STW.PR.A: Stealth Redemption Confirmed

The essence of the redemption noted by Assiduous Reader erikd has been confirmed:

STW.PR.A has been called at $10.2 + accrued for total of $10.3173913 per share. 33.8575% of preferred shares have been called. This is a good premium to last friday’s trading price.

source is bloomberg, under news of the capital shares
I grabbed the screen at work. It will trade ex-redemption on Dec 9th, and supposed to get redeemed on Dec 12th.

I have confirmed with investor relations at Middlefield that the size is at least approximately correct; the redemption price per the prospectus is indeed 10.20.

The closing quote on Dec 8 – the last cum-redemption day, according to erikd, and the day he posted his note – was 9.11-18, on volume of 9227 shares. Yesterday was 8.64-87 on 5,294 shares. Today was 8.80-26, 13×2 on no volume.

I don’t know when the information was posted on Bloomberg, but if I had sold shares prior to the ex-redemption date and after the posting, I’d be pretty upset. According to me, a sizable redemption at a premium of more than 10% to market price counts as material information. Nothing was on their website, and investor relations could not confirm or deny immediately.

Their investor relations representative emphasized that they were not in breach of regulatory requirements. That may well be the case (it is not my place to judge) but I will suggest that:

  • The redemption was material information.
  • Bloomberg is a paid service; advising Bloomberge does not (or should not) constitute public disclosure
  • Therefore – whatever the strict legalities might be – I consider this a case of selective disclosure
  • If Middlefield did indeed follow minimum regulatory standards, that’s not good enough. They should have more consideration for their investors’ interests than that.
  • Let’s see a press release next time!

I will also be most interested to learn whether Middlefield purchased preferred according to the issuer bid. I will suggest that, given that STW.PR.A has not closed above 9.60 in at least a month, it would have been in the best interests of the fund to have exercised this right to the maximum extent possible.

I have noted a previous STW.PR.A stealth redemption.

STW.PR.A is tracked by HIMIPref™ and is part of the InterestBearing subindex. Given the low asset coverage ratio, it will probably be downgraded at some point in the near future at which point it will be relegated to “Scraps”. It is also possible that reduced liquidity due to the reduced float will be a prior cause for relegation.

9 Responses to “STW.PR.A: Stealth Redemption Confirmed”

  1. grasshopper says:

    Thank you for doing what Middlefield should have done..that is notifying shareholders of the “stealth redemption”.

    You are far too polite! Especially given the fact that this is not the first time it’s happened and you notified them of their shortcomings then.

    It is most disconcerting to be treated like a mushroom (kept in the dark and fed sh*t) by a company that has been entrusted with funds.

    Middlefield should at least pretend it has regard and respect for it’s shareholders.

    The response given by the investor relations representative “that they were not in breach of regulatory requirements” says it succinctly and no doubt mirrors the corporate culture there.

    While I suppose I should be pleased after having by sheer luck to have purchased STW.PR.A on Dec 3 and settled on Dec 8, it is my intention to sell or retract the balance and avoid Middlefield, or as I now call them Middlefinger, to the extent that I can in the future.

  2. jiHymas says:

    All I can suggest is that you ensure they know your views!

    I hope that you did get the redemption; I didn’t check the ex-Redemption date for myself and I’m only going by what erikd posted.

  3. lystgl says:

    “33.8575% of preferred shares have been called.”

    That would be cumulative (since inception) wouldn’t it?

  4. jiHymas says:

    That would be cumulative (since inception) wouldn’t it?

    I don’t know – I didn’t get all the particulars. I was under the impression from the call I made that it was just over 1/3 for this particular redemption – but I could quite easily be wrong.

  5. lystgl says:

    I’ve asked Middlefield in an email. I’m hoping that they’re recalling fully 1/3 of the outstanding at this time as at the end of next year, the rest is redeemed at par.

  6. grasshopper says:

    “All I can suggest is that you ensure they know your views!”

    Been there done that.

    Do you really think they care?

    Still nothing on their website!

    What’s really scary is that there are only 2 possible explanations;

    1) they really don’t care

    2) they are most incompetent

    I don’t know which is worse.

  7. erikd says:

    Proceeds from redemption hit my account on Thursday, it’s a nice bonus. Assuming there are now 2 capital units for each preferred (capital units were split 2:1 in Sept 2005), coverage is 1.53x. With December 09 maturity on the prefs, and they are trading at 8.50 range, I might just use proceeds to buy some more.

  8. […] was last mentioned on PrefBlog when its Stealth Redemption was confirmed. STW.PR.A is tracked by HIMIPref™ and is included in the HIMIPref™ InterestBearing […]

  9. […] press release is not yet on the relevant web-page, but I am sure they would wish me to emphasize that this is not actually a regulatory […]

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