Interesting interview with Marty Cohen (of Cohen and Steers) in today's Barrons. I can't figure out how to get my hands on these put-able bonds he mentions though. Unless they are on an exchange, it's difficult to trade bonds.
online.barrons.com
There has been a massive market for converts, and a number of REITs issued them in the past couple of years, but I never understood why. They were priced at low yields and big premiums to share prices. It was paper with a put back to the company in year five, and many companies are regretting it now because the put is equivalent to a looming large-debt maturity. The convert market has collapsed along with everything else, and the prices of these converts have tumbled to well below par, with attractive current yields. Some companies are trying to buy them back at a discount. It is another free lunch gone for the companies, but an opportunity for investors.
Give us some examples.
One interesting issuer is SL Green Realty [SLG], a New York REIT that primarily owns office properties in New York City. One of its converts carries a 3% coupon but is trading well below par with a 19% yield to put. Prologis [PLD], a Denver-based REIT that develops and operates the largest portfolio of industrial and distribution properties in the world, has a convert with a 2% coupon and a 21% yield to put. Weingarten Realty Investors [WRI], which invests in shopping centers, has a convert with a 3.95% coupon and an 19% yield to put. All three have about three years remaining until the put is exercisable.
Then there is an unsecured bond we really like, issued by Healthcare Property Investors [HCP] , which carries a 6% coupon. It is a straight bond, but it has six years to go and trades at a 14.3% yield to maturity. So if you don't like the equities, you can get enormous yields on the debt |
