Can’t Fight the FED So Have to Join in the Fun

Bad news is good news, good news is great news–even no news is good news. So if you run an airline and your load factor goes from down 90% to down just 85% it is great news–I guess. The real question is where will it be next fall? With the FED pumping at the rate of $50 to $100 billion a week there is no use trying to guess where crazy markets will top out.

I have been chasing the new Pinnacle Financial 6.75% preferred issue all morning–I thought it would trade strong, but not quite this strong. I thought I would be able to get a decent ‘flip’ (short term holding to be sold for 1-2% gain). I have raised my bid 3 times–now I am done–I get it at $25.35 or not at all–oops it just executed so I have a 1/2 position and would be happy to sell around $25.75–or if it drops go ahead and add the other 1/2 position.

I am maintaining the 70% invested position that I have had and which has had great capital gains. Mostly utility and CEF preferreds and baby bonds–they are keepers.

I did get out of the UMH Properties 6.875% UMH_B shares–took a few days to get the price I wanted to ensure my 2% dividend capture—I wrote last week about this one (and others).

I forgot to mention I had taken a 1/2 position in the New York Mortgage Trust 7.875% perpetual preferred (NYMTO) last week on 5/22–at $18.38. I had written on an upbeat report out of NYMT the day before. The dividend is suspended on these cumulative shares right now, but I suspect they will reinstate soon. I have now sold my position at $19.60.

I wish I would have jumped on the new Stifel 6.125% perpetual—a $2/share gain in 8 days would have been possible-crazy–

I suspect I will be doing a lot of flipping and dividend captures all summer long–not likely to see great buying opportunities any time soon–party on!!

Pinnacle Financial Partners Prices New Preferred

Tennessee banker Pinnacle Financial Partners (PNFP) has priced the previously announced preferred stock issue.

The non-cumulative issue comes to market at a coupon of 6.75%. They have sold 4.8 million shares and there are another 720,000 available for over allotment.

For what it is worth the shares are rated BBB+ by Egan Jones and BBB- by Kroll Bond Rating Agency. I am not overly familiar with these rating agencies–and I know that many investors eye their ratings with a bit of suspicion.

This issue will trade on the OTC grey market right away under ticker PNFPB.

It is my intention to try to buy some of this issue under $25–will let it trade a bit and see how it trades. It is NOT my intention to hold it long term.

The pricing term sheet can be found here.

2 New Preferreds Announced

New issues are coming fast after the month or two break we had in March and April.

Huntington Bancshares (HBAN) has announced a new non cumulative perpetual issue. The issue should be split investment grade–BB+ by Standard and Poors and Baa3 by Moodys.

The banker has 2 other preferreds outstanding which can be seen here.

The preliminary prospectus is here.

Tennessee banker Pinnacle Financial Partners (PFFP) has announced a new non cumulative perpetual issues as well. I am seeing no rating right now for this issue.

The preliminary prospectus can be found here.

mcg and Early Bird were on these new issue.

Scorpio Tankers Prices Senior Notes

Large tanker fleet owner Scorpio Tankers (STNG) has priced their previously announced senior unsecured notes. These notes are unrated.

The notes are priced at 7% and they will offer 1 million shares (bonds). plus 150,000 for over allotment.

Shares will trade sometime in the next week or so–there will be no OTC trading so you will have to call your broker if you want shares prior to exchange trading with the CUSIP.

NOTE that there is a bonus rate for early redemption (see notes on grid below).

The pricing term sheet can be found here.

Hancock Whitney Prices Baby Bond

The new baby bond from banker Hancock Whitney (HWC) has priced with a relatively tasty coupon of 6.25%. The issue is investment grade.

The permanent ticker will be HWCPZ, which will be used once trading begins on NASDAQ in the next week or so. There is no OTC grey market trading, but those anxious investors can potentially buy with the CUSIP by calling your broker.

The pricing term sheet can be read here.

