It was amazing to note the massive volumes of preferred stocks being traded last week. Obviously a lot of re-balancing going on with funds.
We have a page where we watch volume of preferred issues and we highlight those with 3X the normal average volume Normally there are 5-10 issues each day with more than 3X normal average volume. On Friday there were 124 issues with over 3x normal volume.
We witnessed huge re-balancing going on back in December and prices moved sharply lower—this time values moved higher.
The volume page can be seen here until Monday morning when volumes will reset.
It has been another amazing month for income investors (or flippers or dividend capture folks). We spend so much time working on this website that we can’t participate like we would like–oh well, I have fun just the same.
Preferreds and baby bonds just kind of keep creeping up–not always 25 cent jumps, but a few cents a day and then it is real money after a month.
The lousy European economy (and accompanying low interest rates) and what appears to be a softening U.S. economy have folks looking for a better yield with a decent amount of safety–partially explaining why all these new issues coming out mostly trade strongly–even though the coupons in many instances are pretty damned meager.
We had started the month of March off with 6 positions that we planned to hold only until today, but 5 of the 6 were sold prior to today and we locked down 1-2% gains on each of those issues. We don’t advocate or concentrate on ‘trading’ but the markets have brought all of us an opportunity to knock down some quick gains so why not take advantage of a situation that presents itself on a platter. It is likely that this ‘easy money’ will go away soon.
For some newer investors we want to outline-quickly and briefly, one method that we use to lock down some short term gains, while also fulfilling our ‘sock drawer’ (Gridbirds term I believe for a long term safe hold) needs.
NextEra Energy–the largest utility in the world recently sold a $25/share subordinated debenture issue with a coupon of 5.65%–maturity date in 2079 (data on the issue is here). Given that the company had other similar issues with much lower coupons (i.e. 5.25%) trading in the $25.40 area before the announced new issue the new issue seemed like a bargain. Given our best guess it seemed like the issue would have upside during the 1st month–thus we bought 200% of our normal position at $25.15. Today we sold 1/2 half the position for $25.50 and committed the balance to the ‘sock drawer’. This is how we ‘trade around’ a base position. Given the Goldilocks market we have been in this was an easy one–sometimes they don’t work so well–but this was a low risk move.
On another note over 100 issues (preferreds and baby bonds) went ex-dividend yesterday and today—maybe there is opportunity for those that have time to peruse these issues to see if some fell too much and are ‘on sale’.
Our ex-dividend calendar has been a God send in the regard–it allows some quick research on these things all in one place–we update it daily (or multiple times a day) so data is pretty fresh.
The ex-dividend calendar page is here.
The link on the above page will open a spreadsheet which you can have right in your own google account if you desire. If one wants their own copy that is fine–but we have to manually update this data so if you take a copy you will be responsible for your own updates.
IberiaBank (NASDAQ:IBKC) has priced their new fixed-to-floating rate preferred with an initial coupon of 6.10%.
The coupon will be fixed until 5/1/2024 after which it will float at a rate of 3 month Libor plus a spread of 3.859%.
The issue will pay semi-annual dividends until 5/1/2024 and once the issue reaches the floating rate period will pay dividends quarterly—the 1st dividend on the issue won’t be paid until 11/1/2019.
Dividends will be non-cumulative, but they should be qualified for preferential tax treatment.
The issue is rated BB by Standard and Poors and is unrated by the other ratings agencies.
The issue will trade immediately on the OTC Grey market under the temporary ticker symbol of IBBRL.
The permanent ticker once the issue moves onto NASDAQ will be IBKCN, but of course this can change if the exchange rejects the suggested ticker.
The pricing term sheet can be read here.
Louisiana banking company IberiaBank (NASDAQ:IBKC) will sell a new issue of fixed-to-floating rate preferred stock.
Pricing and size of offering have not yet been released, but we know it will be non cumulative (since it is a bank) and the dividends will be qualified for preferential tax treatment.
We also know this issue will pay dividends just 2 times per year. While this is unusual for a $25/share preferred it is not unprecedented. IBKC had previously sold a preferred issue with semi-annual dividends. That issue can be seen here.
We note that dividends on the new issue will go to quarterly payments once it enters the floating rate stage. This is also true of the older issue noted above.
The preliminary prospectus on the new issue can be seen here.
