Specialty Insurer Conifer Holdings Announces Senior Notes (Baby Bonds)

Conifer Holdings (NASDAQ:CNFR) has announced the sale of a $25 senior note offering.  The baby bonds carry a coupon of 6.75% and will mature in 2023.

The company is selling 800,000 shares with an additional 120,000 being available for overallotment.

The new issue will have an anticipated ticker of CNFRL.  The baby bonds should trade on NASDAQ in the next 10 days or so.

Conifer is a small property/casualty insurer headquartered in Michigan and they target niche and under served segments.  The company was formed in 2012 and focuses on insurance for bars, restaurants and convenience stores etc.

The registration statement for this new issue can be found here.

This FWP (free writing prospectus) contains a company presentation with pricing as well as other details about the company.  Potential investors would do well to review this FWP prior to purchasing any shares.  This is a small company and we are not familiar at all with them, but as always we certainly like the short maturity.


JP Morgan Chase Announces New Fixed Rate Preferred

Giant banker JP Morgan Chase (NYSE:JPM) has announced a new issue of fixed rate preferred stock.

The issue will pay qualified dividends for tax purposes and the shares will be investment grade—Baa3 from Moodys and BBB- from Standard and Poors.  Of course, being a banking issue, it is required to be non cumulative to be used as Tier 1 capital.

The pricing of the issue has not been announced as of yet but it will be between 5.625% and 5.875%.  We expect pricing soon.  No OTC Grey Market symbol is available as of yet.

JP Morgan currently has 6 $25/share issues outstanding (shown below) and all are fixed rate.  JPM has a number of fixed-to-floating issues outstanding but they are $1000/share issues.

The preliminary prospectus can be seen here.




Monday Morning Kickoff

The DJIA traded in a range of about 25,850 to 26,211 last week which is a wider range than we have seen for a few weeks, but generally is still pretty quiet.  The 10 year treasury traded in a ranger of 2.93% to 3% and at this moment is trading right at 3%.

Last week we had Consumer Credit released and it grew by $17 billion in July which is a sizable jump and reflects the level of consumer confidence we have observed for many months now.  Also last week we had the Produce Price Index released at a -.1% and the Consumer Price Index came in right at consensus at .2% higher.

For the coming week we have bunches of housing numbers being released.  Home Builder Index is released on Tuesday, Housing Starts and Building Permits are released on Wednesday and Existing Home Sales are released on Thursday.  These number have been running weak in the last few months and we expect that to continue.  Leading Economic Indicators will be released on Thursday and while the number could be important there are none of the economic releases this week that anyone will pay too much attention to as far as interest rates and equity indexes are concerned.

Economically speaking the new tariffs to be announced on China by the U.S. are the biggest news and could eventually cause havoc in the markets–but predicting major market events based on tariffs has proven fairly futile thus far.  All we can do is wait and see.

The Fed Balance Sheet grew last week by a couple of Billion $, but overall continues on a downward trend.

For last week we had quite a number of new income issues announced.  Duke Energy (NYSE:DUK) announced a 5.625% baby bond.  REIT American Homes 4 Rent (NYSE:AMH) sold a new preferred stock with a coupon of 6.25%.  Container shipping company Seaspan (NYSE:SSW) sold a new 8% fixed to floating rate preferred.  mREIT Chimera Investment (NYSE:CIM) announced a 7.75% fixed to floating rate preferred.  Lastly AllianzGI Convertible & Income Fund (NASDAQ:NCV) announced a very high quality fixed rate preferred with a coupon of 5.625%.

We personally have no long term interest in the issues announced last week–BUT we could see a potential ‘flip’ of the Chimera issue depending on where one can buy it in the OTC Grey market.  The issue is trading under ticker CIMPP and closed at 24.85 on Friday.  We could see a 40-50 cent flip over the next 30 days if one can buy right in this price area.

We have 170 $25 preferred stocks trading at $25 or lower and the average price of a preferred stock fell by a full dime last week.  This is the largest drop we have seen for quite a while and mirrors the rise in interest rates last week.  As we have written about over the years in an orderly market–kind of Goldilocks when rates are rising slowly over time you can lose 1-2% in share price and not really notice.  As share prices fall a few pennies here and there another dividend is collected–at the end of the quarter you end up ‘even’ etc.  We like orderly price adjustments and interest rate transitions,

mREIT AGNC Investment Releases New Presentation

From time to time we like to mention new investor presentations from companies which may have some importance to income investors.

mREIT AGNC Investment (NASDAQ:AGNC) recently presented at the Barclays Global Financial Conference and you can find their presentation on the following link (it will open a new PDF on your computer).

