Ouch!! Truist Financial Prices Preferred

Banker Truist Financial (TFC) has priced the previously announced preferred issue.

The issue prices with a 4.75% coupon. The banker is investment grade, although not strongly investment grade–this is a crazy coupon, but likely they will have no trouble selling the issue.

With a coupon this low the currently outstanding, and redeemable, issues at 5.20% could be at risk of being called, but they are trading at just a tiny premium over $25 plus accrued, so they is little call risk.

The pricing term sheet can be read here.

Banking Giant Truist Financial to Sell Preferred Issue

Banking giant Truist Financial (TFC) has announced a new issue of $25 preferred stock.

The issue will be non-cumulative, but qualified. I expect it will be investment grade rated by both Moodys and Standard and Poors.

Truist is the surviving company from the merger of BB&T and Suntrust late last year and has assets of over $500 billion.

Truist has 5 outstanding preferred issues and the company disclosed they ‘may’ call some preferred stock. The only issues redeemable at this time have coupons of either 4% or 5.20% (2 issues at this level).

‘yield talk’ on the issue is 5% per EarlyBird who was on top of this one.

The preliminary prospectus can be read here.

Sortable Spreadsheet – All $25/Share Issues

Below you can find instructions for the sortable $25 master list (baby bonds and preferreds stocks)–finally after months of being too busy to get this updated I have all but a few issues now included–I hope to get the last few added within a week.

If you already ‘know the ropes’ on this spreadsheet you can go right to the spreadsheet here.

Version 1—12/16/2019

Version 2 —2/15/2020

Version 3—3/4/2020

Version 4–7/29/2020

NOTE THAT NEW VERSIONS HAVE CALLED ISSUES REMOVED AND NEW ISSUES ADDED

UNTIL THE NEXT VERSION IS RELEASED (60-90 DAYS) NEW ISSUES ARE NOT ADDED UNLESS YOU DO IT ON THE COPY YOU MAKE

Please NOTE that this will not work with EXCEL only Google Sheets.

  1. You need a Google Account to use this sheet correctly. Go here to set up an account if you do not have one. While an account gives you gmail and other apps it importantly gives you an account for accessing and using Google Sheets.
  2. After creating an account with Google make sure you are signed in.
  3. Go the the sortable spreadsheet which you can find here.
  4. Once you open the spreadsheet as long as you are logged into your Google account the spreadsheet will automatically be in your spreadsheet list.
  5. You will see that when you open the spreadsheet it will say ‘view only’.
  6. Make a copy of the sheet for yourself–go to File, Make a Copy then give it the name you want.
  7. You will now be able to use own copy to sort etc.

Note that there are 3 sheets to the spreadsheet–I have hidden 2 which are not needed by you unless you wish to make changes. The tab you need is labeled “Filter”.

Unless you are very well versed in Google Sheets I would suggest not modifying the other 2 pages–BUT if you are like me and just can’t help yourself you can always come back here if you ‘break’ the sheet.

mREIT Results Looking Good – For Now

Mortgage REITs (mREIT) are releasing earnings and at least on the surface earnings are fairly stellar–although one needs to drill down a bit into the various special gains and losses within the earnings statements.

On Tuesday giant mREIT AGNC (AGNC) reported earnings and reported book values that were $1.30/share above those reported at Q1 end.

Today much smaller mREIT Dynex Capital (DX) reported earnings which were bolstered by large gains on sale of investments, although the company’s book value per share fell by $1.32/share

Of course these 2 company’s have preferred stock issues outstanding with current yields in the 7-8% area. We have a page of the mREIT preferreds here.

Later today we will have sector giant Annaly Capital (NLY) announce earnings.

For those investors with a tolerance for higher risk these are the best current yields in the preferred stock world (excepting some lodging REITs, which may not be around in a year). Maybe a small ‘taste’ of some of these preferreds is in order?

AGNC’s earnings release can be read here.

The Dynex earnings can be read about here.