As Common Stocks ‘Party On’ Preferreds Follow

While common stocks party on the backs of extreme liquidity from government agencies of all sorts it looks like preferreds are joining in.

A few weeks ago I started doing a little dividend capture and new issue ‘flips’–given that I am flush with plenty of cash it seemed reasonable to try to garner ‘steak dinners’ (minor short term gains) on some new issues and dividend captures.

I started out by buying a 75% position in the newer Wintrust Financial (WTFC) 6.875% reset preferred at a price of $24.90. Given that I simply had a short term goal to garner 2% in a month or less I have now let this issue go (I sold it) as it hit $25.70 today. I left a little on the table, but the goal was reached–so the shares were sold.

Also a few weeks ago I bought a full position of the UMH Properties 8% perpetual preferreds (UMH-B). This issue is redeemable 10/20/20 and the company says they will be redeeming the issue. This is like shooting fish in a barrel as I bought shares @ $25.10 then the shares went ex-dividend on 5/14 for 50 cents. The share price is back above $25 so I have an order in to unload at a 2% gain.

With UMH-B with a ‘threatened’ redemption in October the shares should have a $25 floor–and should move toward $25.40 or so in August near ex-date. So one could go ahead and continue to hold–or sometime in early August it may still be around $25.10 in which case I would buy back–numerous ways to play this.

Another ‘old friend’ is the WR Berkley 5.625% subordinated note (WRB-B) which is currently callable–I bought a 1/2 position at $24.92 and it is now at $25.53–too high and I will exit today. It doesn’t go ex dividend until July so it has 1 1/2 dividends in the price, but could be called any time.

So I am off to see what else is out there to provide a little extra income while I wait.

Southern Banker Hancock Whitney Corporation Announces New Subordinated Notes

Banker Hancock Whitney (HWC) has announced a new $25 subordinated note issue.

The issue will be an investment grade issue—BBB- by Standard and Poors and Baa3 by Moodys.

The issue will have a permanent ticker on the NASDAQ market of HWCPZ when it finally begins to trade. No OTC grey market trading will take place, but when the CUSIP is known you can call your broker if you want to get it before exchange trading.

The company has 1 other baby bond outstanding with a coupon of 5.95%–it can be seen here. It becomes callable next month (6/15/2020).

The preliminary prospectus can be read here.

EarlyBird, If You Prefer and George M were all on top of this new issue.

Scorpio Tankers Announces Baby Bond Issuance

Following the saying ‘get it while the getting is good’ a new baby bond have been announced this morning.

Giant tanker ship owner Scorpio Tankers (STNG) has announced a new baby bond issue.

The senior unsecured note is due in 2025 and should trade under the permanent ticker of SBBA when it hits the NYSE. The issue will not trade on the OTC grey market, but those that want to buy sooner will need to call their broker with the CUSIP once it is announced.

The preliminary prospectus can be read here.

STNG has had decent earnings lately--but like all ship owners it can swing to poor earnings quickly–make sure to understand the risk with shippers.

STNG had a baby bond which matured on 5/15/2020 and thus is no longer trading.

mcg was right on this with EarlyBird chiming in.

Monday Morning Kickoff (on Tuesday)

The S&P500 traded in a range of 2914 to 2980 last week before closing the week at 2955–a gain of 1.5% or so.

The 10 year treasury moved in a range of .648% to .744% and closed the week near the low at .657%.

The Fed Balance Sheet moved over $7 trillion on the way to a much higher level–this is up $103 billion for the week. Sickening–but what else can one do?

The average $25/share baby bond and preferred stock moved higher by 12 cents last week to $22.62. Investment grade moved higher 1 penny, with mREIT issues up 38 cents–the biggest moving sector. CEF issues were up 28 cents to $24.86. All other sectors were pretty quiet. Of course the big laggard is the Lodging REIT issues (not individually shown on this chart) which are still at a lowly $12.22/share.

