New Priority Income Fund Term Preferred Trading

Closed end fund Priority Income Fund (non traded fund) has sold a new offering of term preferred. These shares were part of an “at the market” offering by the company which was unlisted until they sold at least $10 million worth of shares.

The issue has the highest coupon of all the issues of term preferreds they have outstanding–with this issue they have 4 issues outstanding.

They have sold just over 1 million shares of this issue, but being part of an ongoing “at the market” offering they will be selling more shares.

The new issue is trading under the ticker of PRIF-D and has a coupon of 7%. We show the last trade at $24.94.

The shares have a mandatory redemption date on 6/30.2029 with an early redemption period starting 3/31/2022.

Being a CEF the company has to maintain the 200% asset coverage ratio which is always comforting. The ratio now is over 400%–although last December prior to numerous term preferred offering it was 800%.

The company holds a portfolio of CLOs (similar to Oxford Lane and Eagle Point Credit) which totals $465 million as of 5/30/2019.

You can see the data and chart here.

Buy and Hold Portfolios Help Us Learn

We just finished updating our model portfolios so I thought I would share some thoughts on these models.

Long time readers know that we have always constructed portfolios simply as a learning tool—YES I am 65 and after publishing websites on the topic of mostly preferred stocks and baby bonds I am still learning. If you are rather new to investing in these securities I guarantee you will never stop learning.

We currently are running 4 models–2 on this site and 2 on the DividendInvestor.com website. Today I want to review only the 2 on this site–then in a few days I will review the Dividendinvestor.com website models. The DividendInvestor.com website is owned by the company that bought my old website – The Yield Hunter – and they pay me to do a little work for them yet.

The Medium Duration Income Portfolio is simply a portfolio of baby bonds and term preferreds which mature within 10 years of inception. The portfolio is not meant to be traded–except where absolutely necessary. No flipping, dividend captures etc occur in this model.

Lesson 1 in this portfolio is don’t buy securities issued by tiny untried companies. This portfolio held the Atlas Financial 6.625% baby bonds which mature in 2022. The company really screwed up big time in reserves for losses (they are a small insurance company) and ended up writing off damned near half the equity. Needless to say I sold for a 55% loss on this position. Lesson 2 is that when it walks like a duck, quacks like a duck–guess what? It is a duck. I watched this baby bond plunge from $25 to $17 on first announcement and said to myself “give it a little time” to bounce after the initial overreaction. Well I should have simply sold it, but instead watched it go ever lower. Lesson 3 is simply that in spite of my good fortune running these models over the years with a relatively concentrated portfolio this is a good example of what happens when you have $100,000 spread across only 10 holdings. This one bonehead purchase took 5-6% of performance off the portfolio so instead of being up 8ish% it is up a very poor 2.86% after 16 months.

The overall message is that these models are too concentrated–you can’t be at 10% allocations and not get hammered at some point in time. We will be working to resolve this in the months ahead. This was the number 1 loss I ever had in a model and honestly just plain stupid.

I should note that I did not own any of this security personally–although we had owned it at some point in time.

The Enhanced High Yield Model Portfolio has performed quite well relative to our modest goals. After 17 months the model is up almost 10%–so it is tracking right on goal–7% annually.

We don’t have any clear cut new lessons to be learned from this portfolio, but we know that it is too concentrated just like the other portfolio–only 11 issues are in the model and it should be double that (or even more). This portfolio holds the hated Spark Energy 8.75% perpetual preferred which traded down to $18 last year, but now has bounced back–we may have dodged a bullet with this kind of junky issue so we need to address that situation.

For us personally we take these lessons quite seriously–sometimes you get a bit cocky, but buying a total loser knocks you down a few rungs. If I can get 6-7% year after year I would be happy—very happy.

Picked up a Full Position in New Residential Preferred

I was quite surprised to find the NRXPP ticker set up for the new New Residential Investment (NYSE:NRZ) F-T-F preferred on eTrade right away this morning.

