Container company Triton International (TRTN) has priced their previously announced preferred stock.
The issue will have a fixed coupon of 7.375%. The issue is rated B+ by S&P.
The company is going “whole hog” on this issue with 7 million shares being sold (with no overallotment). Guess they are getting the cash while they can at this bargain rate. The other 2 issues outstanding were 3 and 5 million shares respectively.
Be cautious if buying this issue–the company is domiciled in Bermuda–brokers may try to charge $50 as a foreign company.
Giant banker JPMorgan Chase (JPM) will be selling a new preferred issue.
Of course we all know this new issue will be at a rock bottom coupon. The company will be redeeming their 5.45% JPM-A issue with the proceeds. You can see here that we had plenty of snoozers on this one as the issue closed yesterday at $26.00
The new issue will be lower investment grade so I am thinking a coupon in the 4.80% area, but as Gridbird reminds us “names count” and there is no bigger name than JPMorgan Chase.
Of course the issue will be non-cumulative, but qualified.
Container lessor Triton International (TRTN) has announced a new offering of preferred shares.
The company already has 2 other issues outstanding which can be seen here. These are high yield shares which have traded in the $26-$27 area.
We note that being a lessor of containers this company will be very sensitive to global economic conditions and while their common and preferred shares have traded strongly this is subject to sharp changes in a recession (at least that is my opinion). These shares are rated B+ by S&P.
A couple companies have announced earnings for the quarter ending 9/30/2019.
Insurer National General Holdings (NGHC) which has 3 preferred issues and 1 baby bond outstanding released earnings today and they can be seen here. This company is controlled by the Karfunkels (of AmTrust Financial fame).
Financial services firm B Riley (RILY) announced huge revenue and earnings today. The numbers look great, but there is little detail/explanation of the increases. The press release can be seen here.
Just to remind newer readers these notes will be senior to the common stock and pari passu (equal) to all outstanding and future unsecured unsubordinated debt. The only debt the company has is $22 million from their SCCB issuance (noted above and which is pari passu to this new issue) and mortgage debt of $800,000 which is senior to this issue.
It happens every time–markets barely moved prior to any Fed Funds rate cut (or a hike) and this time is no different–equity and bonds markets are barely moving–less than a 1/10% in the stock market indexes.
The 10 year treasury has moved a bit more than stocks as yields are off 2 basis points to 1.81%. This is after a first read on 3rd quarter GDP of 1.9%–seems like a Goldilocks number to me–not too hot, not too cold. Is it a number that warrants a Fed Funds rate cut? I don’t really think so–BUT they will cut–the tail is wagging the dog and the markets are ‘demanding‘ a rate cut. If the FED doesn’t cut rates there will likely be some real fireworks this afternoon.
ADP has just reported (for what it is worth) 125,000 new jobs in October–this also seems to be a Goldilocks number. For the official government jobs report on Friday the median forecast is for 75,000 jobs and this is the number markets tend to focus on (versus ADP).
So we watch and wait–we seldom, if ever, react to rate cuts etc. As individual investors there is little use in thinking you can make a investment decision that is going to beneficial based on events like this. In the ‘olden days’ (or 10 years ago) I thought I was smarter than the market many times–I wasn’t and I don’t remember ever helping myself by buying or selling prior to ‘news’.
The last 60 days has brought the 10 year treasury from a low of around 1.45% back in late August to a recent level of about 1.84%.
I know readers have been watching this climb from some of the comments made on the site–and certainly these climbing rates have made everyone kind of leery of purchasing much in the way of recent new issues that came to market at really low coupons–i.e. 4.875% to 5% and it looks to me like folks should use a bit a caution right here.
The perpetual preferred issued by 4.875% PS Business Parks (PSB) last week, which continues to trade on the OTC Grey market under ticker PSPBZ, came out of the chute pretty hot trading up to $25.20 on day one–but now is struggling to get back above $25.00 closing today at $24.96.
The new junk rated 5% preferred from Citizens Financial Group (CFG) has traded as high as $25.20, but closed today at $24.99 on the 1st day of trading on the NYSE.
Personally we have noted some of our investment grade holdings have dropped some today. The Allianzgi Convertible and Income Fund II (NCZ-A) 5.50% preferred was off 22 cents and the Allianzgi Convertible and Income Fund (NCV-A) 5.625% was off 11 cents. On the other hand these issues were kind of overheated a bit anyway and a bit of a sell off is not a surprise–even though I hate to see RED on the brokerage statement–this year has been a bit of a gravy train for gains so I guess we will have to work harder to make our 7% next year.