Consumer Confidence Drops

In a fairly important signal that consumers may well begin to retrench in their spending Consumer Confidence Index fell by a healthy 5.7 point in July to the level of 92.6.

Last month the reading was at a level of 98.3 , which was up from the low point in April and May, of 85.7. The index had hit a peak in February of 132.6.

Prior to the creation of the new ‘fake economy’ this index was one I watched closely–how could you not watch it with the consumer being 2/3rds of the economy. Now with the Fed running the printing press day and night and liquidity sloshing around everywhere even though the consumer feels lousy they have pockets full of ‘free’ money to spend.

Article on the Index

Oh well–in spite of the lack of realistic expectations by investors I will still watch this index and employment numbers as keys to the future.

Thursday we have GDP being released for the 2nd quarter–it will be ugly–everyone knows it. Also on Thursday we have the important 1st time jobless claims that day as well–if these numbers show a worsening markets may take this news badly. If the economy is to improve we can’t see 1.5 million new unemployment claims every week.

Lastly we are awaiting the new Covid package from Congress. Dems want $3 Trillion and Repubs want $1 Trillion–so you know they will end up at $2 (more or less). I suppose the markets will rally on the news of a deal–why waste a good excuse to drive prices ever higher?

Monday Morning Kickoff

Another week is upon us and another bit of mystery as to how markets will trade presents itself.

We have some potentially ominous developments, which we all knew were coming, at hand and no one—no one, knows what 20 million folks having their paychecks cut by $600/week will do to the economy and the equity markets. Additionally eviction notices are starting to be issued to those who have not paid rent for months and soon foreclosures will begin to occur on some of the homeowners who are now part of the 5 million or so mortgages now in forbearance.

Of course we all know that congress will create new programs for aid to these folks, but I am guessing with somewhat less generous terms–just the same ramp up the printing press once again. The time between now and when a new stimulus is hammered out could be rocky, but on the other hand could it be that the ostriches will simply bury their collective heads in the sand and ignore the obvious?

Last week the S&P500 opened the week at 3224 and closed it out on Friday at 3215–for the tiniest of losses. The index is just 5-6% off a 52 week high.

The 10 year treasury yield fell a bit last week–opening the week at .61% and closing the week at .59%

Last week there was a small amount of growth in Federal Reserve balance sheet as assets grew by $6 billion. The week before the balance sheet grew by $38 billion as QE started to ramp back up. This after the balance sheet fell by $248 billion the previous 6 weeks as longer dated repurchase agreements were closed out.

Last week the average $25 preferred stock and baby bond rose in price by 20 cents. Utility issues remain strong rising by 25 cents–banks by 18 cents and investment grade by 20 cents. The only losing sector was the lodging sector (not in the chart below) which was off by 19 cents.

We had one new preferred issue come to market last week as junky Nexpoint Real Estate Finance (NREF) brought a 8.50% issue to market. The shares were priced at below liquidation preference at $24/share.

Shares are now trading on the OTC Grey market under temporary ticker NREFP. After trading as low as $22.92 shares closed at $23.05 on Friday.

Markets Living on Borrowed Time

Virtually every day we continue to see equity markets move higher–in spite of the news on Covid 19 and poor employment prospects.

Not to repeat myself too often, but I am just sitting tight–no buying and selling. My damn real work is getting in the way of doing what I really love which is working on the website.

We are just a week away from the end of the unemployment supplement money–that $600/week extra which has served to ‘juice’ the economy. Will we see a new program from the federal government? Certainly the states have no ability to pay even modest amounts–most of them are totally dependant upon the federal ‘printing press’.

Dovetailing with the upcoming reduction in unemployment payments we are seeing jobless claims rise again–1.4 million new claims last week.

This is not going to end well–but at what point markets begin to head sharply lower is anyone’s guess. With all of the liquidity the government has pumped into the economy individuals, banks and corporations are all holding bushel baskets full of cash–at what point this changes–who knows?