I picked up a position with the hope (or intention) to likely flip out in a few weeks. Owning much related to mREITs for the long term would not be something I normally do–but this one is fairly tasty with the 5.802% spread when floating begins.

I paid $24.94/share for the position and likely would be open to a sell in the $25.40-$25.50 area. Alternately if it doesn’t achieve that level I would hold up to the 1st dividend and see where it stands then. Either way a 2% gain in 3 months or less would keep me happy.

New Residential Prices F-T-F Issue – UPDATED

We have updated the info below on this new issue with the data that was missing yesterday.

Or we should have said that they have priced the issue, but because the SEC pricing term sheet has not been released, we have only part of the data.

The initial coupon is priced at the rate of 7.50%–as some predicted. The floating rate spread has NOT been released–but we will post as soon as the FWP hits the SEC.

Other details are known and below we show the known data. We will repost in the morning assuming they get the FWP (free writing prospectus) filed.

You can see the pricing term sheet here.

mREIT New Residential Investment to Sell Preferred

mREIT New Residential Investment Corp. (NYSE:NRZ) has announced a new preferred stock issuance.

The issue will be a fixed-to-floating rate issue with the normal terms for a REIT F-T-F issue.

The shares will have an optional redemption period starting in 2024. At this point the coupon will also begin to “Float” at 3 month Libor plus a spread which has not been announced.

The permanent ticker will be NRZ-A when it moves to the NYSE from the OTC Grey market. The OTC ticker is not yet announced.

Shares will be cumulative in respect to dividends, but will not be qualified. Shares will likely be unrated.

The preliminary prospectus can be read here.

NRZ has been a favorite among many income investors and this issue may be something to look at–we will see when it is priced.

Synovus Financial Prices Preferred

Banker Synovus Financial Corporation (NYSE:SNV) has priced their new fixed-rate reset preferred shares.

The company is selling 14 million shares (with no over allotment shares).

The initial fixed coupon is a meager 5.875% which will go to a “reset rate” on the 1st call date at 4.127% plus the 5 year treasury rate. There after the rate will be reset every 5 years.

This issue should trade on the OTC Grey market tomorrow, but the temporary ticker has not yet been announced.

The pricing document can be found here.

Synovus Financial Announces Preferred Issue

Synovus Financial Corp (NYSE:SNV) has announced a fixed-rate reset preferred issue.

Of course the issue is non-cumulative (being a banking issue) and will have a fixed coupon until 2024 . After this point in time the rate will be reset at the 5 year treasury plus a spread (as of yet unannounced).

Shares will trade under ticker SNV-E when they finally trade on the NYSE–they will initially trade on the OTC market under a yet to be announced ticker.

The company has one other preferred outstanding which can be seen here.

We think these will be rated BB- (junk) by S&P.

The preliminary prospectus can be found here.

Monday Morning Kickoff

Another week of strong gains by the S&P500 which opened the week at around 2890 and closed the week at around 2950. With the FED essentially putting a “put” under the market what other way is there to go other than up.

The 10 year treasury touched as low as 1.975% last week before bouncing a bit to close at around 2.07%. This is obviously destined to move below 2% in the next 30 days. This would seem to be supportive to preferreds and baby bonds which is good–on the other hand we will see some redemptions from the stronger issuer’s as they will be able to issue shares at crazy low coupons.

The FED balance sheet fell by $5 billion last week resuming the downward move in assets. What a great time for the FED to let assets run off. Since everyone in the world seems to want our treasuries we don’t need the FED’s demand.

The average $25/share preferred stock and baby bond moved up 8 cents last week, as one might expect, with the falling 10 year treasury. This leaves us with 184 issues which are trading at $25 or below–this is 20 less issues than last week and shows the relative strength in income issues.

Last week we had 4 new income issues offered.

Triton International (NASDAQ:TRTN) offered a 8% preferred issue. The issue is trading on the OTC Grey market under TTONF right now and last traded at $25.30.