Banking company and asset manager Northern Trust (NTRS) will be selling a new fixed rate non-cumulative preferred issue.
Preferred investors have been awaiting this issue anticipating that the company would use the proceeds to redeem the 5.85% non cumulative preferred (NTRSP) that the company currently has outstanding. Since the redemption has been anticipated these shares were trading around $25.50 so only minor damage is done to holders. The redemption can only take place on a dividend payment date, which is January 1 and the payment will be 36.5 cents–at the current price of $25.28 there is 8.5 cents in the shares.
We would anticipate a sub 5% coupon on the new issue as the rating should be BBB+ from S&P and Baa1 from Moodys.
Here we go with what is sure to be an exciting week. We have a Federal Open Market Committee (FOMC) wrapping up on Wednesday with what is likely to be a 1/4% cut in the Fed Funds interest rate. Additionally we have the October employment report on Friday which always have the potential to move markets.
Last week the S&P500 moved in a range of 2991 to 3027 before finally closing the week at 3023–up 1% for the week. The 10 year treasury moved in a range of 1.73% to 1.84% closing near the highs on Friday.
The Fed balance sheet moved up only $2 billion last week–so the slowest growth we have seen since early September, although given their recent actions we should expect further building in assets.
Last week we had a couple of new preferred issues announced.
Citizens Financial Group (CFG) sold a new perpetual preferred with a coupon of 5%. The issue is trading with a OTC ticker of CFGZL and shares closed at $25.15 last week. The issue is non cumulative, but qualified.
PS business Parks (PSB) sold a new perpetual preferred with a meager coupon of 4.875% and shares are trading under OTC ticker PSPBZ and last traded at $25.18. The issue is cumulative and non qualified.
Additionally the Priority Income Fund (nontraded) registered a new issue of term preferred stock, but nothing beyond the initial registration is known at this point in time. This is typical for Priority and we will be looked for an actual sale in the next week or two.
Just looking at equities today I guess I have to conclude that all is good in the U.S. and the global economies.
Forget that the whole world is operating on quantitative easing (QE) as central banks keep trying to pump up global economies and growth is slowing everywhere. Oh well this game will work until it doesn’t and these things can go on for years and years–actually they have already gone on for years.
Right now we are awaiting the 1/4% rate cut next week to the FED Funds Rate. Hey-maybe they won’t cut–but really we all know that equities would tumble hard if no cut came and we know who is seemingly calling the shots at the FED-and it isn’t the FED.
Of course us that have been happy to at least get paid some amount when in cash (money market) will take a hit. Just checking the Gabelli US Treasury Money Market AAA (GABXX) we have in eTrade it is currently yielding 1.82% while the Fidelity Government Cash Reserves (FDRXX) is paying 1.6%. These will begin to trend lower with a rate cut–the speed to be determined by the maturities of the holdings.
It has been a busy week for us as we lock down some of the profits in individual issues. We went ahead and let the New Residential Investment 7.125% (NRZ-B) preferred go early today-seems like for now it is running out of steam and locking down the 3.5% gain seems like the right thing to do. Also the account this holding was in was almost fully invested and I wanted to raise a little cash in that particular account in case an opportunity comes up. My eTrade accounts are almost always fully invested, while the Fido account usually holds too much cash–caused by restrictions Fido has on some baby bonds and preferreds.
Below are the details of the new preferred stock issue from REIT PS Business Parks (PSB).
Even though the issue is priced at a skimpy coupon I believe I will purchase a position to try to do a ‘flip’ (short term hold) for 30 or 40 cents (I hope)–of course this depends on how it trades today (Thursday). If the issue comes out of the gate too hot I will not chase it–but at $25 or a little below I will buy.
REIT PS Business Parks (PSB) has priced their new, previously announced, preferred stock.
The fixed rate coupon has been set at 4.875%. This pricing doesn’t seem logical given that sister company Public Storage (PSA) just sold a new issue at the same coupon. Public Storage is rated a notch better than PS Business Parks. In the end it is what it is—wish they would price like I want them too.
It is amazing how strong the new Public Storage 4.875% issue (PSA-I) has traded which may well have contributed to this low coupon from PS Business Parks. The Public Storage issue closed at $26.26 today.
The issue will trade OTC Grey market tomorrow under ticker PSPBZ. At the right price we will purchase some for a flip–maybe we can squeeze 30-40 cents out of it.
