Traders Cooperative

[Joe Stocks]

CDRprC and CDRprD. Bought some CDR-A right before the close.
CDR announce last fall that they were going to look to sell their assets. The stock has been on a steady climb since. Wednesday they announced a sale of assets and remaining to be merged with WHLR.

I assumed the preferred would do well too as the common. To my surprise I noticed that the preferreds had crashed. the C's were selling for $9.12. That was down from $23 the day of the announcement. I read the press release. The press release implied the preferreds would be held by WHLR. WHLR own preferreds has had their dividends suspended. HOlders of the CDR preferreds assumed the same fate and sold. If you have to get out of a big holding of preferreds of any company the door is narrow as they trade thinly.

I decided to dig deeper and read the SEC filing. The detail there implied something different that the press release.

Company Preferred Stock. Pursuant to the terms of the Merger Agreement, the Company’s currently outstanding 7.25% Series B Preferred Stock and 6.50% Series C Preferred Stock (collectively, the “Company Preferred Stock”) will remain outstanding as shares of preferred stock in the Surviving Company following the Mergers. Both classes of Company Preferred Stock are expected to remain listed on the New York Stock Exchange following closing of the Mergers, and the Surviving Company will continue to be an independent filer of periodic reports with the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). This post-closing structure whereby the Company Preferred Stock will remain outstanding preferred securities of an independent public reporting entity that holds a significant retained portfolio of income-producing assets is intended to facilitate the undisrupted ability of the Surviving Company to pay all required dividends on the Company Preferred Stock in accordance with the articles supplementary governing the terms of the Company Preferred Stock and applicable law.

That sounds like a separate entity and possible subsidiary of WHLR. And also appears to protect the preferred holders. Which makes more sense. How could CDR see their common holders make out so well and the preferreds get so screwed? I mean the preferreds have liquidation rights over the common.

So with only five minutes left in the session I started buying for myself and some accounts I manage. Did not buy all that I wanted as there wasn't many share sitting on the ask. If I would have had to do over gain I would have bought more above the current ask. I picked up a few hundred additional shares in after hours on ARCA. Amazes me that with all the traders I was the only one with a bid slightly over closing prices.

I hope they trade down again Monday. I would like to load up more to about 2 to 3% of portfolio. Currently just over 1%.

Link for sec 8k for merger deal;
http://archive.fast-edgar.com/20220303/A422622CZZ2RUJZA22TR2ZYLW8RJEZ22Z242/

Prospectus for the preferrds;
https://www.sec.gov/Archives/edgar/data/761648/000119312517261053/d430623d424b5.htm

I think these preferred C series shares could double from here. I would not be surprised to see a 50% gain in days once it is know that the preferreds "Preferred Stock will remain outstanding preferred securities of an independent public reporting entity that holds a significant retained portfolio of income-producing assets is intended to facilitate the undisrupted ability of the Surviving Company to pay all required dividends"


Then there is this matter. The Preferreds have a change of control item in their prospectus. Not sure how CDR is getting around that. I owned some preferred back during the financial. The company that issued them tried to sell them along with the company was sued for not adhering to the change of control clause. To get the deal to go through the company ended up paying the preferreds par of $25.

Beware. I do pretty good with these type situations but I have been wrong before. This looks pretty clear cut to me, but my opinion is worth what you paid me.