Enstar Group Prices New Perpetual Preferred

As predicated by some the new $25 perpetual preferred issue from insurer Enstar Group (NASDAQ:ESGR) has priced with a coupon of 7%.

The issue is non cumulative and of course pays quarterly dividends with the 1st dividend to be paid on 3/1/2019.

The company will sell 4.4 million shares with another 660,000 available for overallotments.

Starting tomorrow the shares should trade under the temporary ticker of ESGRL on the OTC Grey Market.  This means that it may be Friday before some investors see it listed on their particular broker website (some brokers are faster than others).  Potential buyers will likely get as good a price on Friday as they will tomorrow as 5.06 million shares do take some time to sell.

Shares will trade on the NASDAQ under the permanent ticker of ESGRO.

The pricing term sheet can be read here.

The issue is rated BB+ by S&P and BB+ by Fitch–both of these are 1 notch below investment grade.

Thanks to George for keeping us on our toes.


Eagle Point Credit Releases Quarterly Update Presentation

Specialty finance company Eagle Point Credit (NASDAQ:ECC) has released their 3rd quarter investor presentation.

ECC is a holder of CLO’s (collateralized loan obligations) and has been as transparent with their data as any similar company.  While we personally believe that companies that hold CLOs have a very high risk in a poor economy they provide some decent returns with a trending or growing economy.

ECC has 2 term preferred issues outstanding and 2 baby bonds outstanding that income investors hold and thus this overview might be of interest.

The term preferreds and baby bond issues currently outstanding can be perused here.

The new investor presentation can be looked at here.

Any bonds or preferred stocks issued by ECC are unrated-thus considered junk (junk means less than investment grade rated).


Insurer Enstar Group Limited to Sell Preferred Issue

Large specialty insurance company Enstar Group (NASDAQ:ESGR) is selling a new fixed rate preferred stock issue.

Being an insurance company the issue will be non cumulative in respect to dividends.

Other terms will be the normal terms, quarterly dividend payments, an optional redemption period beginning in 2024 etc.

The preliminary prospectus can be found here.

The permanent ticker when trading begins on the NASDAQ will be ESGRO.  The OTC Grey Market ticker has not yet been released.

The company has another preferred issue trading and it is a fixed-to-floating rate issue.  Initial coupon is 7% and it begins to trade with the floating rate in 2028.  Info on the older issue can be seen here.

The older issue was rated BB+ by S&P (1 notch below investment grade) and it is assumed the new issue will have the same rating.

Thanks to Eugene for keeping us on our toes most of the time.


Braemar Hotels and Resorts Prices High Yield Preferred

REIT Braemer Hotels and Resorts (NYSE:BHR) has priced a new preferred stock offering with a coupon of 8.25%.  The company will be selling 1.6 million shares with an overallotment available of 240,000 shares.

BHR is the old Ashford Hospitality Prime and is a small lodging REIT focusing on luxury properties.  The company owns just 12 properties.

The new issue has the normal terms with quarterly dividend payments, cumulative dividends and an early optional redemption period starting 11/20/2023.

The issue is fairly junky, in our opinion, but is unrated and thus assumed to be junk.

The pricing term sheet can be found here.

Shares will trade on the OTC Grey Market starting tomorrow (Wednesday) under the temporary ticker of BHRPP.

GasLog Partners Preferred Purchase

We had forgotten to mention last Friday that we had purchased 400 shares of the new GasLog Partners 8.50% fix-to-floating rate preferred which is now trading on the OTC Grey Market under the temporary ticker of GLOUF.

We paid $24.50 for the shares and we see the shares are trading at $24.25 right now.  Even with this bargain price it is unlikely that we will purchase more.

Further info for the issue can be accessed here.

Today we will add 200 shares to the High Yield portfolio which can be seen here.  We already hold the 8.20% fixed-to-floating issue (GLOP-B) in this portfolio so we are making the new purchase small.

All issues from GasLog Partners (GLOP) are junk rated (they have no rating), but we consider them pretty good junk because of their strong balance sheet and large backlog of contract revenue.

Also we note that eTrade charged just the regular commission on this purchase—no $50 foreign stock charge.

Lodging REIT to Sell Preferred Issue

Braemar Hotels and Resorts (NYSE:BHR) will be selling  a new perpetual preferred issue.

It has been quite some time since we have had an issue come to market from the REIT lodging sector so it will be interesting to see what the issue is priced at coupon wise.

Proceeds will be used for the purchase of a property in the Lake Tahoe area.

