got together and decided that they were going to break Ford and GM by flooding the US market with low priced cars. They announced that as soon as they broke the US automakers using their govt deep pockets, they would then gouge the US consumer with high priced cars for many years to come. How fast would the president and congress move to protect the auto industry? Wouldn't even need to pass legislation. Just a couple of phone calls saying it would be under consideration would fix the problem rather quickly.
Just to be clear the Keybank borrowing base is now officially at 60 mil. However, I think it's already effectively at 40 mil based on the recent covenant changes to allow the Badami deal to close. Some of the analysts appear to still be using the 60 mil amount to calculate liquidity in their estimates - LOL. A "cut" to 40 mil would actually be maintaining the status quo.
Meanwhile ESCR (like Mill they are highly leveraged, unlike Mill the ESCR common rallied big yesterday) just got their 50 mil borrowing base reaffirmed in December. So ESCRP has a very high probability to pay the next couple of dividends. The borrowing base is based on factors such as reserves, cash flow and of course commodity prices. The risk to Mill is that given weak production and oil prices, KeyBank could take a hard line with them. My guess is that KeyBank will be cooperative.
For those trading the high yield preferred sector, send yahoo mail to mrpanick for latest copy of on the Panick Value Research Report. Lots of good opportunities in high yield lately in shipping & retail as well as energy.
I think it would make sense to sell some of the oil hedges since they are focusing on drilling for gas near term. The key event is really the upcoming January KeyBank loan redetermination. Geisler talked about selling hedges on the call, so he must think it's plausible. Mill is going to need to work with KeyBank and Apollo though. I took profits on my mill-pd trade a few days ago on the nice "January effect" pop. Waiting on the mill issues to see what happens with the KeyBank redetermination. I don't think many investors fully appreciate what a critical event that is for Mill. My feeling is that KeyBank will be cooperative and keep the borrowing base at around $40 mil (where they are currently drawn).
We are getting some nice cold weather down here in Delaware. I'm trading ESCRP which is almost a pure natural gas play. Mill is trying to move in that direction. Unlike mill, they already got their borrowing base reaffirmed. Geisler made it perfectly clear on the conf call that he wants to pay the preferred dividend. He can monetize hedges and do it assuming that KeyBank cooperates. Something to be said though for trading issues where the borrowing base issue has already been resolved.
The FDIC will never go after PR. If DRL fails then their assets (including the claim against PR) will be assumed by another bank. You are essentially correct though. The claim won't go away and PR will eventually lose one way or another.