WINTHROP REALTY TRUST FUR
April 29, 2014 - 3:09pm EST by
GideonMagnus
2014 2015
Price: 25.70 EPS $0.00 $0.00
Shares Out. (in M): 5,060 P/E 0.0x 0.0x
Market Cap (in $M): 120,500 P/FCF 0.0x 0.0x
Net Debt (in $M): 623,000 EBIT 0 0
TEV ($): 389,163 TEV/EBIT 0.0x 0.0x

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  • Liquidating Trust
  • Preferred stock

Description

Go long the Winthrop Realty Trust Series D Cumulative Preferred (FUR-D)!

If you’re like me and have excess cash in your portfolio waiting for better opportunities, here is a great alternative to sitting in cash. FUR-D offers a yield-to-redemption around 8.5% for the next 2.5 years, with minimal downside risk.

Winthrop Realty Trust (FUR) today announced its intent to liquidate the company, pending shareholder approval. The company isn’t exactly waiting for that approval as it already has contracts to sell two properties for estimated net proceeds of $41 million. The company believes that common shareholders will receive at least $13.80 per share, or just over $500 million. With $102 million in cash and liabilities of only $623 million (as of March 31) in front of the preferred stock and the liquidation process already under way, impairment of the preferred appears highly unlikely outside of a severe collapse in real estate property values. As a minor bonus during liquidation, common dividends cannot be paid until the preferred stock is redeemed.

This preferred has a yield of 9.25% and the company would love to redeem it as soon as shareholders approve a liquidation, but alas it is not redeemable until 11/28/16. The company has authorized a buyback of the preferred stock (as well as its senior notes, which also have call protection) as a means to retire some of this issue prior to the call date. Thus, I expect the preferred to have a pretty firm floor as the company should have a huge amount of cash well in advance of the call date and will want to retire as much of this expensive preferred as can be done at a reasonable cost.

At a current price of $25.70, I calculate a yield-to-call of 8.6% through November 28, 2016. This is a very high yield in today’s market on a reasonably high quality short-term security AND it should have very good price support and liquidity from the company’s purchases.

Risks…there’s always something right? Maybe not so much in this case. If the liquidation is not approved by shareholders (low probability), what happens to the preferred? It’s not clear what the company would do at that point, but the fact is that this preferred was actually trading 3% HIGHER before today’s announcement and it will still be an expensive issue with a near-term call date, so I wouldn’t expect much downside. Barring economic cataclysm, I don’t see this security declining very much in value.

In this market, this is high yield heaven.

I do not hold a position of employment, directorship, or consultancy with the issuer.
Neither I nor others I advise hold a material investment in the issuer's securities.

Catalyst

Shareholder approval of liquidation.
Company buyback to create price floor.
Redemption in November 2016.
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