We are all grappling with the same problem–too many gains in our ‘base holdings’–we should have these problems all the time. We all know the time will come when the issues is how to minimize the losses, so I guess we should just enjoy the ride.
Today the Gladstone Capital 6.125% Note (GLADD) issue spiked mid day which I saw and figured it was some ridiculous ‘market order’ which cost someone some bucks–but no, there were trades after this one and it continued to stay high–closing the day at $26.67 (up 79 cents).
I did not let mine go–maybe should have–always the same problem–what to buy with proceeds? On the other hand 2 quarters of interest is pretty lucrative.
REIT PS Business Parks (PSB) will be selling a new preferred stock issue. PS Business Parks is a sister company to giant storage REIT Public Storage (PSA).
The company has 5 issues currently outstanding which can be seen here. As you can see there are 2 issues currently outstanding with coupons of 5.70% and 5.75%—both issues are trading lower today. The company has announced the intention of redeeming the 5.75% PSB-U issue.
Given the investment grade rating on the company we see a 5.25% coupon being likely (plus or minus 1/8%)
Many of you have been aware this was coming today–and it has been executed.
The New York Fed, who operates the Federal Reserves open market desk, has executed a massive REPO (repurchase) operation this morning.
They have done a $89 billion 1 day and a $45 billion 14 day REPO— $134 billion in total.
As we have mentioned before there is more going on than meets the eye–not that we know what it is, but with the Fed balance sheet up $207 billion in the last couple of months and now larger and larger REPO operations being executed we can only surmise that the huge treasury issuance of notes is larger than the market can bear.
If this continues this will not end well–we only wish we had a crystal ball to tell us when the merry go round was going to stop.
I have been watching a few of my holdings recently trying to determine the right selling price–assuming I decide to sell and today I pulled the trigger on a couple. Where oh where is the top in the preferred market?
As I mentioned last week I was going to exit part of my Highland Income Fund 5.375% (HFRO-A)–I am sure you all recall that last week the issue swooned a bit as a related company filed for bankruptcy. Anyway I let go of a little last week and then today sold some more—so I have about a 1/2 position left which I will just hold. All in all I had a gain of just 1% for my 5-6 week hold–not much, but at least not a loss.
Today I decided to let go of my Gladstone Commercial 6.625% perpetual preferred (GOODN). I am a big fan of the various Gladstone term preferreds which are issued by Gladstone Investment (GAIN) and Gladstone Land (LAND)–or the relatively short term debt issued by Gladstone Capital (GLAD) – I own them all–BUT I have never been a fan of the Gladstone Commercial preferreds because they are perpetual. For whatever reason the market loves them — I have exited for about a 4.5% gain in a month.
A big one I have been watching is the New Residential Investment 7.125% (NRZ-B) which was a real dog for a bit, but now has picked up some steam. As I mentioned on 10/11/2019 (here) I held through the ex-dividend date on 10/11/2019–so I picked up the 44.5 cent dividend and now shares have bounded back strongly to $25.48 right now (I think I bought around $25.04). This was bought as a flip and I have held it for 10 weeks–sometimes things don’t go as planned–regardless, a little patience has that position now up 3.5% (with the dividend which isn’t paid until 11/15). I’ll watch a few days and if the move is over I will exit–it is a full position.
Currently I still am holding the WR Berkley 5.625% Sub Notes (WRB-B) which I had hoped would bounce back a little better after ex-dividend. Right now with the dividend I have a very short term gain of about 1%. Shares are trading at $25.15 right now and with a call possible at any time investors are resisting the urge to push it higher. Honestly I am always happy with a gain–even 1%–it beats a loss.
So with some selling I think I am around 30% in cash–if I sell the NRZ or WRB it will be some higher. Hopefully I find the time to ferret out a few buys–or get a new issue with a coupon above 5% that I am comfortable holding for a while.
Untraded CEF Priority Income Fund has registered another term preferred share offering . The Priority Income Fund is a holder of collateralized debt obligations (CLOs).
The new issue will be PRIF-F when it finally is priced and issued. Because of the known history of issuance of new term preferreds from the Priority Income Fund it could be a week or two before they price the issue.
Being a CEF the company must maintain at least a 200% asset coverage ratio and as of 6/30/2019 the company has a adjusted coverage ratio of approximately 350% (giving affect to the series E issued just 3 weeks ago).
This is just a ‘heads up’ on the preferred shares of REIT Arbor Realty Trust (ABR).
