As those folks that have been following the news this weekend already know a drone attack on Saudi oil fields and facilities has forced Saudi Aramco to shut down over 5 million barrels of oil production–about 1/2 their production. We can expect to see a spike in crude prices Sunday when global trading restarts.
On a global basis there are plenty of crude reserves to serve the needs of everyone, but as we all know there will be knee jerk reaction of some sort–will it be $1 or $10 dollars (or more) is the question. Additionally whether this is a short term issue or will it take some time to bring production back on line.
A confluence of ex-dividend dates with relatively rapidly rising interest rates is forcing many, many preferreds and baby bonds lower by 25 or 50 cents this week–some much more.
With the 10 year treasury trading around 1.89% after being at 1.43% just 10 days ago you might expect some give back on the easy capital gains we have all garnered recently. Personally our accounts are off about $1,000 bucks this week–no big deal–mostly because we have such a high cash position.
Some of the other big losers simply are some quality issues that were getting ahead of themselves such as Digital Realty 6.35% preferred (DLR-I) which had traded up to $27 a couple of days ago and now with the combination of ex-dividend and rising interest rates have knocked it down to $25.93 It should be noted this issue has early redemption available in 11 months and many times when an issue is trading with such a large premium to a $25 redemption once it gets closer to the potential redemption is will fall on ex-dividend date and never recover.
REIT Rexford IndustrialRealty (NASDAQ:REXR) will be selling a new preferred stock issue. The issue will trade under the permanent ticker of REXR-C when it begins to trade on the NYSE—after a short stint on the OTC Grey market. The temporary OTC ticker has not yet been announced.
The issue is the typical REIT issue with cumulative dividends, but being non qualified.
As most that are interested already know the OTC Grey market temporary ticker for the new AG Mortgage (NYSE:MITT) 8% fixed-to-floating rate preferred is AGMGP. Shares traded in a range of $24.95 to $25.10 yesterday and closed at $25.10.
This ticker was announced after we published pricing.
South Jersey Industries (NYSE:SJI) has priced their new issue of baby bonds with a fixed rate coupon of 5.625%.
The issue is a rather large one with 8 million shares (bonds) offered. The ticker is not yet known for this one so readers will need to watch their broker for trading–likely in a week +/- it should begin to trade. There is no OTC Grey Market trading of this issue.
Note that this issue is junk rated. Additionally SJI may defer interest payments for up to 40 quarters without a default.
Potential investors should weigh the true importance of the terms of the issue before making buy decisions. Terms of the offering need to be considered in light of competing issues. I personally may buy this issue because of the lack of reasonable competing issues with a decent coupon–I would prefer investment grade with no deferral periods allowed–but it is what it is and this may be a decent opportunity for many.
Regulated natural gas utility South Jersey Industries (NYSE:SJI) has announced the offering of some Jr Subordinated Notes (baby bonds).
The issue will have a maturity date way out in 2079 with an early redemption period starting in 2024. The issue will have the ability to have interest payments deferred for up to 40 consecutive quarters without a default occurring. While we don’t like these kind of stipulations they are not unusual in utility issues.
Being baby bonds the interest payments are not qualified distributions. I am not seeing a rating at this moment on the new offering, but Moodys has some secured debt at A1–the new offering is NOT secured debt.
This issue will not trade on the OTC grey market prior to big board trading, but occasionally with a call to your broker you may be able to pick up shares prior to official trading.