Lodging REIT Ashford Hospitality Makes Exchange Offer

Junky lodging REIT Ashford Hospitality (AHT) has made an exchange offer for their outstanding preferred shares.

The company has just executed a 1 for 10 share reverse stock split of their common shares and now wants to pay cash for some of their preferreds.

The company is offering $9.75/share cash for just a small portion of the preferred shares and is looking for consent from holders to convert the balance into common shares. 66 2/3% of holders must agree for this exchange to happen.

Additionally it is conditioned upon the company’s ability to raise $30 million in new money to fund the cash portion of the exchange.

The details of this offer can be read here.

mREIT Nexpoint Real Estate Finance Prices New Preferred

As most of you likely know commercial mREIT Nexpoint Real Estate Finance (NREF) has priced a new issue of $25/share fixed rate preferred stock.

The issue is cumulative, but non qualified for preferential tax treatment. The issue comes with a 8.50% coupon–and is being sold for $24/share.

As indicated by the coupon this is a risky issue–NREF was just formed last year and had it’s IPO earlier in 2020. Investors with interest should do some good due diligence on this commercial mREIT.

The pricing term sheet can be read here.

Holding Dry Powder, But Getting Antsy

The economy continues to be buffeted from the Covid 19 corona virus–just now I see another 1.3 million new unemployment claims.

Of course if you are investing in common equities you don’t care how poorly the economy will do for the next year or two–you just follow the Robinhood traders into Royal Caribbean (RCL) Delta (DAL) or maybe even bankrupt Hertz (HTZ). I don’t need to go to the casino–just fire up my device. Everyone is an expert on their huge unemployment checks or payroll protection money (PPP).

Activity in new issues has been exceptionally quiet in the last 2 weeks–maybe everybody is so massively levered up there is no need to raise more money. All the ‘zombie’ companies have the balance sheets loaded with 10-12% money–which is why they are going to be zombies–lots of debt payments and no revenue–i.e. airlines, cruise lines etc.

I have been doing virtually no buying and selling–just hanging in there with my 65-70% invested positions of utility and CEF preferreds and baby bonds–but I am getting antsy and likely will do some short term captures of dividends and interest of investment grade issues–just forgoing too much income with the current level of cash.

On the other hand I have little doubt that an ‘event‘ will give us much better buying opportunities ahead–it may be political or investors will wake up 1 morning and decide that it will be years before we see normalcy–who knows–no one.

Even though I am ‘antsy’ my ‘real work’ keeps me working 12 hours a day, 7 days a week–with only 3-4 days off all year–so my ability to stay in tune with markets has been limited. The flip side is I have never in my life put so much money into investment accounts–so the ‘stash’ balances have risen fast–I guess that is the positive of working so much (at a time I swore I would be full time on this website instead of doing ‘real work’).

“It’s Just Money”–Hot off the Press

I was just reading about the record deficit the federal government ran during June–just a measly $864 billion. This was above the record April deficit of $738 billion.

During the last 4 week the Fed balance sheet has been falling week after week as 30 day repo’s ran off. This is interesting given the massive deficits since April. Is there no QE?

Looking back I see that the Fed did massive QE in March and April–a grand total of about $3 billion. Now the falling balance sheet makes some sense—all the cash was raised upfront, but has been spent at a much slower pace. My rough calculations show that we could see another few weeks before the Fed will need to start more QE—I mean is there any doubt?

With tax revenue way down–or minimally delayed, obviously we will be running massive deficits for many months to come–and you can be certain congress will approve more ‘helicopter’ money soon.

It is really had to fathom what the future holds for our economic system—I used to like to formulate my ‘outlook’–that seems to be such a waste of my old brain cells now–we are in uncharted waters.

But as I watch stocks go up week after week–‘party on’ and watching the talking heads on the business news totally ignore the hazards out there it makes one very (I mean VERY) uncomfortable. As such I keep plenty of dry powder while dabbling with a few investment grade utility baby bonds or preferreds–I may be ‘dabbling’ for some time to come–you really ‘can’t fight the Fed‘.