The company has improved their financials substantially over the last number of years, which of course means they are able to borrow money at pretty decent rates.
Recently, in a private note offering, ABR was able to borrow $110 million at a coupon of 4.75% due in 2024.
The company HAS NOT announced the intention to redeem any of their preferreds, but if you have 3 issues outstanding with coupons of 7.75%, 8.25% and 8.50% respectively you have to consider the possibility. All 3 issues are now redeemable.
Citizens Financial Group (CFG) has announced the pricing for their previously announced new fixed rate perpetual preferred.
The issue will have a fixed rate coupon of 5.00%. The issue is rated BB+ (a notch below investment grade). This coupon is a bit skimpy as recent issues that were rated BBB- (BAC for example) – had 5% coupons, but just the same this will eventually trade above $25–although it would seem $25.30 would be the ceiling.
As of 8 a.m. central time the SEC pricing sheet has not been posted so some info is missing in the chart below–we will update it when the data is posted by the SEC.
Rhode Island headquarter banking company Citizens Financial Group (CFG) will be selling a new fixed rate preferred stock. The issue should be rated BB+ by Standard and Poors–a notch below investment grade.
The bank has a fixed to floating rate issue outstanding with a 6.35% coupon which trades strongly and can be seen here.
The issue will be non cumulative and will become eligible for optional redemption in 2025. The issue can only be redeemed on a dividend payment date once early redemption is available.
The S&P500 traded in a range of 2962 to 3008 before closing the week at 2986.
The 10 year treasury moved in a range last week of 1.69% to 1.77% before closing the week at about 1.75%–all in all a pretty quiet range for interest rates.
The economic calendar is pretty quiet this week, but with all the political turmoil there will always be a chance for fireworks.
The Fed balance sheet grew by $16 billion last week–this brings the balance sheet to a point $201 billion above 8/28/19 which was the lowest point in 6 years.
Last week we had a couple new income issues sold.
Aegon Funding LLC (division of insurer Aegon NV (AEG) sold a new baby bond issue with the meager coupon of 5.10%. This issue is investment grade as you might imagine given the coupon I am not showing any exchange trading in this issue at this time.
Ellington Financial (EFC) sold a new perpetual preferred issue last week with fixed-to-floating rate coupon. The initial coupon is 6.75% which will be fixed until 2024. This issue is trading on the OTC Grey market under ticker EGLLP in the $25.20 area righ now.
Modest tumbles are good for holders that may want to exit overpriced issues–now is the chance. The odds for further redemptions would seem to be very high in the next couple of months, but of course one never knows.
I just knew this had to start happening–and I am less than happy that the Gabelli funds have now figured out they can save a bunch of money by calling old outstanding perpetuals.
Gabelli Convertible and Income Securities Fund (GCV) has announced a redemption of their 6% GCV-B issue(see it here). This is going to be painful for holders of this security–currently trading at $26.55.
Investors should make sure that they don’t hold any crazy highly priced Gabelli CEF preferreds. You can peruse the CEF preferred list here and see that the Gabelli family of funds has over 20 issues outstanding (Ellsworth and Bancroft are Gabelli managed funds as well) and many have been redeemable for years. Many are trading at steep premiums.
I would suggest income investors double check their portfolios and make sure those with the largest premiums and are currently callable hit their sell list tomorrow. I am not firmly predicting they are all going to be called–BUT…….
Disclosure–I own at least 5 Gabelli issues–but I don’t believe I have the big premium issues, but I will be double checking later tonight.
NOTE– Gabelli Equity Trust (GAB) filed a registration statement for new issuances of common and preferred stock on 9/24/2019. Within the prospectus supplement it states that the proceeds of any preferred shares issuance will be used to redeem outstanding preferred issues. There is 1 issue at high risk of the 4 outstanding. GAB-D 5.88% is trading at $26.31 and is redeemable.
NOTE–Gabelli Multimedia Trust (GGT) filed a registration statement on 9/26/2019 for new issuance of common and preferred shares and state proceeds from issuance of preferred shares will be used to redeem outstanding preferreds. The 6% GGT-B issue is trading at $26.66 and is redeemable.
I didn’t go further in researching. Obviously there are numerous issues at risk here–some at absolutely huge premiums–some at more reasonable premiums. If you read through the above documents you will have to dig deep to find redemption references.
Additionally even though the funds have filed various registration statements there is no guarantee issues will be redeemed.