Last week we had 4 new income issues announced–getting back to normal in this area.

Insurer Brighthouse Financial (BHF) announced an split investment grade issue with a tasty 6.75% coupon.

This issue is now trading under the permanent ticker and last was traded at $25/share.

This image has an empty alt attribute; its file name is bhf.png

Banker Truist Financial Corp (TFC) announced a new investment grade issue with a 5.25% coupon.

This issue is trading on the OTC grey market under ticker TFCLL and closed last Friday at $24.95.

This image has an empty alt attribute; its file name is image-5.png

Bank holding company First Horizon (FHN) sold an issue of 6.50% preferred stock with a junk rating.

The issue is trading on the OTC grey market and last closed at $24.72.

This image has an empty alt attribute; its file name is fhn-1.png

Finally American Financial Group (AFG) announced a new baby bond with a coupon of 5.625%–the issue is investment grade.

I am not seeing this new issue trading as of yet–likely will trade sometime this week.

This image has an empty alt attribute; its file name is afg1.png

mREIT New York Mortgage Trust Releases Results

mREIT New York Mortgage Trust (NYMT) has released the results of their financials for the quarter ending 3/31/2020.

NYMT held residential mortgages and securities as well as multi family loans and other commercial mortgage backed securities.

The company took massive losses for the quarter, but it looks like maybe now they have the ‘ship righted’ (maybe).

The earnings announcement is here.

The company had previously suspended their preferred dividends and thus far has missed 1 dividend payment on the preferred which was due in April–no new announcement on the dividends has been made as of yet.

The company’s preferred issues can be seen here.

American Financial Group Baby Bond Pricing Detail

Finally the detail on the new American Financial Group (AFG) has been released.

The issue should trade in the next week or so. You will have to check your broker website to see when it trades–or if you are impatient you can place a phone call to your broker with the CUSIP noted in the grid below.

The pricing term sheet can be read here.

American Financial Group Prices Baby Bond Issue

Insurer American Financial Group (AFG) has priced their new issue of subordinated notes. The SEC documents have not yet been filed so I will post further detail tomorrow morning.

The coupon will be 5.625%. The ticker will be AFGD. Standards and Poor’s rates the issue BBB- and Moody’s Baa2—both investment grade. They are selling 6 million shares.

Being debt this will not trade on the OTC grey market. Once the cusip is known investors can call their brokerage if they want it before exchange trading.

This issue has the potential for trading quite strongly – at least looking at the 5.875% issue that is currently outstanding and trading between $26 and $27 would seem to indicate potential to trade in the $25.50 to $26 area. I may have an interest at a fair price once exchange trading begins.

The company press release on this new issue can be read here.

Insurer American Financial Group to Sell New Baby Bond

Insurer American Financial Group (AFG) will be selling a new issue of subordinated debentures.

The company currently has 3 other issues outstanding which can be seen here.

The company will have the right to defer interest payments for up to 5 consecutive years with a default occurring.

The new debentures should be rated low investment grade.

The new issue will trade under ticker AFGD when they hit the exchange in the next week or so.

The issue will not trade on the OTC grey market, but investors may be able to call their broker and buy early via the CUSIP (not yet known).

The preliminary prospectus can be found here.

Thanks to mcg for the instant heads up.

First Horizon National Prices Preferred Issue

Banker First Horizon National Corporation (FHN) has announced the pricing of their new preferred stock.

The coupon will be 6.50%. The issue is non-cumulative and is rated BB- by Fitch and Ba2 by Moodys–not investment grade.

The permanent ticker will be FHN-E when it finally trades on the NYSE.

As of this moment the OTC grey market ticker has not been announced.

The pricing term sheet can be read here.

First Horizon National to Sell New Preferred

Tennessee banker First Horizon National Corporation (FHN) will be selling a new issue of Non-Cumulative preferred stock.

The new issue will be rated BB- by Standard and Poors and Ba2 by Moodys—both non investment grade.

