AAIC Baby Bond Delisting, Dividend Cuts, Scott's Latest Trade, & Foreshadowing a Potential Trade

It's pretty unusual to see this many trades, but this market has been unusual.

Dec 15, 2023

∙ Paid

Keeping each item brief.

AAIC Baby Bond Delisting

We wrote previously about the risk of AAIC delisting their baby bonds. The prospectus for the merger between Ellington Financial (EFC) and Arlington Asset (AAIC) indicated it would happen, though there appears to be minimal precedent for this activity. In other words, I wasn’t able to locate a precedent despite searching.

They still need to make interest payments and pay off the principal at maturity. They have the right to call them, which would’ve been a more responsible choice, but they are not obligated to do so. I say it would’ve been more responsible because they did not include choosing to deregister as one of the risks in the prospectus. Owners of the bond were buying a publicly traded bond, not a private debt.

I’m disappointed in management for this decision and for their failure to reply when questioned. I contacted management twice and the firm assigned to deal with investors in the merger twice. Since the filing was public knowledge, there was no risk of insider information from confirming it. It just makes them look less professional.

In an office setting, an older Caucasian man with a grey mustache and a less stylish comb-over hair, wearing a black suit and a red tie, is sitting at a desk ignoring his colleagues. He looks indifferent and bored. Around him are three colleagues making reasonable requests: a Black female with shoulder-length black hair, a Hispanic male with short dark hair, and an Asian female with long black hair, all dressed in business casual attire. They appear frustrated, standing next to the desk and pointing to documents. The scene conveys a mood of frustration and indifference.

NYMT Dividend Cut

NYMT cut the dividend from $.30 to $.20.

Scott’s note:

“A bit of a surprise here. Below my $0.25 - $0.30 per share range. Simply put, an underperforming sub-sector peer for a while now which only solidifies the prior downgrades in NYMT to make them the most discounted sub-sector peer (and 2nd most discounted out of the 20 covered broader sector peers). NYMT's equity interests continue to disappoint.”

RC Dividend

Ready Capital (RC) reduced the dividend from $.36 to $.30. A bit disappointing as this is one of my larger positions. Shares still have a significant discount to book, but this will weigh on risk ratings, targets, and most likely, market prices.

I’ll have Scott’s notes and trade in the section for paid members, along with the potential move I’ll be considering.

The REIT Forum

AAIC Baby Bond Delisting, Dividend Cuts, Scott's Latest Trade, & Foreshadowing a Potential Trade

It's pretty unusual to see this many trades, but this market has been unusual.

AAIC Baby Bond Delisting

NYMT Dividend Cut

RC Dividend

This post is for paid subscribers