4/23/2024
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As noted earlier today insurance company American Financial Group (AFG) is offering a new baby bond.
The investment grade rated issue has been priced at 5.125% with a maturity date in 2059.
The issue carries a BBB- from Standard and Poors and a Baa2 from Moodys.
There is no OTC Grey Market trading, but it might be available to you before big board trading if you call your broker with the CUSIP.
Insurance company American Financial Group (AFG) has announced a new issuance of baby bonds.
The company has a number of issues already outstanding–3 baby bond issues to be exact.
The company intends to redeem the 6.25% baby bonds due in 2054 (AFGE), which have been redeemable since 9/30/2019.
The new issue will likely be investment grade (BBB- from S&P and Baa2 from Moodys) so the coupon will be fairly low. The permanent ticker will be AFGC when it begins to trade on the NYSE in a week or two.
Multi strategy REIT Ready Capital (RC) will reopen (sell more shares in a currently outstanding issue) their 6.20% baby bonds (RCB).
This issue was originally sold in July, 2019 and was most recently trading in the $25.59 area.
Disclousre–I own this issue and may take this opportunity to add a little more.
The selling price of the new issue has not been announced yet.
FINALLY the OTC Grey market ticker has been posted. It is GBLNP–of course now you have to wait on your broker to update their systems.
Diversified triple net lease REIT Global Net Lease (GNL) has priced their new preferred.
The issue comes with a coupon of 6.875% and it will be cumulative, but non qualified.
This is unrated–they will sell 3 million shares plus 450,000 more for over allotments.
The issue WILL trade on the OTC Grey market–likely tomorrow, but the temporary ticker has not been announced–likely one of the folks will post it here in the morning the minute it is announced.
I may/may not have a personal interest in the issue–probably only if it trades at $24.75 or at least below $25–then our interest might only be for a flip.
Insurance company/asset manager AXA Equitable (EQH) has posted the pricing on the new preferred stock previously announced.
The issue has priced with a fixed rate coupon of 5.25%–slightly better than what I thought it might price.
The issue is non cumulative and qualified and is a fairly large issue with 29 million shares with 4.35 million more for an over allotment.
The shares will trade on the OTC Grey market immediately under ticker AXQEL.
The pricing term sheet can be found here.
Thank you Jerry for having the correct coupon hours ago.
Insurance/asset manager AXA Equitable Holdings (EQH) has announced a new issue of non-cumulative, fixed rate, perpetual preferred stock.
No doubt this will be another low coupon issue–readers are guessing 4.75% to 5%.
The issue will be lower investment grade–S&P has the rating at BBB-.
This will be the 1st preferred for AXA (at least for many years).
The preliminary prospectus can be found here.
mcg had this one on the Reader Initiated Alert page a couple hours ago.
Online and television retailer QVC (owned by Qurate Retail:QRTEA) has priced the previously announced baby bond.
The issue will carry a coupon of 6.25% on 17.4 million shares (plus 2.6 million over allotment shares).
The issue is low investment grade per S&P and Fitch, but speculative per Moodys.
Being investment grade one would have expected a lower coupon, so this means that holders of the QVCD issue (the currently outstanding 6.375% baby bond), which carries a yield to worst around 5.5% would be a bit better off buying the new issue once it trades (sometime in the next week), assuming it trades in the $25 area.
There will be no OTC Grey market trading in this issue, but if one desires an early purchase a call to your broker might allow you to purchase before permanent market trading.
Triple net lease REIT Global Net Lease (GNL) has announced the sale of a new cumulative, fixed rate, perpetual preferred stock. Of course being a REIT preferred the dividends will be non qualified.
The issue will have an early redemption period in 2024.
The preliminary prospectus can be found here.
The company has 1 other preferred issue outstanding which has a 7.25% coupon (GNL-A) which trades fairly strongly and is at $26.35.
Thanks to Fabrib for being on this one right away this morning.
VEREIT has priced a new issue of Senior Notes–NOT baby bonds.
$600 million in investment grade notes were priced at 3.10%. The notes are expected to be rated Baa3 by Moodys, BBB- by S&P and BBB by Fitch.