All the terms of the issue will be the normal terms with an optional redemption in 5 years, cumulative dividend, NON qualified for preferential tax treatment etc.

The company currently has 1 convertible preferred outstanding (BHR-B) with a coupon of 5.5% which is trading at $17.80/share right now.

The preliminary information can be read here.

The new issue will be unrated–thus junk.

CHS Begins Shakeup

Agriculutural coop CHS (Cenex Harvest States) has begun a shakeup of some magnitude after the reports of a $190 million fraud was reported on 10/26/2018 which we wrote about it here.

This is of interest to many income investors as CHS has 5 series of preferred stock outstanding which have been favorites over the years for conservative investors.  While unrated, the 5 issues are typically viewed as investment grade type issues–with a 4 year $190 million dollar fraud one may have to reevaluate this point of view.

The new local news article can be found here.

Investors Dumping Stocks Today

We are closely watching the equity markets as they tumble and while there isn’t a singular smoking gun in the sell off, there certainly are lots of individual items weighing heavily on investors.   It would be a good time to head down 800 Dow points and wash out the weak hands.

Energy prices have tumbled pretty hard the last number of weeks with crude being down $15/barrel over the course of the last 5 weeks and while some like to make the case that “it is like a tax cut for energy users” this has always been a baloney saying and it is this time as well–most certainly if supply is too high we are going to have cutbacks in drilling and exploration which will serve to hurt the industry in such a way as to far outweigh the so called ‘tax cut’ benefits.

We have wild fires in California that this time are meaningfully destructive–and it is speculated that the utilities may be to blame for some fires and while it may or may not be the cases the preferred shares of these companies are getting absolutely hammered lower.  Pacific Gas and Electric (NYSE:PCG) has a number of preferred shares outstanding and they are all down $2-$3/share and mostly trading in the high teens.

Insurance company Maiden Holdings (NASDAQ:MHLD) announced earnings last Friday that were horrendous–we started to go through them, but gave up as there are all kinds of creative accounting items seemingly going on with their numbers and with their sister company AmTrust Financial (NYSE:AFSI).  MHLD common shares are down to $2.51 down from a 52 week high of over $9–the preferred series are all down in the $13-16 area.  This mess is not California fire related–but is management caused I believe.

Southern California Edison (NTSE:SCE) has preferred shares now trading in the $19-$20 area with current yields around 5-5.5%–way too low to be worthy of even a speculation.

Goldman Sachs (NYSE:GS) is off a bunch today as it appears that Malaysia is demanding refunds on a crooked deal back in 2012-2013–this doesn’t surprise us–for no particular reason we have never had a high level of trust with Goldman.

Even with all the equity market issues interest rates are only moving a tiny bit lower–again, and for about the 20th time this year interest rates and stock prices are moving in a fashion that is confusing.  The 10 year treasury is at 3.19% which is barely perceptible movement.  You would think that interest rates would be much lower–BUT maybe the marketplace is getting tired of funding huge deficits in the U.S.

Conservative investors and those without adequate retirement funding should stay away from the preferred issues with huge drops today–it would be hard to make a case that there are ‘bargains’, because there are plenty of opportunities ahead to see the issues mentioned above move much lower yet.

Most preferred stocks are holding up well today and we would suggest that investors are best sitting back and watching further unfolding of the sick equity market.  Will it bleed over to the preferreds and baby bonds?

To see the decimation in many preferred shares you can observe the damage here.


Monday Morning Kickoff

Stocks jumped sharply last week, although they ended the week on a soft note.  The DJIA traded in a range of 25,261 to 26,277, before closing at 25,989.  Given that we had the mid term elections and a change in the house power in Washington one would expect a wide ranging DJIA.

The 10 year treasury traded in a relatively tight range of 3.18% to 3.23% before closing the week at 3.19%.  This tight range doesn’t seem to make sense given the large gain in equities for the week, but we have had a disconnect in the market place many times in the last year–let’s face it that there are a tremendous number of cross currents occurring in the global economic scenario.

