Interesting, Short Read on CLOs

Gary Hargreaves posted a short article on the Sandbox page relative to CLO exposure by a few companies that I follow to some degree so I am just posting the link for others that may have missed Gary’s post. The article is 6 weeks old, but still may be of interest.

The article is short and not detailed for the most part, but it does highlight some history and touches on Oxford Square (OXLQ), Prospect Capital (PSEC) and Saratoga Investment (SAR).

The bottom line is be cautious with what you own–dig a little deeper to find out who owns equity ‘tranches’ of CLOs (the riskiest tranches)–don’t chase the juicy yield some of the common shares pay, without understanding some of the risks.

Here is the article in the BDC Reporter

Ford to Offer Baby Bonds

Vehicle manufacturer Ford Motor (F) will be selling a note offering with a maturity date out in 2059.

The company offered notes earlier in the years (May) so this will be their second offering this year. The previous note (which can be seen here) carries a 6.20% coupon.

The preliminary prospectus for the new issue can be seen here.

There will be no official OTC Grey market trading on the issue, but one may be able to purchase before exchange trading by contacting their broker once the CUSIP is announced.

earlybird was right on this one on the Reader Initiated Alerts page.

Customers Bancorp to Sell Baby Bonds

Customers Bancorp (CUBI) will be selling a small issue of $25 subordinated notes with a due date in 2034. Details are not known but I believe the issuance will be 1-1.5 million shares (bonds).

Of course CUBI has numerous issues of preferred stock outstanding and they have always seemed to be favorites with investors.

Their preferreds outstanding can be found here. All 4 issues outstandings are fixed-to-floating rate issues.

Note that within the preliminary prospectus for the new notes the company states they ‘may redeem shares of our preferred stock once they become redeemable’. The next issue available for redemption is the CUBI-C 7% issue which is redeemable in June, 2020.

The preliminary prospectus can be found here.

Baby Bond Listing Now Loading Fast

The Baby Bond page is the 4th most accessed page on the website–and honestly, the crappiest in performance.

Historically speaking, many of us that have watched these things for a long while, know that just getting a reliable source for baby bond quotes is near impossible–and further getting them to load in a timely fashion is a royal pain in the ass (to be blunt).

For 14 years I have fought this problem and I finally believe I have it solved (maybe famous last words before it breaks again).

Anyway the page had an average load time of 10.8 seconds–really. Who the hell waits around for 10.8 seconds for the page to load? I can tell you 69% of the folks accessing this page don’t wait–what frustration.

As I have ‘clocked’ the page it is now loading in around 2 seconds which is about as fast as any page.

If a few readers could access the page here and let me know in the comments below if the page is fairly fast–or still painfully slow I would appreciate it. Sometimes what I see is not always the same as what you might see and feedback would be helpful.

Thanks for your help.

And the Poundings Continue

The poundings of common stocks continue to take place today, but with a totally different bond market reaction.

With the S&P500 off just over 1% the 10 year treasury is moving sharply lower as well–off 13 basis points (13/100 of a percent) to 1.70%. Yesterday with the S&P500 off just less than 1% the 10 year treasury was actually up 6 basis points from last weeks close–this made no sense. Obviously the bond market was betting on a trade deal–which was in conflict with stocks.

I though for sure I would find some preferred stocks and baby bonds beginning to fall in sympathy with common stocks today–but NO–they are virtually unchanged, on average, over yesterdays prices. Both junky issues and investment grade preferreds and baby bonds are actually about even (although taking out the CBL and Just Energy issues from the picture shows prices up a couple cents).

We do note that the Pennsylvania Real Estate Investment Trust (PEI) perpetual preferreds are off 8-10% (1.50 to 2.00) in sympathy with CBL no doubt. You can see the PEI issues here.

An income issue holder has to be happy right now with the reaction of our issues to this rocky market. BUT this could change. Remember last December–I went into the month with a nice gain for the year and ended the month with a 1% loss for the year–11 months worth of work up in smoke in 30 days. Fortunately this year has been kind and thus far I am happy with gains, but have plenty of dry powder available.

Just Energy and CBL Properties Cut Preferred Dividends-Updated

It has been a tough time for investors in the preferred stock of Canadian energy reseller Just Energy (JE) and mall owner CBL Properties (CBL).

While the preferred shares have been under pressure for some time it was only yesterday that both company’s announced suspension of their preferred stock dividends.

Just Energy has just 1 preferred issue outstanding which can be seen here. The issue had been trading around $16-$17/share last week and plunged yesterday to $9.80/share on the suspension announcement.

For what it is worth these shares are cumulative–thus dividends will continue to accrue. Of course whether they are ever paid probably is kind of a long shot, but speculators can determine that for themselves.

The Just Energy announcement can be read here.

Of course CBL Properties preferred stock had already seen tough times and the announcement was expected by many. CBL has 2 outstanding preferreds which can be seen here.