AGNC Barclays Presentation.

AGNC has 2 perpetual preferred outstanding which income investors may own-or have an interest in.

You can see their preferreds here–as well as a listing of all mortgage REIT preferreds.


AllianzGI Convertible & Income Fund Prices New Preferred

As many readers already know AllianzGI Convertible & Income Fund (NASDAQ:NCV) has priced their new perpetual preferred with a coupon of 5.625%.

This is kind of a surprise bonus as the AllianzGI Convertible & Income Fund II (NASDAQ:NCZ) priced a new preferred with a coupon of 5.50% last week and we doubt there is a nickel worth of difference between them.  We should note that this issue has traded weakly on the Grey Market since issuance–around $24.80-$24.85

The new issue has a OTC Grey market ticker of NZCZP.  We are not seeing the ticker being active on the eTrade platform as of yet.

The final prospectus can be seen here.

Since this is a preferred issue of a closed end fund (CEF) the company is required to have an asset coverage ratio of 200% (or more).  The company filing shows the a current asset coverage ratio of 262% on preferred shares.

Disclosure–we bought a measly 100 shares of the 5.50% issue in one of our accounts–we certainly realize the risk to net asset value (share price) if interest rates continue to move higher.



Potential Error in Chimera OTC Ticker

I have been notified by a number of readers that the OTC Grey Market for the new Chimera fixed to floating preferred MAY BE CIMPP.  This ticker is showing up on eTrade and it looks like it is probably the correct ticker.

I just double checked and FINRA has it as PRBRP–which seemed weird to me when I originally listed it.

mREIT Chimera Investment Prices Fixed-to-Floating

As noted by a number of readers Chimera Investment (NYSE:CIM) has priced their new fixed-to-floating rate preferred issue with an initial fixed rate of 7.75%. While the initial fixed rate coupon is about as expected the spread on the float (which begins in 2025) is a disappointing 4.743% which is added to 3 month Libor.

The terms are the normal terms–except the issue doesn’t become floating for 7 years.  When fixed to floating rate issues started being issued (in large quantity) a few years ago many didn’t become floating for 10 years—and most recently most have been 5 years.  Whether one is better than the other depends on ones interest rate outlook.

The pricing term sheet is here.

The OTC Grey Market ticker is PRBPP

CEF AllianzGI Convertible & Income Fund to Issue Preferred

Just last week the AllianzGI Convertible & Income Fund II (NASDAQ:NCZ) sold an issue of perpetual preferred stock–this week we have the sister (or is it brother) AllianzGI Convertible & Income Fund (NASDAQ:NCV) fund selling a new issue.

Given the coupon on the sister CEF of 5.5% there is no reason to believe this will be any different.  The issue from last week is trading on the OTC market yet at $24.95 and came to market at $24.75—it should trade up another 30-40 cents when big board trading starts.

As a CEF the issue requires a 200% asset coverage ratio–so very safe and investment grade.

No OTC Grey market has yet been announced.

The preliminary prospectus can be found here.


mREIT Chimera Investment Selling Fixed-to-Floating Preferred

mREIT Chimera Investment Corp (NYSE:CIM) is selling a new issue of fixed-to-floating rate preferred.

The issue is not priced as of yet.

The preliminary prospectus can be found here.

The mortgage REIT has 2 perpetual preferreds currently outstanding–one of which is a 8% f-t-f issue (see below)  which is being knocked down today on the news of a new issue.

While we are not fond of most mREITs there may be a flip opportunity on this one if the coupon and spread are reasonable–we shall see.

Giant Container Ship Owner Seaspan Sells Preferred Shares

Container ship owner Seaspan (NYSE:SSW) has priced and sold a new fixed-to-floating rate preferred issue with an initial coupon of 8%.

They will be selling 6 million shares.  The coupon will be fixed until 10/30/2023 at which time it will begin to float at 3 month Libor plus a spread of 5.008%–kind of a skimpy spread in our opinion–although we need to do more due diligence on SSW before deciding just how skimpy.

