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.

REIT Armada Hoffler to Offer Preferred

Armada Hoffler Properties (NYSE:AHH) will be offering a new issue of preferred with a fixed coupon.

The company has no other preferred or baby bond issues outstanding at this time.

The issue will be typical for a REIT preferred, meaning perpetual, cumulative but non qualified. The issue will be unrated. The optional redemption period will begin in 2024.

The permanent ticker for the issue will be AHH-A, although it will trade initially on the OTC Grey market under a yet to be announced temporary ticker symbol.

The preliminary prospectus can be seen here.

We are not very familiar with this company and have no real opinion on the new shares–at least until we see the coupon announced.

Monday Morning Kickoff

Last week was a big week for stocks as the S&P500 rose by near 5% last week as Fed Chair Powell yakked about being prepared to act if trade wars hurt the economy.

The 10 year treasury closed the week around 2.09% after trading in a range of 2.05% to 2.15%. Obviously interest rates are not signaling any super strength in this economy, in particular, in light of the fairly muted job numbers announced last week for the month of May.

The Fed balance sheet fell by a modest $4 billion last week so that moves us to a runoff of about $55 billion in the last 4 weeks. Certainly the timing of the runoff couldn’t be better as any potential upward pressure on rates caused by withdrawing Fed demand is masked by the global demand for treasuries as rates remain extremely low on a global basis.

The average preferred stock and baby bond closed the week at $24.91 which is a gain of 15 cents from the week before–this is the biggest move that we have seen for many months (although not very big). There are 202 issues trading at $25 or below compared to 207 last week.

Last week we had 3 new income issues announced last week.

The Gabelli Dividend & Income Trust (NYSE:GDV) announced a new 5.375% perpetual preferred. The preferred from this CEF is rated investment grade and now trading under the OTC Grey market ticker of GDVVP. This is the 4th issue that GDV will have outstanding. The 4 outstanding issues can be seen here. The shares last traded at $25.40.

First Internet Bancorp (NASDAQ:INBK) sold a new issue of baby bonds with a fixed-to-floating rate coupon. The initial coupon is 6% until it moves to floating rate in 2024. We are not aware of a ticker being announced as of yet.

Lastly Athene Holding (NYSE:ATH) sold a new fixed-to-floating rate preferred with an initial ticker of 6.35%. The issue is marginally investment grade. The issue is trading on the OTC Grey market under ticker ATHDF and is trading strongly at $25.95. This is the only exchange traded preferred issue that this company has outstanding.

Wrapping Up the Week

Certainly there has been more than enough activity reported in the economy to keep one vigilant with their holdings, but for us personally we only bought or sold a couple issues.

We purchased a “sock drawer” holding in the new Gabelli Dividend & Income Trust (NYSE:GDV)–of course we paid a little more than we wanted at $25.10, but our hope for a purchase below $25 was simply a dream. This issue is a 5.375% cumulative, perpetual so we may be holding it for a lifetime anyway–what’s a dime or quarter–nothing at all. The new issue is trading on the OTC Grey market right now under ticker GDVVP at $25.23–lots of folks want the safety of the strong investment grade.

We sold a full position yesterday in the WR Berkley WRB-D 5.75% baby bond which I had bought just for a dividend capture. “Captures” are more difficult now and although we are happy with the 1% we gained we were spoiled by the 1.5% or 2% I had been able to nail down earlier in the year. This was the 2nd time this year we owned this issue and the Berkley baby bonds seem to be good for a 1% monthly gain on a capture. Additionally they are investment grade so if it doesn’t work out a person at least holds a quality issue.

The jobs number this morning was kind of weak at 75,000 jobs added and the 10 year treasury is off 5 basis points to 2.07%. The stock market is doing a bit of partying and up over 1%. The “put” that Fed Chair put under the market is disturbing–I don’t like this never ending yakking from the Fed. Markets need to move based on market conditions–not the suggestion of never ending easy money. Eventually this will end–and it will end badly, but that could be years away–who knows.

Definitions for new readers.

“Sock Drawer”–where we put our quality long term holdings.

“Capture” or “Dividend Capture” — shares bought prior the the ex-dividend date with the intention to hold for a short period of time (for me about 30 days) for the sole purpose of receiving the dividend/interest.

Athene Prices Fixed-to-Floating Preferred

Annuity company Athene Holding (NYSE:ATH) has priced their new large offering of fixed to floating rate preferred with an initial coupon of 6.35%

The company will sell 30 million shares with an additional 4.5 million available for over allotments.

The issue will be non-cumulative being a financial company, but dividends should be qualified for preferential tax treatment.

The coupon will float beginning on 6/30/2029 at a rate of 3 month Libor plus a spread of 4.253%

The shares are rated investment grade by Standard & Poors (BBB-) and BBB- by Fitch.

The pricing term sheet can be seen here.

Shares are to trade on the OTC Grey Market under temporary ticker ATHDF.

First Internet Bancorp Prices Baby Bonds

First Internet Bancorp (NASDAQ:INBK) has priced a new issue of Fixed-to-Floating rate subordinated notes. This is a small issue of just 1.4 million shares (bonds) with another 80,000 for over allotments.

The issue will have a fixed 6% coupon until 6/29/2024 after which it will float at the rate of 3 month Libor plus a spread of 4.114%.

The coupon will float beginning on 6/30/2024 and final maturity will be on 6/30/2029.

The issue is unrated by the big ratings agencies, but is rated BBB- by Kroll Bond Rating Agency.

The pricing term sheet can be found here.

No ticker has yet been announced and there will be no OTC Grey market trading on this issue.

Gabelli Dividend & Income Preferred Filing

Although most everyone with interest in this new issue has most of the data the filing did finally hit the SEC this afternoon.

The final prospectus can be found here.

I have reviewed the document and as suspected there does not appear to be anything unusual or different in the papers.

eTrade showed the issue trading in the OTC Grey market, under ticker GDVVP, at a range of $24.95-$25.18 before closing at $25.12.

We have not picked up any yet but will likely do so tomorrow morning.

Athene Holding to Sell Fixed-to-Floating Preferred

Annuity company Athene Holdings (NYSE:ATH) will be selling a new fixed-to-floating rate preferred issue.

The issue will be non-cumulative being a insurance company, but dividends should be qualified.

This is a investment grade issue and is rated BBB- by Standard and Poors.

Further details of the issue are not available at this time.

The preliminary prospectus can be found here.

The company has no other preferred issues outstanding at this time.

Gabelli Dividend & Income Prices Preferreds

As many of you already know the new preferred from the Gabelli Dividend & Income Fund (NYSE:GDV) has priced at 5.375%.

We try to not post on the pricing until the SEC documents have been filed as on occasion there is a change–but they have not been filed as of this moment.

Data on pricing comes from a company press release where details are sparse, but it is fair to assume that the normal terms will be in effect–optional call after 5 years, quarterly dividend payments etc.

The press release is here.

The issue will trade on the OTC Grey market, but a ticker is not yet announced.

We will try to pick up a little for the sock drawer (referring to those issues we buy and put away to be held for a very long time)–hopefully we can buy it a little below $25.

The company announced they will be calling in some auction rate preferreds, which is not a publicly traded preferred.