Updated Leverage Ratios of Closed End Funds (CEF)

As most all of you know closed end funds (CEFs) offer some of the highest quality preferred stocks available. In fact this is our favorite “shopping” place–although in their current overvalued state there are not many bargains.

The safety of these preferreds is ensured by the requirement that these CEFs have an asset coverage ratio of 200% or GREATER. For us the more the merrier.

One of our favorite issues, the Tri-Continental 5% preferred (NYSE:TY-P) which was originally issued in 1963, has a coverage ratio of 4400%.

We have updated a good share (most) of the coverage ratios for the CEF preferreds outstanding. The leverage ratios are generally published twice a year by the CEFs in their semi-annual and annual reports.

The updated list can be found here.

These high quality, but modest coupon issues, mostly have great safety, BUT if interest rates spiked very high the share prices would take major hits.

Disclosure – we own numerous issues on this list–multiple Gabelli Issues, the Bancroft Fund issue, the Ellsworth Fund issue, the AllianzGI issues and the Tri-Continental issue.

Oil Prices Set to Spike on Saudi Attacks

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.

Lots of Red in Income Markets

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.

I am personally watching certain quality issues–for instance the AllianzGI Convertible and Income Fund 5.625% preferred (NCV-A) is trading down 60-65 cents in the last 2 days (about 1/2 is due to ex dividend) bringing the current yield to 5.41%. I have more than a full position, but could add a little more.

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.

The preferreds list showing losses can be seen here–maybe it is a shopping list?

Rexford Industrial Realty to Sell New Preferred

REIT Rexford Industrial Realty (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.

The company currently has 2 preferred issues outstanding, both with 5.875% coupons which can be seen here.

The preliminary prospectus can be read here.

mcg had this posted in Reader Initiated Alerts a couple hours ago.

Fifth Third Bancorp to Sell Perpetual Preferred

Regional Banker Fifth Third Bancorp (NASDAQ:FITB) will be offering a new preferred stock.

The issue will have typical banking company terms–qualified, but non cumulative and will be a fixed rate issue.

The company currently has 2 issues outstanding, 1 of which is the old MB Financial issue which they acquired recently. These issues can be seen here.

The preliminary prospectus can be see here

mcg had this new issue announced 1st on the reader alert page.

AG Mortgage Investment Trust Prices Preferred

mREIT AG Mortgage Investment Trust (NYSE:MITT) has priced their new fixed-to-floating rate preferred with an initial coupon of 8%.

There was some thought that they might be able to call one of the old issues, which bear coupons of 8% and 8.25%, but it would appear to be unlikely with this issuance at 8%.

The issue will float starting in 2024 at 3 month Libor plus a spread of 6.476%.

NOTE–the OTC Grey Market ticker has not been posted as of 7 a.m. CDT.

The pricing term sheet can be seen here.

Fred was on top of this pricing last night with a posting under the mREIT AG Mortgage Investment Trust to Sell Fixed-to-floating Preferred.

mREIT AG Mortgage Investment Trust to Sell Fixed-to-Floating Preferred

Mortgage REIT AG Mortgage (NYSE:MITT) will be selling an issue of fixed-to-floating rate preferred.

The issue will trade under the permanent ticker of MITT-C when it begins to trade on the big board–no OTC symbol has yet been released

The company has 2 other preferred issues outstanding which can be seen here. MITT has not announced any redemption in the preliminary prospectus with proceeds from the new offering.

The preliminary prospectus can be seen here.

Saul Centers Prices New Preferred

REIT Saul Centers (NYSE:BFS) has priced their new preferred stock with a fixed coupon of 6.00%–slightly better than I thought it might come at.

All of the terms are normal REIT preferred terms.

The company plans to call their 6.875% BFS-C issue with the proceeds of this offering.

The pricing term sheet can be see here.

mcg had this pricing last night in under the New Preferred OTC Grey Market Tickers note I had posted

New Preferred OTC Grey Market Tickers

Interestingly the new OTC temp symbols of the Bank of America preferred and the Saul Centers preferred have been posted.

Bank of America will be BFALL

Saul Centers will be SAUXP

Unfortunately there have been no pricing terms posted yet for either issue. I have noticed lately that the SEC filings get later and later–for whatever reason.

Thanks to Number 6 for being on the lookout for these temp symbols.

Bank of America Selling New Preferred

Bank of America (NYSE:BAC) is coming to market with another preferred offering. Of course being a bank the dividends are non cumulative, but qualified.

The company had just offered a new preferred in June @ 5.375% (BAC-M) which as can be seen here has traded very strongly. Guess that tells us this new issue will have a lower coupon–for sure.

The issue will be low investment grade.

The new issue will have a permanent ticker of BAC-N when it hits the big board. The OTC Grey market ticker is not yet known.

The preliminary prospectus can be seen here.

Again mcg was right on this new issue 2 hours ago in Reader Alerts.

Saul Centers to Issue Preferred for a “Refi”

REIT Saul Centers (NYSE:BFS) has announced a new issuance of preferred shares with the intention to redeem the 6.875% BFS-C issue.

The issue will be a typical REIT issue being cumulative and non qualified. The permanent ticker will be BFS-E when it trades on the big board. The OTC ticker has not been announced yet.

While likely to be unrated BFS is a quality company and the coupon is likely to be somewhat meager.

The preliminary prospectus can be found here.

mcg was right on this one in the Reader Initiated Alerts section.

South Jersey Industries Prices Baby Bonds

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.

The pricing term sheet can be found here.

South Jersey Industries to Sell Long Dated Baby Bonds

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.

The preliminary prospectus can be read here.

