Asset Manager Affiliated Managers Group to Sell Baby Bonds

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 to Sell Preferred Issue

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.

Triton International Preferred Now Trading on NYSE

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.

10 Year Treasury Moves into the 2.50’s%

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.

OFS Credit Finally Prices Term Preferred Issue–UPDATED

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.

Giant Insurer American International Group’s New Preferred Now Trading on the Big Board

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.

American Financial Group Baby Bonds Start Trading

The new Subordinated Debentures issued last week by insurance company American Financial Group (NYSE:AFG) have now begun to trade.

The issue is trading on the NYSE under the ticker AFGB. The issue, which carries a decent coupon of 5.875%, traded in a very narrow range of $25 to $25.08 during initial trading Tuesday.

The company sold 5 million shares (bonds) which will have a early call period starting on 3/30/2024 and have a maturity date of 3/30/2059.

The shares are rated Baa2 by Moodys and BBB- by Standard and Poors.

Further details can be found here.

The company has 2 additional baby bonds outstanding which can be seen here.

Spam Reporting

We have had a few items (or people) slip through the automated spam blocking we use so we have set up another method to report these few instances when they occur.

In the right hand column there is a link called “Report Spam”. Clicking this link will take you to a page of instructions for reporting via email to a new email address we have set up for just this use.

While we would prefer to have a “form” to fill out and with a click we have the info using an email is a quick and dirty (and cheap) way to get the job done. We are due to meet with Chad (our tech guy) in the next week or two and we have added this to our list.

Just so everyone knows we currently have an automated spam filter running and to this we can manually add people, URL’s or even IPs to be filtered out. I can guarantee that a few items will still slip through, but with your help we will get those out quickly.

As I reviewed the filters yesterday I noticed over the last couple of months a couple posts from regular posters ended up in the filter–don’t know why but it was just a couple.

We note that the biggest reason we have to manually approve posts is because some, on occassion, will use more than 5 links in the comment space. This quarantines the post until we approve it. It is ok to use more links, but it will take a bit before it gets posted.

Newer Callon Petroleum Investor Presentation

We note that Callon Petroleum (NASDAQ:CPE) has a newer earnings presentation which they released on 2/27/2019.

Callon has a $50/share 10% perpetual preferred outstanding which many investors on this site likely own. These shares have been darned good performers as long as the price of crude oil stays above $50/barrel.

We do note that the preferred is trading above $52/share and are now redeemable (1st call date started 5/30/2018).

Issue details can be seen here.

The earnings presentation can be seen here.

NextEra Energy Baby Bonds Trading

The nicely investment grade baby bonds issued by giant utility company NextEra Energy (NYSE:NEE) are now trading under the ticker symbol NEE-N.

The shares traded on Monday in a range of $25.25 to $25.35. These bonds carry a coupon of 5.65% and are rated BBB by Standard and Poors, Baa2 by Moodys and BBB by Fitch.

For the conservative investor this would seem to be a decent issue to hold on a long term basis.

FED Meeting Today

When no interest rate hike is expected the FED meetings always seem to be lost in the news of the day.

Today the FED starts their meeting, which will result tomorrow with no FED Funds rate hike. It would be near impossible to raise rates at this time as there is almost zero expectations for a hike–and while the FED would have you believe they don’t pay much attention to the markets I think they are paying plenty of attention to the markets.

While the meeting will not result in any rate hike Chair Powell will have a news conference tomorrow afternoon and that can always result in some fireworks in the marketplace.

Probably the key items markets will be watching for is further news relative to the runoff of the balance sheet. Right now the balance sheet stands at $3.97 trillion dollars. The question would be – what level does the FED plan to take the balance sheet to eventually?

Brighthouse Financial Prices Preferred Issue

Brighthouse Financial (NYSE:BHF) has priced their new issue of preferred with a coupon of 6.60%

The issue is non-cumulative, but dividends are qualified dividends for preferential tax treatment.

The issue will have an early redemption period starting 3/25/2024. On and after this date the issuer can call the shares for redemption at a price of $25 plus accrued dividends.

This issue has been rated low investment grade by Standard and Poors at a BBB- rating. Moodys has the rating at Ba2 and Fitch at BB+, both of which are non investment grade.

The new issue will trade under the permanent ticker of BHFAP. In the meantime the issue will begin trading on the OTC Grey market under the temporary ticker of BHFLL.

The pricing term sheet can be found here.

The preliminary prospectus can be found here.

BHF has a baby bond outstanding currently which carries a coupon of 6.25% which was issued last September and can be seen here.

