INCORPORATED (NASDAQ:AAL) Files An 8-K Other Events
Item8.01. Other Events.
The following changes will be made to the investment policies of
Flaherty Crumrine Preferred Income Fund Incorporated (the Fund)
effective on February21, 2017.
| OldPolicy: |
At time of purchase, at least 75% of the securities that the Fund will acquire will be rated investment grade by any one of Moodys Investor Service, Inc. (Moodys), Standard and Poors Global Ratings (SP) or Fitch Ratings Group (Fitch). In addition, the Fund may invest up to 25% of its assets at the time of purchase in securities rated below investment grade by all of Moodys, SP and Fitch, provided that (a)such securities are rated at least Ba3 by Moodys, BB- by SP, or BB- by Fitch or (b)such securities are issued by an issuer having an outstanding class of senior debt rated investment grade by any one of Moodys, SP, or Fitch at the time of purchase. Thus, the Fund may invest in securities rated below Ba3 by Moodys, BB- by SP and BB- by Fitch if the issuer has investment grade senior debt outstanding. In addition, the Fund may invest in unrated securities that the Funds investment adviser deems to be comparable in quality to rated issues in which the Fund is authorized to invest. |
|
| New Policy: |
At time of purchase, at least 85% of the Funds managed assets will be either (a)rated investment grade by any one of Moodys, SP or Fitch or (b)issued by companies with issuer or senior unsecured debt ratings that are investment grade by any one of Moodys, SP or Fitch. In addition, the Fund may invest in unrated securities that the Funds investment adviser deems to be comparable in quality to rated issues in which the Fund is authorized to invest. |
Reasoning for Changes
Rating methodologies for each of Moodys, SP, and Fitch have
evolved in dramatic fashion ever since the financial crisis of
2008-2009, and ratings on preferred securities are lower than
pre-crisis levels, despite what the Funds investment adviser
views as substantial credit strengthening at most issuers.
The Funds ratings guidelines were designed prior to this
evolution and are now stale in light of the current market.
According to the advisers data, preferreds with an investment
grade rating by at least one agency only comprise approximately
62% of the total market prior to the financial crisis, they
comprised 90%.
The adviser recommended these changes in order to address both
the change in the composition of the preferred market and
frequent changes in rating methodologies for preferred securities
by referencing the issuer or senior unsecured debt ratings.
Impact of Changes
The Fund would be authorized to purchase below investment-grade
preferred securities of investment grade issuers. In addition,
subject to its 15% limit, the Fund may now purchase securities
rated below Ba3/BB-/BB- by each of Moodys, SP and Fitch,
respectively, even if the issuer rating or senior debt of the
same issuer is rated below investment grade by Moodys, SP or
Fitch at the time of purchase. While this change would permit the
Fund to acquire securities rated B and below by all the ratings
agencies, the Funds adviser has no current intention of doing so.
-2-
As before, the Fund will apply the ratings criteria at the time
of purchase and the Fund will not be required to dispose of
securities if, after purchase, they are downgraded, although the
adviser may take this into account in determining whether to
retain a security. As a result, more than 15% of the Funds
holdings at any time may be issued by companies with issuer
ratings or senior debt ratings that are below investment grade.
In addition, as before, the Fund may invest in unrated securities
that the Funds investment adviser deems to be comparable in
quality to rated issues in which the Fund is authorized to
invest.
-3-
About INCORPORATED (NASDAQ:AAL)
American Airlines Group Inc. (AAG) is a holding company whose primary business activity is the operation of a network air carrier through its subsidiaries, American Airlines, Inc. (American) and its regional subsidiaries, Envoy Aviation Group Inc. (Envoy), Piedmont Airlines, Inc. (Piedmont) and PSA Airlines, Inc. (PSA). The Company has hubs in Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York City, Philadelphia, Phoenix and Washington, D.C. Together with its regional airline subsidiaries and third-party regional carriers operating as American Eagle, the Company’s airline operates an average of approximately 6,700 flights per day to over 350 destinations in approximately 50 countries. The Company operates approximately 940 mainline aircraft and is supported by its regional airline subsidiaries and third-party regional carriers, which operates an additional 587 regional aircraft. INCORPORATED (NASDAQ:AAL) Recent Trading Information
INCORPORATED (NASDAQ:AAL) closed its last trading session up +0.74 at 48.00 with 5,559,577 shares trading hands.