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Tender but Tough...

Started by Leigh, December 06, 2019, 06:10:09 AM

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I thought I had heard all of the terms and turns regarding muni/coroporate bonds but I'm not familiar with a voluntary tender offer.

I was hoping for some input.

My very elderly parents are risk adverse and have all of their money in bonds. About half muni (no tax) and the rest in old school corporate bonds. We are averaging about 4.6%. This is strictly to bring in some predictable income with little to no risk. We are not buying and selling. We are buying and holding. We try to buy on top of par as much as possible. They are in a very low tax rate.

SO. I got a tender off from Time Warner (ATT).  Can someone help me to fully understand this? They currently have 15 bonds showing about $1500 profit over purchase, should they sell today, regardless of tax.  But I'm not interested in trying to reinvest 15 bonds since it's currently at 4.65%.

It says it's voluntary but should we not participate, they are saying our account could be affected anyway. But if that's the case, why not just call it? It's continuously callable. Moody has WR and S&P is BBB. Thoughts? Again, we buy and hold, it's just monthly money for mama to get her hair done and daddy to pay for his doctor bills.

"AT&T Inc offers to purchase for cash, any and all of its outstanding 4.650% Debentures due 2044 issued by Time Warner. As a holder of the 4.650% Debentures due 2044, for each $1,000 principal amount you validly tender you will be eligible to receive: 1. A total cash payment to be determined by reference to the fixed spread of 175 basis points over the yield based upon the bid side price of the U.S.

Treasury Bonds 2.250% due 08/15/2049, as quoted on page PX1 on the Bloomberg reference bond trader series of pages at 11:00 a.m. New York City time, on 12/16/2019 (the price determination date). 2. Accrued and unpaid interest from the last interest payment date to, but not including, the settlement date. * The hypothetical total consideration, assuming a hypothetical price determination date of 11/15/2019, 11:00 a.m. NYC time, is $1,090.61 per $1,000 principal amount. You may only tender your notes in minimum denominations of $2,000 principal amount and multiples of $1,000 principal amounts in excess thereof. If you tender less than your full position, you must continue to hold at least the applicable minimum denomination of $2,000 principal amount."


Yikes that sounds so confusing. Wish I could help, but that legal text made my head spin. I haven't come across that type of situation in my portfolios before. Hope someone else knows and can chime in.


So from what I think I understand, the company has some high paying bonds out there and they'd like to reel them in, but the original contract on issueance wouldn't make it favorable to just call them, so they put out an offer that is hopefully enticing to where some holders of the bonds will trade them in and take the profit.

This is how I am interpreting it. I am choosing to hold onto them.

Now, I'm wanting to learn about pre-refunded bonds and if there is a date showing a year in the future as a pre-refunded date, does that mean anything important besides it being refinanced?


It appears that AT&T issued tender offers on long-dated bonds from the various companies it has acquired. The tender offer expired today. The majority of bond holders did not take advantage of the tender offer. Here is a link to the press release.


Fascinating link!! Thank you!

The debt I had showed the majority did accept the tender. Like I said, we'e in this for their monthly income and hopefully we can just keep this bond until they pass away. At least it's been an interesting learning experience.



AT&T issued a preferred stock Class A on December 5, 2019 and my guess is the proceeds were used to retire several of these bonds.
The filing is here   I wish this info was easier to find and clearer!
I bump into these notices on Seeking Alpha from time to time. T-A pays 5% per share of stock at a par value of $25 for perpetuity but it has a call date of 5 years out on 12/12/24. Seems like a nice safe yield.

I have bought some at $25.90 or 3.6% above NAV and I think T-A is mispriced because its first dividend payment is partial and therefore it gets reported as a lower dividend yield at the brokerages.

Hope this info helps