Triton International final prospectus

Bank of American (NYSE:BAC) offered a huge offering of preferreds 5.375% preferred which is trading on the OTC right now under ticker BAMKL and last traded at $24.98.  This is an offering of more than 60 million shares.

Bank of America final prospectus

mREIT Annaly Capital Management (NYSE:NLY) priced a fixed-to-floating rate preferred with an initial coupon of 6.75% which becomes floating in 2024 at 3 month Libor plus a spread of 4.989%.  They will redeem a 7.625% coupon issue (NLY-C).  The issue is trading on the OTC now, with ticker ACAXP, and last traded at $24.73.

Annaly Capital final prospectus

Specialty finance REIT Sachem Capital (AMEX:SACH) is selling a new baby bond with a coupon of 7.125%. This is a little company that is capitalized at just $88 million at this time so caution is warranted.  We need to look closer at this company as we simply are not familiar with them–but we can’t imagine having any interest.  This issue will trade under ticker SCCB when it begins to trade in the next week or so (no OTC trading).  This issue matures in 2024.

Sachem Capital final prospectus

Annaly Prices New F-T-F Preferred

NOTE – I am out of town at the moment so a little late with this (announced yesterday) and my new method for listing details will be posted later in the weekend.

Giant mREIT Annally Capital (NYSE:NLY) has priced a new issue of fixed-to-floating rate preferred.

The issue will have an initial coupon of 6.75% which will change to floating rate in 2024 and will float with a rate of 4.989% plus 3 month Libor.

The issue will trade under OTC ticker ACAXP immediately.

The final pricing document can be read here.

The company will redeem their NLY-C issue with a coupon of 7.625% issue with the proceeds.

Party On!!

Looking at the stock market futures this morning it is obvious that the Fed “put” is in play. You can hear the chant out of the stock people — easy money, easy money, easy money!

We all know that that this easy money will end badly–we just don’t know when. The government deficits are totally out of the control at over a trillion dollars per year. Many years ago it was opined that we are the next “Greece” because of the never ending deficit spending. Now we hear little talk about this problem–it is OBVIOUS to me that no action will be taken on spending until there is a crisis

In the meantime we will try to take advantage of the positive effects of the “easy money” on preferred stocks. Yesterday we bought a full position in the new Band of America 5.375% preferred. At $24.98 it was a reasonable buy, although the likelihood that we hold this one long is low–we see it moving to $25.50 in 30 days.

Bank of America Prices Huge New Preferred Offering

Bank of America (NYSE:BAC) has priced their new preferred stock. Details of the issue may be found below.

Pricing is on the low side of my hopes (as usual I hoped for 5.50%).

We expect the company to redeem the BAC-W 6.625% preferred which is available for redemption in September.


The pricing term sheet can be read here.

Bank of America to Sell Preferred

Giant banker Bank of America (NYSE:BAC) will be selling a new non-cumulative preferred stock issue. You can count on this issue being pretty huge–30 or 40 million shares.

The shares will be typical for a banking company. Qualified, non-cumulative, with quarterly payments. I expect these to be investment grade.

The guesstimated range of coupon for this issue is 5.375% to 5.50%. The company has announced that they may buy back some equity which we take to mean an outstanding preferred. The company has a 6.625% issue outstanding (BAC-W), which becomes redeemable in September. These shares are trading around $25.44 so there is just a little maybe 15 cents of call risk in the shares.

The preliminary prospectus can be read here.

The permanent ticker will be BAC-M, while the OTC Grey market ticker has not yet been announced.

Interest Rates Plunge on Draghi Comments

Wow—wow—the 10 year treasury is now trading at 2.03% after falling down to near 2% on comments out of the ECB that they may need more stimulus with interest rate cuts. That means more rates heading negative in the various European countries.

Then we have the Fed meeting today starting today (ending tomorrow) and the chatter for a rate cut here is growing. We don’t think that is likely to happen–just seems like there is no legitimate reason for it now — the market place is taking care of rate cuts. Plus we are “talking our book” because we like getting 2.35% on our money market funds.