Last week we had the Job Openings and Labor Turnover (JOLTS) released on Tuesday and it can in with 7 million job openings, which is fairly strong, but is lower than the 7.3 million released last month.  Wednesday we had consumer credit released–and we consider this one quite telling for economic forecasting–and it was softer than expected.  We look at this number as a decent indicator of economic growth ahead (or lack thereof)–it is a 2 edged sword.  1st it is important for economic growth that the consumer spend like crazy since they drive the economy, but that credit spending will have a day or reckoning in the future when the economy softens.  Thursday we had the FOMC announce no change in interest rates–as expected.  I believe that the December rate hike in the Fed Funds rate is absolutely going to happen.  After that hike I believe that a soft housing market and now falling energy prices will put a brake on further hikes–some may happen in 2019, but there is a possibility we will see maybe only 1 hike.  Friday brought a ‘hot’ producer price index–up .6%.  A large chunk of this increase was because of the rising price of oil–and with the price of oil falling like a rock in the last couple of weeks it is likely that this is a ‘one off’.

For the coming week we have Veterans Day on Monday so there will be no economic releases, but on Wednesday we have biggest economic release of the week with the Consumer Price Index (CPI) being released.  The forecast is for a rise of .1%–of course we shall believe it when it is released as we don’t have faith in any forecast (and only partial faith in the actual releases).  A hot number reinforces the December rate increase I expect–in fact only a black swan of sorts will derail the rate increase, but a hot CPI would at least provides some cover for the Fed.

The Fed balance sheet grew by $2 billion last week so no added pressure on interest rates from bond run offs.

We had a couple new income issues announced last week.  LNG ship owner GasLog Partners (NASDAQ:GLOP) sold a new fixed to floating rate preferred with a 8.50% initial coupon.  This issue is trading right at $24.49 on the OTC Grey market under the ticker GLOUF.  The pricing term sheet can be found here.   Also BDC WhiteHorse Finance (NASDAQ:WHF)  announced a new baby bond with a maturity date in 2025 and a coupon of 6.50%.  The permanent ticker WHFBZ when it begins to trade in a week or so.   The pricing term sheet can be seen here.

The average price of a $25 preferred stock moved 3 cents higher last week with 241 issues trading at $25 or under which is 9 less issues than the week before.




WhiteHorse Finance Prices Baby Bonds

BDC WhiteHorse Finance (NASDAQ:WHF) has priced their new issue of baby bonds with a coupon of 6.50%. The issue will have a maturity date in 2025. The issue will have an optional redemption beginning in 2021.

The company will issue 1.32 million shares with another 198,000 available for overallotment.

WHFBZ will be the ticker symbol of the new issue–there will be no OTC grey market trading.  Investors will have to watch their broker website for the start of trading which is likely by the 15th of the month.

Tonight the SEC filing has not been posted, but the company announcement on the pricing can be seen here.

Investors will remember that the previous baby bond issue of WhiteHorse had a coupon of 6.5%–this issue was called this past August.  While the company did not reduce their interest rate by calling the old issue and selling a new issue they did move the maturity out 5 years as the previous issue matured in 2020.

UPDATE–here is the Pricing Term Sheet

BDC WhiteHorse Finance to Sell Baby Bonds

WhiteHorse Finance (NASDAQ:WHF) is selling a new issue of baby bonds with a maturity date in 2025.

Details of the notes which will trade under the ticker WHFBZ have note been released, but preliminary paperwork can be found here.

The company previously had a 6.50% baby bond outstanding, but they early called the issue in August.

New Gladstone Baby Bonds Trading

Our reader ‘wedgehead’ has informed us that the new Gladstone Capital (NASDAQ:GLAD) baby bonds are now trading under the ticker GLADD.

We have checked Fido and eTrade and find it available right now in the $25.15 to $25.25 area—obviously pretty decent demand for a 6.125% coupon.

These baby bonds mature in 2023—and unlike their ‘term’ preferred pay quarterly interest payments instead of monthly.

The pricing term sheet can be found here.

I am buying a modest position for a long term hold in personal accounts.

Website Down-Update

Our apologies for the site being down earlier today. I have no idea what occurred, but hopefully will hear back from our tech folks sometime today. As we have mentioned we do not do the tech work anymore on our website–we did in the early days, but feel pretty incompetent to do it now.

Our tech people told us the hosting companies database was down and all of the sites they host were off line this a.m. So we were only 1 of many. I think that is the first time since the site came online 11 months ago.

Some Recent Earnings Reports of Interest

Numerous earnings reports have been released lately by companies of interest to preferred stock/baby bond buyers.  We post these because we know there are many folks interested in these companies.  Click on the company to go to their report.

mREIT Two Harbors Investment released earnings

JMP Group Earnings

Ladenburg Thalmann reported earnings

B Riley earnings release

These 4 companies have many issues of baby bonds and preferred stock outstanding–some of which are ‘high yield’–pretty junky.

This is not a recommendation to buy anything–but simply a ‘heads-up’.