Chicken Soup for the Soul Finally Prices Baby Bonds

Entertainment content producer Chicken Soup for the Soul (CSSE) has finally priced the previously announced baby bonds.

The issue prices at 9.50%. They will be selling 840,000 shares with another 126,000 for over allotment.

The maturity date is 7/31/2025 with an optional redemption starting 7/31/2022.

It is noted that the underwriting discount for this issue is 5% which is above the more normal 3.15% which may indicate the underwriters confidence (or lack thereof) of selling this issue near $25

The pricing term sheet can be found here.

Monday Morning Kickoff

Last week saw the S&P500 trade at a low of 3155 to a high of 3186 closing right near the high at 3185–a gain of just shy of 2% on the week–another liquidity fueled up week.

The 10 year treasury traded in the range of .57% and .71% before closing the week at .63% down a few basis points from the week before.

3 month Libor closed the week at .27%–down from .31% the week before. It was 2.34% a year ago.

The Fed balance sheet fell by a giant sized $89 billion last week. Fairly large 30 day repo operations a month ago that have run off have been responsible for these large drops–we can see that, but just the same I am surprised at the large drops. I suspect this won’t last long as the treasury continues to sell large amounts of debt.

The average $25 preferred stock and baby bond fell by 4 cents last week. Utility issues were up 29 cents, while lodging REIT preferreds fell by 86 cents. Banking issues rose 4 cents, mREIt preferreds fell 51 cents, while overall investment grade rose 16 cents.

We did see 1 new income issue last week as Argo Group Holdings sold a resettable preferred with an initial coupon of 7%.

The issue is trading on the OTC grey market under temporary ticker ARGHF and closed on Friday at $24.40.

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A Little Risk for a 10% Reward

Never stopping in the search for a little extra yield without extraordinary high risk I stumbled across an old friend ( a security I held previously for some amount of time) that may well be worth a minor position in a portfolio generally characterized by conservative holdings.

I have been looking at the 6.50% $25 Senior Notes of REIT Ready Capital (RC) which trades under ticker RCP. This issue was originally issued by Sutherland Asset Management which was the company’s previous name.

These senior notes have been callable since 4/29/2019 and offered a early call bonus of 1% (callable at 101% of $25) until 4/30/2020–after which it is callable under more normal terms – $25 plus accrued interest.

The baby bonds closed at $24.13 today (Wednesday) and have been trading perfectly flat at this level for over 1 month.

Now the interesting part of this baby bond is that it will reach maturity on 4/30/21–about 10 1/2 months from now. The bond goes ex-dividend (interest) next Monday 7/12 (for a 7/31 payment) which means that an investor could garner 4 interest payments prior to maturity and additionally if bought at $24.13 there will be a capital gain of 87 cents. This means a gain of 10.3% is possible if held to maturity in 10.5 months.

Now as you might expect with the potential 10.3% return you will be taking more risk than a security with potential for a 5% return–that is what this game is all about–risk/reward.

Ready Capital is a mREIT and the lions share of the loans they make are in the small and medium sized commercial marketplace–honestly in the current environment this is a ‘dicey’ part of the market. RC is a company of $5.3 billion in assets with shareholder equity of $775 million. The company announced a loss of $50.4 million on the most recent quarterly earnings compared to profit of $29.4 million a year ago. It would not surprise me a bit if the company reported substantial losses for the next 2-3 (or more) quarters as the commercial end of the mortgage will be very messy as this recession unfolds.

The company recently cut their common dividend from 40 cents/share to 25 cents/share and may well cut again–or even suspend it.

We can’t recommend this security since every single reader has different needs–different risk tolerances–but I personally will get at least a starter position with consideration to adding in the future as economic conditions unfold.