A shout out to Eugene and mcg who noted this one within 2 minutes of when I saw the announcement. mcg has posited an estimated coupon of 5.675-5.75%ish.

Monday Morning Kickoff

Last week, which was a shortened holiday week, was again strong for stocks with the S&P500 closing at 2979 after trading in a range of 2891 to 2986–another gain of over 3%–that makes it 2 weeks in a row. This puts the index at less than 2% off a 52 week high.

The 10 year treasury moved in a range of 1.43% to 1.61% before closing at 1.55%.

All of this movement based upon a potential China deal–I would be surprised if that happens YET.

The average $25/share baby bond and preferred stock closed the week at $25.42 which is up 12 cents—this must be related to various ex-dividend dates etc that become big factors in March, June, September and December, which are large dividend payments months.  There are 130 issues trading at $25 or below–compared to 138 last week.

The Fed balance sheet moved $2 billion higher–maybe now the runoff has stopped?  We’ll see as the balance sheet is now $27 billion lower in the last 3 weeks which we believe is simply a timing issue more than a true runoff which the Fed announced was ending.

Last week we saw the announcement of many new income issues.

Capital One Financial (NYSE:COF) announced a new 5% perpetual non-cumulative issue with 60 million shares being sold.  The issue is trading on the OTC right now under ticker COFOL and last traded at $25.09.

Public Storage (NYSE:PSA) announced an offering of 4.875% cumulative preferred, which is a new low coupon for PSA in the 13 years I have been watching the company.  The issue is trading under OTC ticker PSSSP and last traded at $25.25.

Fortress Transportation and Infrastructure (NYSE:FTAI) sold a 8.25% fixed to floating rate preferred.  This cumulative issue floats starting in 2024 with a nice 6.886% spread which is added to 3 month Libor.  The issue is trading under OTC ticker FRTRP and last traded at $25.40 on Friday.  NOTE–this is a K-1 issue (partnership) for those adverse to such securities.

Additionally–although we don’t cover $1000 issues, Citigroup (NYSE:C) priced an offering of 1.5 million shares ($1.5 billion) last week at 5%.  The pricing document is here.  5% for an issue rated junk by the major ratings agencies.

Also we saw American Finance Trust (NASDAQ:AFIN) “reopened” their 7.50% cumulative preferred (NASDAQ:AFINP) with an offering of 3 million shares at $25.25.  Shares closed Friday at $25.39.

I Bought Fortress Transportation Preferred Today

Chomping at the bit to buy “something” I took a 400 share position in the new Fortress Transportation preferred @$25.15 today. I just checked and after hours it traded up to $25.80–closed the day earlier at $25.40. I like that–sometimes better lucky than good. Get it up to the $25.80 area and I likely am gone–am too conservative to hold it long–we’ll see.

The last flip I tried was the newer New Residential 7.125% preferred (NRZ-B)–a month later I have a profit of $1.05 on 300 shares–not even a cup of coffee–oh well I guess the easy money from the 1st 6-7 months of the year are gone–now we have to actually do some work.

Fortress Transportation and Infrastructure Prices Preferred Issue

Fortress Transportation and Infrastructure LLC (NYSE:FTAI)has priced their previously announced preferred issue with an initial fixed coupon of 8.25%.

The issue is fixed-to-floating rate and the floating rate period begins 9/15/2024. The floating rate is 3 month Libor plus a spread of 6.886%.

This issue will send a K-1 at tax time.

The pricing term sheet can be read here.

Public Storage Prices New Perpetual Issue

Storage REIT Public Storage (NYSE:PSA) has priced their new perpetual preferred issue and it sets a new record low coupon (for the time I have been watching–13 years) at 4.875%.

This low coupon is no real surprise given the super strong balance sheet the company possesses and the massive free cash the company generates.

Now we will await word from the company on a redemption for the 5.625% PSA-U issue. The size of this offering is not adequate for redeeming both the U issues and the 5.875% PSA-A issue in December so likely we will see another issue prior to that time.

The pricing term sheet can be read here.

Capital One Financial Finally Files Pricing Document

Finally COF pricing has been filed with the SEC, and unfortunately it is as bad as we all believed it would be–5%. Any number of readers had most of this data prior to the filing hitting the SEC–but just the same here it is. We have no interest whatsoever in this one.

The pricing term sheet is here.

REIT American Finance Trust Prices Reopened Preferred

American Finance Trust (NASDAQ:AFIN) priced their reopening on their 7.50% perpetual preferred at $25.25 for 3 million shares (plus 450,000 for overallotment).

Shares are now trading right in the $25.25 area.

Thanks to xerty for being right on this one earlier this morning.

The pricing document is here.

Fortress Transportation & Infrastructure LLC Announces Fixed-to-Floating Rate Preferred

Fortress Transportation & Infrastructure (NASDAQ:FTAI) has announced an offering of FTF rate preferred stock.

I am not familiar with FTAI and will need to do some due diligence. The company is a LLC so it will likely issue a K-1 for this preferred

The preliminary prospectus is here.

It certainly appears that anyone that needs some cash is jumping into the marketplace. It could be a wild fall for issuance and redemptions.

Public Storage Announces New Preferred Offering

Self storage giant Public Storage (NYSE:PSA) has announced a new preferred stock offering. It was only a matter of time before PSA came to the market as they have a 5.625% (PSA-U) redeemable now and a 5.875% (PSA-A) redeemable in December.

No details are yet known, but reader mcg who wins the early morning trophy today for catching this one early, posits a sub 5% coupon.

The issue will be cumulative, non qualified (as a REIT preferred–REITs pay non qualified distributions). The company states they may use the proceeds to redeem preferred stock–I would bet money they will unquestionably redeem issues.

The preliminary prospectus can be read here.