The company has one other preferred issue outstanding which can be seen here.

The preliminary prospectus can be found here.

mcg was on this one early as usual.

Banker Truist Financial Prices Fixed Rate Preferred

Truist Financial (TFC) has priced the previously announced non-cumulative preferred stock.

The issue will carry a fixed rate coupon of 5.25%. The issue is a large one of 20 million shares with another 3 million available for over allotment. The shares will have an optional redemption period starting 6/1/2025.

The issue is investment grade.

Shares will trade immediately under OTC grey market temporary ticker TFCLL.

The pricing term sheet can be seen here.

Shenanigans in the Commercial Mortgage Patch?

You know it is happening–I know it is happening–the question is to what level phony mortgages are being written in the commercial mortgage market?

We all have our own thoughts and opinions on subjects like this, but to truly get to the bottom of it you would need to work 24 hours a days for months on just this one topic. Since none of us have this type of time we depend on others to do the legwork.

Here is an article–I can’t vouch for how accurate it is, but typically where there is smoke there is fire–is it a backyard bonfire, or a ranging wild fire?

Check out this article if you haven’t seen it already.

Purchased Some South Jersey Industries Baby Bonds

Yesterday I made a purchase of a 1/2 position in the South Jersey Industries 5.625% Junior Subordinated notes (SJIJ).

While the issue is a notch under investment grade it appears that the risk/reward was about right for the price I paid–$24.80–a current yield of around 5.70%. These shares had traded solidly in the $26.50 area prior to the pandemic.

As I have mentioned I am pretty loaded up with utility issues–mainly electric utility baby bonds and with closed end funds (CEF) preferreds–most bought at bargain prices last month so have been mostly lying in the weeds in the last couple of weeks around 70% and watching for reasonable buys.

I am quite convinced we will see lower prices in many preferreds and baby bonds–but when? In the meantime I really want to get back on the dividend train so will get some decent quality issues here and there to get the dividends and interest rolling.

South Jersey Industries is the natural gas supplier for a portion of New Jersey and recently reported solid earnings for Q1 ending 3/31/2020. More importantly they affirmed their forecast for the balance of the year–very solid numbers (of course who can totally forecast in this environment).

The shares go ex dividend on 5/29/2020.

Truist Financial to Offer New Preferred

Truist Financial (TFC), which is the new name of the company composed of BB&T and SunTrust Bank which previously merged, is offering a new preferred issue.

The issue will be non-cumulative and investment grade and will have the relatively typical terms.

The company has a number of other issues outstanding which can be seen here.

The preliminary prospectus can be read here.

Thanks to mcg and EarlyBird for ferreting this out earlier today.

Brighthouse Financial Prices New Preferred

Insurance company Brighthouse Financial (BHF) has priced their new issue of non-cumulative preferred stock.

The issue is split investment grade (investment grade per S&P, but not per Fitch or Moody’s).

The issue will trade today on the OTC grey market under temporary ticker BHFBL.

The pricing term sheet can be found here.

Hard Not To Like These Gains

Looking over accounts today it is difficult to not like the nice gains I have today—I don’t necessarily understand the market movement from a common sense perspective, but just the same I will take the gains.

In spite of the gains there are still plenty of baby bonds and preferred stocks falling today–some of them kind of hard–with fixed-to-floating rate issues acting a bit dicey.

One loser today is the Customers Bancorp Fixed to Floating rate 7% preferred (CUBI-C). This issue is off more than 3% to $22.33. Prior to the pandemic this issue was trading up near $26–way too high. The issue enters the ‘floating’ period on 6/15/2020—less than a month away. The issue will float at 3 month Libor (now .42%) plus a spread of 5.30% so today that would equate to 5.72%—1.28% below the current coupon–something has to give and in this case it is the price.

It is pretty likely that we are going to see quite a few of the fixed-to-floating rate issues remain outstanding in the future—unless we get some really spiking interest rates coupons will be heading lower.

