Business Context and Reporting Period
Company: Flaherty & Crumrine/Claymore Preferred Securities Income Fund Incorporated
Filing Type: Form 8-K (Current Report)
Date of Report: February 3, 2011
Subject: Announcement of changes to investment policies effective April 4, 2011.
Key Financial Metrics
This filing does not contain financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity. The report focuses exclusively on policy modifications.
Portfolio Composition Impact (as of January 31, 2011):
- Holdings deemed below investment grade would decrease from 15.7% to 12.0% under the new policy.
Material Changes Versus Prior Period
The Fund is modifying its investment grade criteria and allowable below-investment grade purchases:
- Approved Rating Agencies: Expanded from Moody's and S&P to include Fitch Ratings Group. A security is now considered investment grade if rated as such by any one of the three agencies.
- Below-Investment Grade Purchases: The Fund may now purchase securities rated below Ba3/BB-/BB- by all three agencies if the issuer has an outstanding class of senior debt rated investment grade by any one agency.
- Unrated Senior Debt: If an issuer's senior debt is unrated or non-existent, the Fund may purchase preferred securities rated at least Ba3/BB-/BB- by any one agency.
Guidance, Outlook, and Risks
Management Commentary: While the new policy permits the acquisition of securities rated B and below, the Fund's adviser has no current intention of doing so. The Fund applies ratings criteria at the time of purchase and is not required to dispose of securities if they are subsequently downgraded.
Risks and Contingencies:
- Increased Vulnerability: Securities rated below Ba3/BB- indicate a high degree of vulnerability to non-payment of obligations.
- Speculative Nature: Lower ratings (e.g., B1-B3 or CCC) suggest issuers are highly speculative and dependent on favorable conditions to meet commitments.
- Default Risk: Securities rated below Caa/CCC generally indicate issuers that are highly vulnerable to default or have already defaulted.
Investor Verification Checklist
- Confirm the effective date of the new policy (April 4, 2011).
- Verify the current percentage of the portfolio held in below-investment grade securities post-policy change.
- Monitor whether the adviser exercises the new option to purchase securities rated B and below.
- Review the credit quality of the Fund's senior debt holdings to understand the new eligibility criteria for lower-rated preferred securities.