Q: Hi, I own a number of preferred shares from various Canadian issuers and came across a recent article from Seeking Alpha which is concerning, except below. What is the possibility delisting of preferred shares could occur in Canada as well for the reasons outlined? Thanks.
“Preferred stock can be a useful and important part of a diversified fixed-income portfolio, even with the decline in all segments of fixed income in 2022, however, recent events related to preferred stock delistings have put to the forefront a risk that needs to be taken into stronger consideration by investors. While the matter of delistings is certainly not new, these recent events have heightened our concerns on this risk, and we also call on the SEC to take up the issue to protect investors.
Earlier this month Höegh LNG Partners LP (HMLP) announced that it will delist its 8.75% Series A Cumulative Preferred Stock units (HMLP.PA), effective January 2, 2023, to save legal, audit, and other reporting costs associated with the preferred stock listing. While the company intends to continue to pay the distribution, the withdrawal and effective loss of liquidity for unitholders is a major negative event that led to a sharp 33% plunge in the price from the low $21 range to $14.25 as of this writing, as seen in the chart below.
HMLP-A Price Chart 2022
While some may find value in what is now a 15% current yield, the lack of liquidity creates massive uncertainty for unitholders going forward, and it's unclear what investors should do next. HMLP management has affirmed that it does not care about its preferred investors who handed over $176 million in cash to the company in good faith, expecting that the public listing of the preferred stock would remain stable and tradable as expected when initially issued. The proper action would have been to redeem the issue as the parent company Höegh LNG Holdings Ltd. did when it acquired HMLP and paid common shareholders in cash.
The action of delisting preferred issues and disrespecting preferred stock investors is not just a phenomenon of smaller and obscure issuers. The same thing is happening to the preferred issues of PS Business Parks (PSB) Series X, Y, and Z (PSB.PX) (PSB.PY) (PSB.PZ) totaling $755 million of combined face value. PSB has been reliably issuing, paying and redeeming preferred issues since 1999 when its Series A preferred was issued. Series X was issued in 2017 as a solid investment grade issue (rated Baa2) yielding 5.25% - presumably a perfect fit for a long-term, conservative income-focused investor. PSB-PY was also issued in 2017, and PSB-Z in 2019.”
“Preferred stock can be a useful and important part of a diversified fixed-income portfolio, even with the decline in all segments of fixed income in 2022, however, recent events related to preferred stock delistings have put to the forefront a risk that needs to be taken into stronger consideration by investors. While the matter of delistings is certainly not new, these recent events have heightened our concerns on this risk, and we also call on the SEC to take up the issue to protect investors.
Earlier this month Höegh LNG Partners LP (HMLP) announced that it will delist its 8.75% Series A Cumulative Preferred Stock units (HMLP.PA), effective January 2, 2023, to save legal, audit, and other reporting costs associated with the preferred stock listing. While the company intends to continue to pay the distribution, the withdrawal and effective loss of liquidity for unitholders is a major negative event that led to a sharp 33% plunge in the price from the low $21 range to $14.25 as of this writing, as seen in the chart below.
HMLP-A Price Chart 2022
While some may find value in what is now a 15% current yield, the lack of liquidity creates massive uncertainty for unitholders going forward, and it's unclear what investors should do next. HMLP management has affirmed that it does not care about its preferred investors who handed over $176 million in cash to the company in good faith, expecting that the public listing of the preferred stock would remain stable and tradable as expected when initially issued. The proper action would have been to redeem the issue as the parent company Höegh LNG Holdings Ltd. did when it acquired HMLP and paid common shareholders in cash.
The action of delisting preferred issues and disrespecting preferred stock investors is not just a phenomenon of smaller and obscure issuers. The same thing is happening to the preferred issues of PS Business Parks (PSB) Series X, Y, and Z (PSB.PX) (PSB.PY) (PSB.PZ) totaling $755 million of combined face value. PSB has been reliably issuing, paying and redeeming preferred issues since 1999 when its Series A preferred was issued. Series X was issued in 2017 as a solid investment grade issue (rated Baa2) yielding 5.25% - presumably a perfect fit for a long-term, conservative income-focused investor. PSB-PY was also issued in 2017, and PSB-Z in 2019.”