UPDATE

These shares which were already depressed trading around $10–per Ptrader they are trading much lower this morning.

The CBL issues are cumulative so dividends continue to accrue–again, whether they will ever be paid may be dicey.

The CBL announcement can be read here.

While very conservative investors such as myself are unlikely to have any interest in these preferred shares an opportunity may present itself for more adventuresome folks–only time will tell.

SVB Financial Group Prices New Preferred

SVB Financial Group (SIVB) has priced the previously announced new preferred stock offering.

The issue priced at 5.25% and will be non-cumulative, but qualified.

The issue is split investment grade with Moodys rating the issue Baa2 and S&P being at BB.

The issue will trade today under OTC Grey market ticker SIVBL.

The pricing term sheet can be seen here.

SteveA was right on the pricing under yesterdays announcement article.

Common Stocks Can Go Down?

For the 1st time today I looked at the stock market numbers at 11 a.m. (CST)–wow the DJIA is off 200 points. I didn’t know stocks ever fell–in particular 2 days in a row.

So just for the fun of it I turned on the TV (which I seldom do during the daytime anymore) and found 5 panelist on CNBC arguing about the market fall–each one of them was the smartest person in the room, at least that is what was conveyed.

Honestly while I don’t want to see a stock market crash, or even anything close to it, it would do all the smart people some good to see the equity markets take a nice 10% or even 20% setback – once we see that kind of a market we will at least have more of a clue who really knows what they are talking about.

Also a nice tumble in markets would separate the wheat from the chaff on Seeking Alpha where the never ending “recommendations” by some folks of total crap companies really grinds on me. With the ‘rising tide lifts all boats” market these folks are allowed to lead the sheep to slaughter. Not that there are not some good items on Seeking Alpha, but most of the most popular writers are legends in their own minds.

I concentrate on what I own–I watch interest rates and some potential causes of movement in the rates. I can’t say I get any ideas off of the TV and I get few ideas from Seeking Alpha–BUT I will admit to stealing ideas from the folks commenting around this website. I am only looking for a 6-7% annual return–I don’t need ideas from goofballs-and their are plenty of them out there.

SVB Financial Group to Sell Fixed Rate Preferred

California banking company SVB Financial Group (SVB) has announced a new issuance of fixed rate preferred stock.

The issue will be non-cumulative, but qualified and will have an early redemption period starting in February, 2025.

We find no rating for this new issue at this time from S&P, but it will be rated Baa2 by Moodys.

The issue will be traded on the NASDAQ once it trades on its permanent exchange under ticker SIVBP.

No OTC Grey Market ticker is yet known on the issue.

The preliminary prospectus can be found here.

2 Favorites to Be Called For Redemption

It looks like the Axis Capital 5.50% perpetual preferred (AXS-D) will be called soon (no official notice has yet been made).

Axis Specialty Finance LLC has announced a new $1000 Fixed-Rate Reset Junior Subordinated Note issue with the stated “use of proceeds” for “redemption of all of our outstanding 5.50% Series D preferred shares”.

This issue was one of the issues we owned as it traded right in the $25 area and had little to no call risk (i.e. money would not be lost on a call). It is now trading at $25.07 after going ex-dividend on 11/14 with a pay date of tomorrow. Assuming the call notice will give 30 days notice the accrued dividend should be in the 11-14 cent range meaning a value of $25.11 or 25.14.

Additionally Kimco Realty (KIM) has announced the redemption of the 5.50% KIM-J issue on 12/31/2019. We did not own this issue, but had studied it for a potential purchase. The issue will be redeemed at $25.29028 as it will have about 2.5 months of accrued dividends included as the last payment date was 10/15/2019. The notice is here.

Monday Morning Kickoff-Corrected

I HAVE REMOVED THE CHART ON PREFERREDS AND BABY BONDS AS I FOUND AN ERROR IN CALCULATIONS.

Last week, being a holiday week, was fairly quiet, although–of course, the S&P500 moved higher. The average moved in a range of 3117 to 3154 before closing the week at 3140–a gain of just under 1% for the week. All news is good news (so says stock prices).

The 10 year treasury traded in a range of 1.73% to 1.80% with a close at 1.78%–essentially unchanged from the week before.

The FED balance sheet data was NOT released at noon Friday as is normal, because of the holiday business week. We should see it by noon on Monday.

As might be expected the number of new preferreds or baby bonds announced last week was muted.

Fortress Transportation and Infrastructure (FTAI) priced a previously announced fixed to floating rate preferred stock issue that carries a coupon of 8.00%. The issue is trading under the temporary OTC ticker of FTABP and last traded at $25.21. Details are here.

Banker First Republic (FRC) priced a new fixed rate at the rock bottom coupon of 4.70%. The issue is trading on the OTC Grey market under the temporary ticker of FRCJL. It last traded at $24.90.