I don't really have an actual view on the company/assets (yet), but really fail to see the appeal of the pref's versus the debt in a muddle along and survive scenario that is your thesis.
So let's say the pref's benchmark is the 30 year tsy since they are perpetual.
The pref's yield 8.21%, The 30y = 2.87%, so the pref's trade 530 over. If they went to par tomorrow, they'd be at (7.375 - 2.87) = 450 bps over. so you only have 80 bps of tightening potential (unless you think they can get above par and trade at a negative YTC, which they have before)
the 5.95% of 2026's @ $93.26, 6.96% YTM according to last trade (structurally ahead of the pref's and not the red headed stepchild of the capital structure), 6.96% - 2.35% (interpolated 9 year in absence of readily accessible 9 year tsy) = 4.61% credit spread.
the credit spread pick up of a meager 70 basis points to go down capital structure and be aligned with a bunch of retail yield pigs in the preferreds, is in my opinion, inadequate. On an absolute yield basis, not taking into account the difference in maturity, it's not that much either, 1.3%.
To quantify it a bit let's say everything muddles along and spreads tighten by 100 bps (holding rates constant) over the next year.
Your prefs go to par (+11%) and you make your current yield (+8.2%) for total return of 19%. If you think they can trade to $105, add on another 5.5%. So the pref's will earn 19-24% (24.5% being the absolute max 1 year return).
The 2026's in a 100 bp tightening would trade to a 3.6% spread on an 8 year (since they'll roll down the curve over the year), at today's rates that'd be just above par. Let's call it $100.5, so you make 7.3% from capital appreciation and 6.4% from your coupon, call it a 14% total return.
So in a muddle along scenario where credit improves, the preferreds will beat the bonds by about 10% in a year (if they went to $105), 5% if they went to par. If credit REALLY improves the bonds have more upside. The bonds have less duration risk (being 9 years versus perpetuals), but almost as much duration upside since the prefs are callable (they go up 7.3% instead of 11% in our hypothetical)
Now if your thesis is wrong and CBL goes to shit, the bonds will definitely outperform the prefs.
In short, I think the scenarios where the prefs are better than the bonds are pretty narrow and in the end you're talking a difference that will be in the single digits in percentage terms, for a BIG step up in credit risk (no covenants, dividends can just get shut off, preferreds get f'd over all the time).
Another way to look at it is a waterfall
$1.8B Non-Recourse Single Asset Debt
$2.4B unsecured debt <--bonds here
$600mm preferred
$1.0B common
$5.8B rough, simplified cap structure
So the equity is the 100 - 83 tranche, the prefs are the 83 - 73, the unsecured are the 73-33 (much thicker and more protected, though the 2026's are last to mature) and then you have the mortgage debt which is in some ways senior but in other ways not since you can just hand back the keys.
Are the prefs really all that different than the common in terms of leverage / riskiness?
Prefs down 77% in price, maybe about -60% or so total return since this post
Common stock -67%
longest unsecureds down 32%, maybe about -17% or so total return since this post
all returns approximate and assume no reinvesting of divvies/coupon. I declare an early victory that a) the prefs were terrible risk reward relative to the unsecured bonds b) the prefs had just as much downside as common stock with little upside.
Is anyone looking at any part of the capital structure? I don't see enough juice in the unsecureds ($64-$72) yet.
Last time I did a deep dive I concluded that their worst properties were the unencumbered ones and that the weird dynamic of where they had to pay dividends was a credit negative. Now that's taken care of, I guess I'll look again, but probably won't get there.