The issue will not be rated as far as we can tell.
Oxford Square Capital Corp (NASDAQ:OXSQ) has priced their new issue with a 6.25% coupon. The company has sold 1.7 million shares (bonds) with 255,000 available for over allotment
The notes will mature 4/30/2026, but the company will have a early call available to them starting 4/30/2022.
The issue is expected to trade under the permanent ticker of OXSQZ when it begins to trade on the NASDAQ–there will not be any OTC Grey market trading.
This issue is rated A- by Egan-Jones (for what it is worth).
While the SEC pricing document can be read here.
The company has 1 other baby bond outstanding with a coupon of 6.50% coupon which is trading in the $25.50 area. This issue can be seen here.
Reader xerty noted the pricing this morning at 3 am (our time CST)–thats pretty early.
Business Development Company (BDC) Oxford Square (NASDAQ:OXSQ) has announced they will sell a new issue of baby bonds.
The new notes will have a maturity in 2026 and will have an early call available to the company starting in 2022.
Final details have not been released, but the company expects to list the bonds under permanent ticker of OXSQZ (although these sometimes change).
The preliminary prospectus can be seen here.
With weak growth in Europe and most of the globe and economic numbers that are weakening in the U.S. interest rates continue to fall.
The 10 year has traded down to 2.36% today and is currently trading around 2.37%. It was only 10 days ago that we wrote that it looked like rates would be falling into the 2.50’s%—and the ‘smart people’ on the financial news said rates would not be falling much if any further and likely would head higher. Only goes to show that no one knows with any certainty what rates will do.
These falling interest rates have made all of us income investors look like genius’s. Preferreds and baby bonds keep creeping higher–a few pennies here and a few pennies there. BUT we all know that these interest rates likely means that any company that is at least mid-quality are preparing prospectuses to head into a new ‘refinancing’ period–we will need rates at these low levels for a month or two before we see this occur, but you can be certain it will occur.
We don’t see anything unusual in the income markets today. The usual suspects are moving around – the junky CBL preferreds are trading down (of course) on high volume. We see the Arlington Asset Investment 8.25% new preferred trading near a new low at $23.08–think someone screwed up on pricing this one-you can see it here. Also the new term preferred from Priority Income Fund is not getting much traction and is trading in the $24.70 area–it is here.
The OTC Grey market ticker of NGLPP has been assigned.
Midstream MLP NGL Energy Partners (NYSE:NGL) has priced a new fixed-to-floating rate preferred units with an in initial coupon of 9.625%.
The issue will pay the fixed coupon rate until 4/15/2024 after which it will float at a rate of 3 month Libor plus a spread of 7.384%.
The pricing term sheet can be seen here.
Being a MLP this issue will generate a K-1 at tax time and the distributions will not be qualified for preferential tax treatment.
The issue is unrated.
This issue will trade under the permanent ticker of NGL-C when it begins to trade on the NYSE, but in the meantime will trade on the OTC Grey market although the ticker has not been announced.
Master limited partnership, NGL Energy (NYSE:NGL) will be selling an issue of fixed-to-floating rate preferred units.
The units will have an early redemption date starting in 4/2024 which also serves as the date the issue will begin the have a floating rate coupon.
The preliminary prospectus can be found here.
NGL Energy has another high yield fixed-to-floating rate preferred unit series outstanding and that is the 9% series B which has a spread of 7.213% which is added to 3 month Libor starting in 7/2022. You can see it here.
This issue will generate a K-1 for owners. Additionally the issue will be unrated.
Dynagas LNG Partners (NASDAQ:DLNG) reported earnings late last week for the quarter and year ending 12/31/2018 and I had a chance to briefly look over the report.
Dynagas LNG is an owner of LNG ships for the transportation of liquified natural gas. The company runs a small fleet relative to competing ship owners such as GasLog Partners. DLNG runs a fleet of just 6 ships as compared to the 14 ships owned by GasLog Partners.
Dynagas LNG showed falling revenue in 2018 as compared to 2017 and anytime revenue is falling, these ship owners, which typically carry pretty massive debt, are going to run into trouble. DLNG started 2018 with a common quarterly distribution of 42 1/4 cents/share which was lowered to 25 cents/share and finally slashed to 6 1/4 cents/share–with the severely reduced distribution the company was able to cover the total distributions (common and preferred).
