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Month: May 2020

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.

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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.

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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.

Federal Agricultural Mortgage (Farmer Mac) to Sell New Preferred–Ticker Update

UPDATE–the OTC Grey market ticker will be FAMCP with the permanent ticker AGM-E

Agricultural lender, Federal Agricultural Mortgage (AGM) has announced a new offering of preferred stock.

The issue will have a fixed rate coupon of 5.75%, will be non-cumulative and will have the typical optional redemption available to the company beginning 7/2025. They will sell 3 million shares and there will be an additional 450,000 available for over allotment.

The issue is unrated.

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

The company press release can be read here.

I will post further information once the filing hits–the company is exempt from filing of the typical prospectuses and final pricing documents.

Economic Damage Sinking In

This week finally looks like the week where investors start to realize that the economic damage done to the global economy will not be quickly repaired. For anyone watching Fed Chair Powell this morning he was in a somber mood–and trying to tamp down expectations without spooking the markets.

I have expected this to happen, but didn’t know it would take this long for all the ‘dip buyers’ to begin to get burned. Fortunately, for all of us, the sell offs have been orderly allowing investors to shift their dollars around slowly.

I haven’t even considered doing any buying this week as last weekend the more I read the more I was convinced that having lots of dry powder is the best way to ride out the next few weeks–or maybe months.

Lodging REIT preferred are getting paddled good today–off 2-5%. I had previously held a couple minor positions in these, but took some ‘steak dinner’ profits (small profits) a number of days ago. It’s going to be a long, long process to get these REITs back in the black.

mREIT preferreds are getting the same shellacking as the lodging REITs–down 1-6%.

I feel good having the largest chunk of money in the utility and closed end fund (CEF) preferreds and baby bonds–not too much movement in this arena. Won’t be buying more of this stuff now, but wouldn’t hesitate to add to positions if we get a downdraft.

Everyone should have lots of patience right now waiting for bargains on decent quality issues—many of the ‘bargains’ are likely traps–this will be realized more and more in the next few weeks.

Stifel Financial Corp Prices New Preferred Issue

Stifel Financial (SF) has priced the previously announced new preferred stock issue.

The 8 million share issue has been priced at 6.125% and will be non-cumulative and become optionally redeemable (at the company’s option) on 6/15/2025. The company plans to use the proceeds for general corporate purposes.

Standard and Poors and Fitch both rate this issue BB- which is 3 notches under investment grade.

This new issue will trade immediately on the OTC grey market under the temporary ticker of STFLL.

The company already has 2 preferred issues outstanding as well as a baby bond–all which can be seen here.

The final pricing term sheet can be read here.

mREIT Invesco Mortgage Reinstates Dividends-Corrected

mREIT Invesco Mortgage Capital (IVR) has reinstated the dividends on their preferred stock issues as well as common shares.

The company had previously suspended the declared dividends in an announcement 3/24/020—the payment was to be made 4/28/2020.

The previous announcement was here.

Today the company announced that the payment for the common shares would be made 6/30/2020 in a combination of common shares and cash–most of it being made in shares with only 5 cents/share made in cash.

Preferred dividends for the first quarter will be paid in cash on 5/22/2020, the dividends for the second quarter will be payable on 6/29/2020.

The announcement is here.

The 3 preferred issues outstanding can be seen here–they jumped $3-S4/share today.

NOTE–correction was made to the terms and date of payment of preferred stock.

Stifel Financial to Sell Non Cumulative Preferred

Stifel Financial (SF) will be selling a new issue of fixed rate, non-cumulative preferred stock.

The issue will be redeemable beginning 6/15/2025 at $25 plus accrued dividends.

SF has 2 preferred issues outstanding currently as well as 1 baby bond–you can see them here.

The new issue will be rated BB- by Standard and Poors–3 notches BELOW investment grade.

The preliminary prospectus can be read here.

Thanks to mcg for noting this one an hour ago.