I only mention this because the VEREIT 6.70% perpetual preferreds have been a favorite of many of us–and for good reason–where do you find this coupon of a quality REIT?
While I won’t go into detail VEREIT is the old American Realty Capital Properties, which almost fizzled out of existence 5 years ago because of accounting fraud.
VEREIT announced a settlement of about $740 million in September and now the company can move forward. This is no little company–they have $14 billion in assets and $7 Billion in equity, but the lack of a settlement in the American Realty Capital accounting fraud case had hindered the company from moving ahead with the normal course of business.
The VER-F preferred fell by 36 cents today as the filing on the above referenced senior notes stated they would be calling some number of the issue. With VER-F now trading at $25.12 it would seem that a partial call of the issue might leave some opportunity.
With a monthly dividend of almost 14 cents any shares left outstanding will garner a generous coupon.
There are currently 39 million shares of the VER-F issue outstanding (as they had previously redeemed 4 million) so it would require $1 billion for a full redemption, but in the prospectus for the notes they used an ‘assume’ $200 million for redemption–so this should leave around 30 million shares out.
The prospectus on the notes can be read here. The pricing document is here.
I have kept model portfolios (meaning they are not real, but educational ) for years–the ones on this site are just a few years old, but provide some insight, in particular to a newer investor.
The Enhanced High Yield Income Portfolio has worked fairly well–near the intent of the model. This model had an original goal of a 8.25% return, which we lowered to 7.50% a couple months ago as more and more high yield issues were redeemed. This portfolio began on 1/25/2018–so just short of 2 years old.
The portfolio is very rarely traded–and new purchases are primarily done to re-invest dividends. Occasionally issues with known problems are sold–but it is rare. I did unload the hated Spark Energy 8.75% Fixed-to-Floating Rate preferred because it is too volatile for my taste. This issue plunged as low as $17 last December/January and it took 8 months to get back near $25 where we took the opportunity to sell the issue.
The Enhanced portion of this portfolio was intended to hold a REIT or 2 which had some upside potential. The primary vehicles were to be issues like Whitestone REIT (WSR) and Independant Realty Trust (IRT), both issues that we had traded in and out of many times for short term profits. I simply have not had time to use this feature since the original profitable sale of WSR.
We had written before that this portfolio was too concentrated with energy related issues–which included some energy (LNG) shippers and in my opinion it is still too concentrated. Unfortunately just like real life decent high yield opportunities are few and far between.
So in spite of a high cash position of around 20% performance has been on target–14.77% in 22 months. So the portfolio should be right around 8% annually when the 2nd year ends. While not as great as it could be it is a lower stress 8%–no trading, no babysitting and no flipping.
The Medium Duration Income Portfolio, which should be the most steady portfolio of the 2 models, has performed poorly. These are shorter duration issues with maturities generally in 10 years or less–although we modified the ‘rules’ to allow up to 25% of the portfolio to have longer maturities as our choices became very limited.
This medium duration portfolio happened to hold a position in Atlas Financial 6.625% baby bonds until 5/2019 at which point the pain was great and the outlook for recovery was marginal so it was sold. The lesson here was that companies without longer histories can bring great pain as about a $5,500 loss was taken on this position–so about 5% of the portfolio evaporated.
So currently this more conservative (in duration) portfolio has a gain of about 6% in 21 months–which would be 11% without the Atlas issue–but it is what it is
It should always be expected that if you are buying issues with maturities in the near future you will be rewarded with a more meager coupon, but hopefully with a ‘date certain’ for return of your capital
Some of my most recent lessons are–
–even with a modest $100,000 portfolio you need diversification of issues. 10-12 is likely not enough to save you if 1 issues falls by 55%. I am thinking for $100,000 15-16 issues are probably better.
–sticking to rules that are not reasonable may well cost you in the end. For instance the Medium Duration Income Portfolio allowed for only issues with 10 years or less to maturity–because of this it held too much cash. Opening it up to allow 25% longer dated issues allows a much broader selection.
So while there are wild rides over a 2 year period in the end ‘buy and hold’ is not a terrible thing for those not wanting to be glued to the computer screen (or phone) like many of us are–unfortunately.