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Msg  22849 of 22994  at  2/3/2023 12:08:11 PM  by


Trade idea - CEN

Disclosure: I am long CEN, thought I would share an idea with the community.

CEN is a small ~100M MLP fund with Brookfield as the fund sponsor that frankly probably shouldn't exist (small fund, illiquid, high fees, and 33% of the portfolio locked up in an illiquid private co-investment). It currently trades at a 15% discount to NAV while Brookfield's only other CEF, ticker RA trades at a 10% premium, or a 25% differential in valuation.

The activist Saba has taken a ~25% stake in CEN and I would presume is pushing for a liquidity event to get out close to NAV.

There is a little blurb in this article that originally caught my eye:

"Saba has also had some recent successes in its campaigns against closed-end fund management in the energy sector. After seeking representation on the board of the Center Coast Brookfield MLP & Energy Infrastructure Fund, in which it recently held a 24.45 percent stake, Saba agreed in August to withdraw its nominees, according to a Securities and Exchange Commission filing a sign that the two sides are working on an accommodation to reduce the discount."

I believe Saba would only withdraw its nominees because it has agreed behind closed doors that something will be done to address the discount. Well, fast forward to last December (which I originally missed!) CEN put out its annual report:

Notably, "In addition to the macroeconomic factors outlined above, we note that Brookfield Public Securities Group LLC ("PSG"), the investment adviser to the Fund, in collaboration with the Board of Trustees of the Fund (the "Board"), has been and continues to evaluate various strategic options for the Fund seeking to advance and maximize shareholder value. This includes, without limitation, fund reorganizations within the Brookfield fund complex, reorganization opportunities with third parties, and strategic portfolio repositioning, including a potential sale of all or a part of the Fund's holding in KKR Eagle Co-Invest LP. As previously announced, the Board expects to be in a position to present an option for shareholder action or otherwise by the end of the first quarter 2023. Nevertheless, this effort is ongoing and there can be no guarantee that PSG and the Board will develop a proposal for announcement and execution by the Fund."

I believe that Brookfield will put out a proposal prior to the end of this quarter to propose merging CEN into RA. This will cause a sharp price up in CEN and somewhat of a drop in RA. Outside of what the energy market does, I expect CEN to jump up ~10% in share price over the next two months.

Good luck

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