Terms are the normal terms–cumulative, redeemable and perpetual.

The OTC Grey Market symbol will be SSWPP and we expect trading to commence immediately.

The permanent NYSE ticker will be SSW-I when the issue moves to the big board in a week or so.

The pricing term sheet can be found here.

Thanks to Eugene who noticed this new issue at the same time I did–his note motivated me to work ‘after hours’.

The company has 2 baby bonds outstanding as well as 4 preferred issues–coupons range from 6.375% to 8.25%.  The company could possibly use some proceeds to redeem outstanding debt or preferred per their filing.

American Homes 4 Rent Prices New Preferred

AMH has priced their new issue of perpetual preferred stock with a coupon of 6.25%.

The issue will have expected ratings of Ba1 from Moodys and BB from S&P–junk rated.

They will sell 4 million shares with another 600,000 shares for overallotments.

The proceeds will be used to pay off a short term senior note due 11/15/2018.

The pricing term sheet can be found here.

If one can buy it cheap (like 24.60-24.80) there may be a chance of a very modest flip–for 30-50 cents.  Beyond a potential modest flip we have no interest in the issue.

NO OTC Grey Market ticker has been posted as of now (4:45 pm central), but we would expect one tomorrow with trading starting Thursday afternoon or Friday.  The issue will have a ticker of AMH-H when it hits the NYSE.

SFR REIT American Homes 4 Rent Announces Preferred Shares

Single family residential (SFR) REIT American Homes 4 Rent (NYSE:AMH) has announced a new issue of preferred stock would be sold.  This is 1st perpetual preferred issued by a REIT in some time.

As most of you know American Homes 4 Rent is a large owner of single family properties and was formed back when the mortgage crisis was in full blown mode.  More recently the company has focused on the rental of their large, 52,000, portfolio of houses.

AMH was initially formed with the backing of B Wayne Hughes–the founder of giant storage REIT Public Storage (NYSE:PSA) and PS Business Properties (NYSE:PSB).  B Wayne Hughes remains the Chairman of American Homes 4 Rent.  Like Public Storage, AMH, has depended upon the issuance of preferred stock in a large way to help finance the business.

AMH currently pays a meager 5 cents/share per quarter to common holders while generating about 23 cents/share in adjusted funds from operations (AFFO).  The company carries $2.4 billion in debt against $8.8 billion in assets–like other B Wayne Hughes companies the use of extreme leverage is avoided.  While we are NOT impressed with the financial performance of SFR REITs the asset quality is generally good and investors seem to believe that SFR REITs are safer than other real estate assets–even though shares are rated Ba1 by Moodys and BB by S&P.

AMH has 4 current preferred issues outstanding with coupon ranging from 5.875% to 6.50%.

The 4 current issues outstanding can be looked at here.

Pricing and size of this new issue have not yet been announced.

Duke Energy Prices Baby Bonds

Giant electric utility Duke Energy (NYSE:DUK) has priced their new subordinated debentures with a coupon of 5.625%– a hair above where I thought they might price it–I was thinking maybe 5.50%.

As expected the issue is rated BBB by S&P and Baa2 by Moodys–investment grade.

The issue has a maturity date 9/15/2078 with an early redemption option starting 9/15/2023.

Interest payments on the bonds can be deferred for up to 40 consecutive quarters–any deferred payments will accrue and compound quarter at 5.625%.  Of course anytime any corporation defers interest payments they are in serious financial hurt so we would only consider this a minor condition negative in a buying decision.  Personally we probably have no interest at this time as the maturity date is further than we care to own at this time.

Because of the long dated maturity of this issue it likely will have pricing pressures if we see long interest rates (10-30 year bonds) move further higher.

The pricing term sheet can be found here.

Duke Energy Selling Baby Bonds

Giant utility Duke Energy is selling some subordinated debentures with a maturity date in 2078

These $25 baby bonds have not yet been priced but with a investment grade expected (S&P BBB) we would think these would price in the mid 5%’s.

The company currently has 1 other baby bond outstanding with a maturity in 2073 and a coupon of 5.125% (NYSE:DUKH)–and it is trading sharply lower on the new issue news.

Be aware that these issues contain the ability for interest payments to be deferred for up to 40 consecutive quarters (10 years).  This should be only a minor consideration for investors because if this occurs the economy and this company are in terrible straits.

The preliminary prospectus is here.