8.49% Yield Preferred Share Called, Good Sign For Management Quality

Resource Capital Corporation (RSO) has a portfolio of commercial real estate loans which carry a substantial amount of credit risk. The common stock of RSO carries significant risk, but they trade at a significant discount to book value which gives them a decent safety cushion. The company also has higher operating expenses compared to other mortgage REITs. I will be primarily covering the preferred shares in this article. RSO is in the buy range for traders willing to take on very high-risk positions.
RSO recently issued new convertible bonds and it was a good move by management. The newer preferred share, RSO-C, carries a much lower dividend rate than RSO-B. Management of RSO continued their good moves and called RSO-B.
RSO calls RSO-B
Source: CWMF’s subscriber spreadsheet (subscription required)
Resource Capital Corporation issued a call on RSO-B. ALL of it. This is a clear positive for both the common shareholder and for RSO-C shareholder. While a prior arrangement was designed to temporarily (unless it is modified) protect management revenues during these calls, the fact that management is removing this preferred equity is extremely positive. Until RSO-A and RSO-B were both entirely retired, there was no way to take management seriously about their intention to improve RSO. I believe external managers should always be viewed as guilty until proven innocent.
If you owned shares of RSO-B, getting $25 plus the dividend accrual (to be about $.3208 per... Read more

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