Brighthouse Financial to Sell Preferred Issue

Insurer Brighthouse Financial (NYSE:BHF) is selling a new non cumulative preferred stock issue.

BHF was formerly part of Met Life which was spun off in August 2017. The company has $206 billion in assets.

The issue will have typical terms for an insurer-non-cumulative, but qualified for preferential tax treatment.

There will be an early redemption period starting in 2024.

At this point in time no rating has been issued, but Moodys has a shelf registration for preferreds from 9/2018 at a Ba2–not investment grade.

Preliminary details of the issue are here.

Monday Morning Kickoff

Here we go on another week, with the 10 year treasury ending last week at around the 2.60% mark. It looks to me like this yield is going to move into the 2.50%’s this week if there is any whiff of economic weakness or movement lower in equities.

The average preferred stock crept higher by a nickel or so last week. It looks like while preferreds are creeping higher they are less inclined to move sharply higher irrespective of the movement in the 10 year treasury. There are 195 preferred issues trading at $25/share or less now as compared to 194 issues last week.

The FED balance sheet grew by $2 billion last week, which is the 1st time in about 5 weeks that the balance sheet grew. For the week ending 2/16 it also had grown by $2 billion.

Last week we had 4 new income issues announced.

Container leasing company Triton International (NYSE:TRTN) priced a new 8.50% perpetual preferred. The issue is trading on the OTC Grey market under ticker TPNRF and last traded around $25/share. The issue is unrated.

Insurer American Financial Group (NYSE:AFG) sold a new baby bond with a coupon of 5.875%. This issue is investment grade. The shares (bonds) will trade under ticker AFGB. The issue is “queued” up in eTrade but no trading has occurred.

Brookfield Property Partners (NASDAQ:BPY) has priced a new issue of perpetual preferred units with a coupon of 6.50%. The units are rated a notch under investment grade. The shares are trading under OTC Grey market ticker BRKPF and last traded at $24.80/share.

Lastly, very late in the week, Merchants Bancorp (NASDAQ:MBIN) , a smaller Indiana banking company, announced they were selling a perpetual issue of fixed-to-floating rate preferreds. Pricing of the shares has not yet been announced.

CEF Preferred Stock Updates

We have updated most of the leverage ratios for the preferred stock issues of closed end funds. There are some that have not released recent data on their leverage.

As most of you are aware preferred stock issued by closed end funds must maintain at least a asset coverage ratio of 200%. This is extremely important to some of us conservative investors.

Virtually all preferred stock issues outstanding are the named Gabelli issues or are from Ellsworth or Bancroft, both of which are Gabelli managed funds. Most Gabelli issues are extremely highly rated (although there are a couple issues which are unrated).

The coverage ratios for all CEF preferred issues fell in the period ending 12/31/2018 as would be expected given the equity selloff in December, but most remain in very good condition.

NOTE that I personally am not a fan of most of the closed end fund issues (common shares)–but you don’t have to be a fan of the CEF to buy their preferred shares.

The most conservative of income investors should give plenty of consideration to owning some of these issues. We should disclose we own a number of these issues and while the coupons and/or current yields are fairly modest the peace of mind is always most welcome. Most of the Gabelli issues are superior in quality to any utility issue that is out there.

Since most of these issues are perpetual preferreds the shares price may move around a fair amount as interest rates rise and fall the safety of the dividend is unmatched by other preferred issues.

You can peruse the list here.

We prefer to own preferreds shares from the closed end funds that own level 1 securities (level 1 means that the price of the holding–i.e. common stocks is observable and known everyday as they trade on security exchanges).

The following preferreds may be just fine, but their assets are level 3 in many cases and thus the asset coverage ratios are in the “just trust me” category as they are not traded on exchanges where the prices can be observed.

  • Eagle Point Credit Company
  • Oxford Lane Capital
  • Priority Income Fund
  • RiverNorth Marketplace

We note that Priority Income Fund and RiverNorth Marketplace are not publicly traded CEF’s. This means they own level 3 assets and 1 can’t even observe the issuers share price as this is no regularly published share price.

Disclosure–we own the following issues-

  • Gabelli Utility Trust (NYSE:GUT-C)
  • Ellsworth Growth and Income (AMEX:EGF:A)
  • AllianzGI Convertible (NYSE:NCV-A)
  • AllianzGI Convertible II (NYSE:NCZ-A)
  • Kayne Anderson MLP (NYSE:KYN-F)
  • Tricontinental Fund (NYSE:TY-P)