We will be watching closely for economic weakness in all of the statistical releases.

Triton International Prices Preferred

Container lessor Triton International (NASDAQ:TRTN) has priced their newly announced preferred with a fixed rate of 8%–much lower than we thought it should go for from a risk/reward perspective. Of course we are almost always disappointed, but you can’t blame underwriters for pushing junk at this coupon when there is a never ending stream of folks chasing yield.

While the company is performing well now they carry over $7 billion in debt and the weight of this much debt gets very heavy in a recession.

The permanent ticker for this issue will be TRTN-B when it trades on the NASDAQ. The issue will trade on the OTC Grey market immediately under the temporary ticker TTONF.

The issue is rated B+ by S&P.

The company is selling 5 million shares and there are 750,000 more available for over allotment.

The pricing document for the new issue is here.

Triton International to Offer Preferred

Container owner and lessor Triton International (NYSE:TRTN) is offering a new fixed rate issue of preferred stock. The company is a large company with $10 billion in assets (and also $7 billion in debt).

The company currently has an 1 other current issue of preferred outstanding with a coupon of 8.50% which was sold last March and has traded strongly at over $26/share. The old issue was rated B+ by S&P (junk grade).

The preliminary prospectus is here.

This issue will be cumulative and optionally redeemable in 2024. The permanent ticker will be TRTN-B when it reaches the big board. The issue will trade on the OTC Grey market, but the ticker is not announced yet.

Monday Morning Kickoff

Well the markets gyrated around a bit last week, but in the end the S&P 500 ended up going nowhere closing almost exactly where it started the week.

Interest rates had a bit more (a very little bit) movement than the stock market as the 10 year treasury opened the week at 2.14% and moved around to as low as 2.07% before closing the week at 2.09%.

All in all a quiet week really, but we all know that this Goldilocks marketplace can continue for months, or it can spin and change on a dime and no one is going to blow a whistle letting us know in advance of changing markets.

The Fed Balance sheet grew by $2 billion last week–taking a breather from the $55 billion runoff from the previous 4 weeks.

The average $25 preferred stock and baby bond closed last week with a loss of 4 cents to close at $24.87–for all practical purposes this is flat with no movement (unless you owned some of the Ashford Hospitality preferreds which got battered on a common dividend cut).

There are now 201 issues trading at $25 or below compared to 202 issues last week–again nothing really changed through the week.

Last week we had 4 new income issues announced. 2 baby bonds and preferred issues.

REIT Armada Hoffler (NYSE:AHH) announced a nice 6.75% fixed rate. This is a typical REIT preferred–cumulative, perpetual and unrated. The issue is trading under ticker AMAHP on the OTC Grey market and traded between $25.20 and $26.30 before closing the week at $25.75. Permanent ticker will be AHH-A.

Armada Hoffler final prospectus

Voya Financial (NYSE:VOYA) announced a marginally investment grade fixed-to-floating rate preferred issue with an initial coupon of 5.35%. This issue is trading on the OTC Grey Market under ticker VOYXL and struggled to close the week at $25.29. Permanent ticker will be VOYA-B

Voya Financial final prospectus

Great Elm Capital (NASDAQ:GECC) sold a baby bond with a fixed rate coupon of 6.50%. GECC is a BDC and potential investors would do well to review the companies financials prior to any investment. The issue has a shorter maturity in 2024, which could help performance of the shares. The new baby bonds will trade under ticker GECCN when they finally trade–sometime in the next week or so.

Great Elm Capital final prospectus

Lastly utility Sempra Energy (NYSE:SRE) sold a baby bond with a coupon of 5.75%. The maturity on this one is way out in 2079 and the bonds do have the fairly normal deferment clause that allows up to 40 consecutive quarters without a default being declared. Of course being a California utility attention should be given to potential liabilities for future wild fires etc. prior to investing in this one–personally I see no reason to by an issue with this kind of coupon with real (or imagined) risk. The ticker is not known, but the issue should trade in the next week or so.