I am happy to observe that if the company can maintain present revenue levels coupled with the reduced distribution they will readily cover the dividends for 2019. Of course this still leaves this company with a large debt load – and they will pay a heavy price for having over $700 million in debt when the company has an annual run rate of revenue of just $130 million. The company has about $250 million in debt coming due this year.
It is noted that on 12/31/2018 the company had over $100 million in cash on the balance sheet and with the greatly reduced distribution the company will likely be ok in 2019.
DLNG has 2 preferred stock issues outstanding which have taken a pounding in the last couple of months. DLNG-A which carries a 9% coupon is trading at about $19.63 with a current yield of 11.46%. DLNG-B, which is a floating rate issue carrying a current 8.75% coupon is trading with a current yield of 11.56%
Investors with a high risk tolerance can look at the above – personally I will pass on issues with this level of risk.
The company press release on earnings is here for those that have not seen it.
The OTC Grey market ticker is changed to DUEKL.
Giant utility Duke Energy (NYSE:DUK) has priced a new offering of preferred stock with a fixed coupon rate of 5.75%. The early redemption period start in 6/2024.
The company is offering a massive 40 million shares (a cool billion dollars worth).
The OTC Grey market ticker is DUEK–and it is trading now on that marketplace–we see 104,000 traded today but at an unspecified price.
The pricing term sheet is here.
The preliminary prospectus is here.
As we expected the issue is rated investment grade – Baa3 by Moodys and BBB by S&P. Fitch assigns it a BBB-.
It is likely this will be a popular issue–and we are considering a small amount, but we need to consider whether the baby bonds at 5.625% (DUKB) would be a better buy being slightly higher rated and trading at $25.15 right now.
In a new twist for Duke Energy (NYSE:DUK), the giant utility, will sell a new perpetual preferred issue.
In recent time Duke has issued a couple of baby bonds, but they do not have any perpetual preferreds outstanding.
In September, 2018 the company issued a baby bond with a coupon of 5.625% (ticker DUKB) which has traded above $25 recently. The issue which can be seen here.
Previously the company sold a baby bond issue with a coupon of 5.125% back in 1/2013. This issue, which can be seen here, trades in the $24 to $25 range.
The new perpetual preferred stock should be rated investment grade. Moodys has a rating of Baa3 and S&P will likely rate it BBB or BBB-, although they have not yet published their rating.
Ticker symbols have not yet been published.
The preliminary prospectus can be read here.
If this issue prices in the 5.75% to 5.875% range it will likely be a popular preferred stock issue.
BDC Monroe Capital Corp (NASDAQ:MRCC) has reopened a previously sold issue of baby bonds, which have a maturity date in 2023.
The reopening is the 5.75% notes.
The ticker on this issue is MRCCL and it is now trading around $24.87 although it could dip down with the new shares being offered. The IPO offered 2.4 million shares.
This issue has a maturity date in 2023.
Data on the issue can be found here.
Last week brought a plunge in the 10 year treasury yield as the yield started the week at 2.60% before plunging all the way down to 2.42% based primarily on further weakness in the European economy.
The average preferred stock rose again by 8 cents as the slow creep higher continues. There are now 192 $25 preferred stocks trading at $25 or below which is 3 issues fewer than the week before.
The FED balance sheet fell by $9 billion last week which continues the runoff. The smart folks seem to think we will see the runoff continue until the fall of this year–I guess we shall how the economy performs as the months go by.
Last week we had 3 new income issues announced.
Insurer Brighthouse Financial (NASDAQ:BHF) announced a new fixed rate perpetual preferred stock with a coupon of 6.60%. The issue is now trading on the OTC Grey market under ticker BHFLL and last traded at $25.25. This issue is investment grade (just barely) per S&P. Moodys and Fitch have it below investment grade.
Asset manager Affiliated Managers Group (NYSE:AMG) priced an issue of baby bonds with a maturity date in 2059 and a fixed rate coupon of 5.875%. The issue is investment grade. We do not see this issue trading as of yet.
Lastly American Finance Trust (NASDAQ:AFIN), a REIT, priced a new issue of fixed rate perpetual preferred stock with an coupon of 7.50%. The issue is trading on the OTC Grey market under ticker AFINP and last traded at $24.46–obviously the markets don’t think much of this issue. This issue is not rated.