BE CAREFUL–pricing on fixed to floating rate issues will react negatively to a lower reset in the coupon 2-4 quarters prior to the new reset occurring.

We would suggest double checking any fixed to floating rate preferreds you are holding. Our fixed-to-floating rate page shows the 1st call dates (which is also when rates begin to float) as well of the ‘potential coupon’. A large share of these issue would reset from 1-2% lower in coupon if they reset today.

Many of these fixed-to-floating rate issues have some time before they go to quarterly resets so everyone should make sure where their issue stands at least 1 year prior to the first coupon reset and then apply your best prediction to where interest rates might be at reset time so you can exit if necessary.

Brighthouse Financial Announces New Preferred

We start off the week right away with another new preferred issue being announced.

Insurer Brighthouse Financial (BHF) has announced they are selling a new non-cumulative preferred. The issue will be rated BBB- (low investment grade) by Standard and Poors and Ba2 (below investment grade) by Moodys.

The issue will have the typical optional redemption (optional to the company) period starting in 6/25/2025.

The permanent ticker will be BHFAO when it finally hits the NASDAQ exchange.

The company has 1 preferred and 1 baby bond outstanding now and they can be seen here.

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

mcg was right on top of this new issue under the Ready Initiated Alerts.

Monday Morning Kickoff

Well we are starting a new week—will it be an up week or a down week for equities—no one knows but almost undoubtedly it will be exciting.

The S&P500 opened last week at 2908 and traded in a range of 2766 to 2946 before closing the week at 2864–down about 2% from the Friday before.

The 10 year treasury traded in a range of .59% to .74% before closing at .64% which was 4 basis points lower than the week before.

The Federal Reserve balance sheet grew by a MASSIVE $214 billion last week to $6.94 trillion–remember last week the FED was going to begin to buy exchange traded funds (ETFs)–primarily composed of investment grade corporate bonds issues, but also some junky high yield corporate bonds.

There were 3 new income issues sold last week–the most we have seen in over 2 months. It is becoming obvious that new issues are not being received all that well as all 3 issues are trading under $25–we shall see if these were priced right or if the coupon were simply too meager for the marketplace we are in at this time.

None of the 3 are investment grade, but the Farmer Mac (Federal Agricultural Mortgage Corporation) issue is fairly high quality (in my opinion) and if rated would be low investment grade.

Stifel Financial (SF) sold a new non-cumulative preferred–details are below. The issue traded on the OTC Grey market under ticker STFLL and closed the week at $24.84.

This image has an empty alt attribute; its file name is sf-c.png

Federal Agricultural Mortgage Corporation (AGM) announced they had sold 3 million shares of 5.75% non cumulative preferred. The issue is trading on the OTC grey market under temporary ticker FAMCP and last priced at $24.45.

Lastly Chicago banker First Midwest Bancorp (FMBI) sold a new non-cumulative preferred issue with a coupon of 7%. This issue is trading under the temporary OTC grey market symbol of FMEEL and last priced at $24.55.

This image has an empty alt attribute; its file name is fmbi-1.png

It looks like markets will move strongly higher today on some cheer leading from FED chair Powell last night on 60 minutes as well as some potentially good news from biotech company Moderna on a vaccine–hold on for a ride.

First Midwest Bancorp Sells a New Preferred

$18 billion in assets community banker First Midwest Bancorp (FMBI) is selling a new issue of preferred stock.

The coupon is 7% and the issue is non-cumulative. The normal optional early redemption period will begin 8/20/2025 and on any dividend payment date thereafter.

The issue is rated BB- by S&P and Ba1 by Moodys—not investment grade.

The issue should trade today on the OTC grey market under temporary ticker FMEEL.

The pricing term sheet can be read here.

The preliminary prospectus can be read here.

mcg had this one in the Reader Initiated Alerts yesterday.