Sempra Energy final prospectus

Ashford Hospitality Whacks Distribution

AHT has chopped their distribution by 50%–from 12 cents to 6 cents.

The large lodging REIT has had a very dicey balance sheet for a very long time, and it looks like this will continue as the common shares are now trading at $3.65–down 65 cents meaning the ability to raise equity with common shares is pretty limited.

We had written about Ashford Hospitality way back in January–simply outlining our negative outlook on the REIT. You can see that article here.

Of course I don’t own the common shares, but because they have 5 preferred issues outstanding I kind of keep an eye on them.

The preferred shares are trading off 1-2% today so we are seeing some reaction to the common distribution cut.

You can see there outstanding preferreds with charts here.

Amada Hoffler Preferred Takes Wild Ride

While we didn’t personally have interest in buying the new 6.75% perpetual preferred from REIT Armada Hoffler (trading under OTC Grey market ticker AMAHP) we were watching it a bit yesterday.

The shares were very strong, climbing as high as $26.30 before plunging with a couple of larger trades right near the close to close at $25.15, although we do see some sites reporting different closing prices.

The reported volume on the shares was not very large, but we don’t know how many shares institutions may have picked up that were not exchange traded.

We are going to watch the trading today–maybe there is another trade to be made here. In fact I am sure many folks bought and sold yesterday for nice profits and they likely are interested at a re-entry.

Sempra Energy to Sell Baby Bonds

Utility Sempra Energy (NYSE:SRE) will be selling a new issue of baby bonds.

The subordinated notes will have a maturity in 2079 with an early redemption option available to the company in 2024.

These baby bonds will have the deferment clause in them, as most of the utility baby bonds do, which allows for deferment of interest payments for up to 40 consecutive quarters, once or more, without a default being declared.

We have not found a rating for the notes with either Standard and Poor’s or Moody’s as of yet, although these should be investment grade.

The preliminary prospectus can be seen here.

Great Elm Capital Corp Offers Senior Notes

Business development company Great Elm Capital Corp (NASDAQ:GECC) is going to offer a new offering of baby bonds.

The notes have a coupon of 6.50% and they will sell 1.6 million shares (bonds) with 240,000 shares available for over allotments.

The senior notes will mature in 2024 and carry a rating of BBB from Egan Jones (for what that is worth).

The baby bonds will have a ticker of GECCN.

GECC has a 2 older issues of baby bonds outstanding at this time which can be seen here.

The pricing term sheet can be read here.

Voya Financial Announces New Preferred Issue

Insurance and financial services company Voya Financial (NYSE:VOYA) has announced a new issue of perpetual non-cumulative preferred stock.

This issue will be marginally investment grade (a split rating) with a BBB- from S&P, a Ba2 from Moodys and BB+ from Fitch.

The company will sell 12 million shares and there will be no over allotment shares available.

The issue has priced at an initial coupon of 5.35%–the issue is a Fixed-Rate-Reset Non-Cumulative Preferred.

The coupon will reset starting 9/15/2029 at a rate of the 5 year treasury rate plus a spread of 3.21%.

9/15/2029 is also the date upon which the issue is first callable.

This issue will trade under the permanent ticker of VOYA-B when it begins to trade on the NYSE. Starting immediately the issue will trade on the OTC Grey market with the temporary ticker of VOYXL.

The preliminary prospectus is here.

The final pricing document is here.

Armada Hoffler Prices Preferred Issue

REIT Armada Hoffler (NYSE:AHH) has priced their new issue with a fixed rate coupon of 6.75%.

The company will be selling 2.2 million shares with an additional 330,000 shares available for over allotments.

Of course the shares are perpetual (no maturity), but an optional redemption period (at the company’s option) starts 6/18/2024.

Dividends are cumulative, but not qualified.

The permanent ticker is AHH-A, but shares will trade on the OTC Grey market under ticker AMAHP starting immediately.

The pricing term sheet can be read here.