In addition to the newly announced income issues, OFS Credit (NASDAQ:OCCI) announced pricing for their new Term Preferred issuance. The issue carries a coupon of 6.875% and pays monthly dividends. The issue is trading on the OTC Grey market under ticker OCCIP and last traded at $24.80.
Also Merchants Bancorp (NASDAQ:MBIN) priced their previously announced preferred issue with a coupon of 7%. The issue is set to trade on the OTC Grey market under the ticker MRBPP.
RiverNorth Marketplace Lending, which has a term preferred stock outstanding, has decided to take their closed end interval fund to the public markets
The closed end fund, which invests in loans made in the peer-to-peer marketplace, has been quoted (but not traded) on a daily basis up to now–and has traded on a ‘direct purchase’ basis.
The fund has had a minimum investment of $1,000,000 required (which is a aggregate amount of client accounts at the advisor level).
The company has around $232 million in assets–$190 million on a “net asset” basis (on 2/28/2019) as they have a little of $40 million of the term preferred outstanding which they use as leverage.
The term preferred issue is an ‘ok’ issue, but we have not owned it as it holds level 2 and level 3 assets–and our preference is for level 1 (i.e. assets that trade on exchanges) CEF preferred issues.
Of course the fund must hold a 200% asset coverage ratio, which give some safety to any CEF preferred issue.
The term preferred issue can be seen here.
The announcement on the stock exchange listing can be seen here.
Earlier this week we had FED chair Powell speak and we expected that to be the highlight of the interest rate week. You can be certain that anytime one thinks they know what markets will bring, they will prove you wrong. We all knew Europe has had a weak economy–and this continues and I believe will continue for a very, very long time.
The plunge in the 10 year treasury (to 2.42% from 2.60%), since Wednesday, is kind of ominous–but does it mean that there is a recession ahead? Honestly no one has an answer to this–everyone thinks they have an answer–but no one really knows.
With the interest rate drop we can be certain that some new issues will be sold to ‘refi’ old higher coupon issues. We have been through this game before so we all have a hint as to how it could play out for preferred stocks and baby bonds. Maybe the good part right now is that many of the issues we hold are not redeemable until 2021 or later.
We have noted that preferred stocks have crept higher week after week and it might be a good time to ‘harvest’ some gains if you have gained a years worth of dividends in capital gains–of course everyone is different, but we certainly are scrutinizing our holdings for potential sells.
Of course any sells generate cash which needs to be redeployed–but the good part this time is that the money market we hold is paying 2.38% as of this morning (Gabelli US Treasury MKT AAA–GABXX). Certainly this could change in the future, but at least for now it is a hell of a lot better than ZERO.
The other thing we will be doing if we see economic weakness is scrutinizing many of our ‘base holdings’. We hold all kinds of Gladstone term preferreds and Gladstone Investment and Gladstone Capital should be watched for portfolio weakness since their holdings are Level 3 (value assigned by management since holdings do not trade on an exchange and value are not directly observable). We do not plan action here–but every time rates plunge like they have my focus gets a little sharper.
The OTC Grey market ticker of MRBPP has been announced for this new issue.
Indiana banking company Merchants Bancorp (NASDAQ:MBIN) has finally priced the new perpetual preferred issue that they announced last week.
The issue will be fixed-to-floating rate with an initial coupon of 7%. The issue will move to floating rate on 4/1/2024 and will trade with a coupon which will reset quarterly at 3 month Libor plus a spread of 4.605%.
The company is offering 2 million shares plus 300,000 for over allotments.
The issue is non cumulative, since it is a banking company. Dividends should be qualified for tax treatment.
The issue is rated BBB+ by Egan-Jones (for what it is worth) and unrated by the major rating agencies.
The final pricing term sheet can be seen here.
The company also previously released a slide show which can be seen here.
The issue should trade with a permanent ticker of MBINP when it finally trades on the NASDAQ–no OTC ticker is yet announced.
Thanks to Nomad for seeing this one finally priced.
THE OTC GREY MARKET TICKER HAS BEEN ASSIGNED AS AFINP–SAME AS THE PERMANENT TICKER.