For those wanting a position in these shares make sure to go through the SEC 10-Q below which provides data not only on the companies financials, but gives explanations about which segments of the marketplace the company operates in.

The latest 10-Q for the quarter ending 3/31/2020 can be read here.

Argo Group Prices New Preferred–Update–OTC Ticker

Insurer Argo Group International Holdings (AGRO) has priced the previously announced resettable fixed rate preferred.

The pricing will be 7% and when it begins to reset in about 5 years it will reset at the 5 year treasury plus a spread of 6.712%. The 1st reset is on 9/15/2025–and then every 5 years there after.

The pricing term sheet can be read here.

CHS Releases Earnings

As noted by ‘Number 6’ in the reader initiated alerts cooperative giant CHS has released their earnings for the quarter ending 5/31/2020.

Revenue was off again–as it has trended lower for a few years. This quarter revenues were $7.2 billion compared to $8.5 billion a year ago. Net income continues to hang in there with $98 million in income this quarter compared to $55 million a year ago.

In the last number of quarters energy sales had been propping up income–but now that has reversed as energy sales were off almost 50% this quarter. There were no energy profits (in fact a sizable loss) this quarter while ag and nitrogen moved more strongly into profits.

CHS has 5 preferred issues outstanding which can be seen here.

The companies 10-Q can be read here.

Argo Group to Sell Fixed Rate Reset Preferred

Insurance firm Argo Group International (ARGO) will be selling an issue of Resettable Fixed Rate preferred shares.

The issue will be non cumulative, but qualified.

The issue will have a fixed rate until 9/15/2025 after which it will be reset at the 5 year treasury plus a ‘spread’ (unknown as of this moment). It will then reset every 5 years.

‘Yield talk’ is in the 7 to 7.125% area.

The preliminary prospectus can be read here.

The company has 1 outstanding baby bond with a 6.50% coupon which can be seen here.

mcg was right on this one with EarlyBird chiming in.

Chicken Soup for the Soul to Sell Baby Bonds

On line and television content creator Chicken Soup for the Soul Entertainment (CSSE) will be selling some $25 baby bonds. ‘Yield talk’ is in the 9.5% area.

The notes will matured in 2025 and will have a early redemption period starting 7/31/2020.

The company is estimating that they will be selling around 1 million bonds.

Of course the issue will be unrated by the major rating agencies, but will be rated by Egan Jones–potentially BBB.

The preliminary prospectus can be read here.

The company does have a $25/share perpetual preferred outstanding which they have re-opened numerous times–you can see it here.

Thanks to EarlyBird for picking this one up.

Monday Morning Kickoff

Well another sizable up day is in store in the equity markets today–with all of the futures markets up over 1%. There is so much liquidity sloshing around in the ‘system’ —so much in fact that even the Fed is adding no new money in the last 4 weeks.

The S&P500 traded in a holiday shortened week between a low of 3000 to a high of 3166 before closing last Thursday at 3130 a gain of just over 4%.

The 10 year treasury traded in a range of .63% to .72% before closing the week at .67%.

3 month Libor closed last week at .30%–it was 2.31% 1 year ago.

The Fed balance sheet fell by $13 billion last week – which gives us a total reduction in assets of over $100 billion in the last 3 weeks. Proving that the liquidity in the system must be extremely good the REPO markets remain quiet–most days seeing overnight operations of 0-$7 billion last week. There was 1 day that had a $17 overnight repo–but still quiet relative to a month or two ago when we were seeing overnight REPO operations of up to $75 billion or so.

The average $25 preferred and baby bond gained 7 cents in value last week–the quietest week we have seen for months. Every sector rose except for mREITs which fell by 18 cents/share. REIT lodging issues shares rose by 26 cents/share. Virtually all other sectors rose by around 5-10 cents.

Once again the new issue market was very quiet as there were no new issues announced.

The new Saratoga Investment (SAR) 7.25% baby bonds began to trade under ticker SAK and closed the week at $24.93.