REIT American Finance Trust (NASDAQ:AFIN) has priced a new issue of perpetual preferred stock with a fixed rate coupon of 7.50%.
The issue will have an early redemption period starting on 3/26/2024. There will be 1.2 million shares sold with another 180,000 available for over allotment.
The pricing term sheet can be read here.
The anticipated permanent ticker is AFINP. No OTC Grey market ticker has been announced, but we would anticipate one before the end of the today.
Asset manager Affiliated Managers Group (NYSE:AMG) has priced their new issue of baby bonds.
The issue will have a maturity date of 3/30/2059 and will have an early redemption period starting 3/30/2024.
The coupon will be 5.875% and the company will sell 11.2 million shares.
The issue is investment grade rated at BBB by S&P and Baa1 by Moodys.
The interest payments are not qualified payments for preferential tax treatment.
The pricing term sheet can be read here.
There is no OTC early trading in this issue.
Affiliated Managers Group (NYSE:AMG) will be selling a new Jr Subordinated note with a maturity date out in 2059.
AMG previously had a number of baby bonds outstanding, but all have been called in recent years. This new issue will be their only baby bond outstanding.
Affiliated is a fairly large asset manager with over $700 billion in assets under management.
The issue doesn’t have a current rating available, but we believe based on ratings from the past it will rate BBB+ by S&P and Baa1 by Moodys.
The issue DOES have a deferment clause in the prospectus. The company can defer interest payments for up to 20 consecutive quarters (5 years) 1 or more times.
The preliminary prospectus can be seen here.
American Finance Trust (NASDAQ:AFIN) has announced a new issue of preferred stock is being sold. American Finance Trust is a newer REIT and we are not familiar at all with this issuer.
Only a few details are known at this time.
The issue is to be 4 million shares with an over allotment of 600,000 shares.
The shares will be cumulative and will likely NOT be qualified for preferential tax treatment.
The preliminary prospectus can be read here.
The 8.50% perpetual preferred issue from Triton International (NYSE:TRTN) has moved from the OTC Grey market to the NYSE.
This junky issue has traded strongly in a rush for the coupon. The issue closed at $25.68 on Wednesday. This seems like it has come too far, too fast–but one can never tell where how high investors will push the price.
Shares are trading under the ticker TRTN-A.
Further detail on the issue can be found here.
As we expected interest rates are pulling back a bit–I think based upon the expectation of a neutral press conference with FED Chair Jay Powell this afternoon, as well as the pull back the last 2 days in the equity markets.
While generally this little movement (10 year treasury at 2.59%) is not really meaningful it does keep preferred stocks and baby bonds in the mode to gain a few cents here and there.
Also with the drift lower in interest rates we see redemption of preferred stocks by the quality companies–and if we get a sharp drop off in rates we likely would see a rush in redemptions and it always hurts when your favorite income producer gets called away.
It has been announced that the issue will trade with the symbol of OCCIP on the OTC Grey market. This is the same symbol that the permanent ticker is supposed to be. Never had that before but it is what FINRA has announced.
The new pricing term sheet has also been posted–here.
CLO (collateralized loan obligation) owner OFS Credit (NASDAQ:OCCI) has priced their new issue of term preferred stock.
The company will sell 800,000 shares with a coupon of 6.875%. There are also 120,000 shares available for over allotments. The shares will have a mandatory redemption date on 3/31/2024. Early optional redemption will be available to the company starting 3/31/2021.
The company will pay monthly dividends on the shares.
The shares will trade on the NASDAQ under ticker OCCIP. A OTC Grey market ticker has not yet been announced–although we would expect one to be announced today.
The company press release for the pricing of this issue can be seen here.
The preliminary prospectus can be seen here.
Of course this is an unrated issue.
OFS Credit is organized as a closed end fund and thus must follow asset coverage ratios on senior securities of 200% or more.
The new non cumulative 5.85% perpetual preferred from American International Group (NYSE:AIG) is now trading on the NYSE.
The issue which is a low investment grade issue is trading under the ticker AIG-A and has traded in a range of $24.95 to $25.38 before settling in the $25.19 area on Tuesday.
Further detail on this new issue can be seen here.
This is a giant issue of 20 million shares which have been rated BBB- by Standard and Poors and Baa3 by Moodys and BBB- by Fitch.