Public Storage Prices New Preferred Issue

Storage giant Public Storage (PSA) priced their previously announced new preferred issue.

The coupon will be 3.875%–not a giant surprise since they priced an issue in August at 4.125%.

The issue is rated BBB+ by Standard and Poor’s and A3 by Moody’s. Investment grade.

The issue is cumulative and non qualified.

All of the company’s outstanding preferred issue can be seen here.

The pricing term sheet can be found here.

Public Storage to Sell New Preferred

Self storage giant Public Storage (PSA) has announced that they will issue new preferred stock.

The company which has long depended on preferred equity issuance to finance the business currently has no older issues redeemable. The PSA-X and PSA-W issues will be redeemed tomorrow (both 5.2% coupons).

There is a 5.40% (PSA-B) issue which will be redeemable 1/31/2021. This issue is trading at $25.73 right now and holders may want to consider exiting now–this issue will be called 1/31/2021 and thus has about 50 cents worth of dividends to be collected up until call date.

All of their preferred issues outstanding can be seen here.

The preliminary prospectus can be read here.

If you prefer was right on top of this with EarlyBird and mcg chiming in. EarlyBird says ‘yield talk’ is in the 4-4.125% area. If you Prefer is tossing out a 3 handle guess.

Altera Infrastructure Preferreds Zoom Higher

I see that the 3 preferreds from Altera Infrastructure are moving strongly higher today.

The move higher is on an announced open market buyback of shares as they have been trading down in the $14/share area. Altera is the old Teekay Offshore which is now owned by Brookfield Business Partners (BBU)–part of giant Canadian asset management firm Brookfield

All the preferreds are now trading up $2-$3/share. You can see the issues here.

You can read about the buyback here.

Utility Entergy Texas Comes a Calling–UPDATED PRICING

UPDATE–They garnered a 1.75% coupon on the new issue–maturity in 2031.

Pricing term sheet can be found here.

Entergy Texas will be calling some or all of their 5.625% 1st Mortgage baby bonds due 2064 (EZT). These 1st became callable 6/1/2019.

The company will be selling some 1st mortgage $1,000 bonds with proceeds to be used in the redemption.

EZT had traded as high as $27/share a month ago–but had drifted lower in the last month to now trade at $25.40

The prospectus with the ‘use of proceeds’ statement can be found here.

With the various recent calls everyone should be on notice that these utilities will be calling issues when possible with proceeds from low coupon bonds (2-3%)–and who can blame them.

Monday Morning Kickoff

The S&P500 had another down week last week–but not by much as a frantic rally on Friday helped the week. The index had a low of 3209 with a high of 3320 before closing the week at 3298 which is 2/3% lower than the Friday before.

As has been the norm for weeks (if not months) the 10 year treasury closed at .66% with the yield running between .65% to .69% on the week.

The Fed balance sheet continued its climb adding $27 billion in assets after adding $54 billion the week before.

The average $25/share baby bond and preferred stock closed last week 15 cents lower than the week before–the losses would have been 27 cents/share, but a rally on Friday moved prices higher. CEF preferreds fell by 47 cents–the big loser on the week. Utility issues fell by 9 cents, banks by 7 cents and investment grade by 10 cents.

Last week it was relatively quiet in the new issue arena with just 1 baby bond issue announced–no preferreds were offered.

DTE Energy (DTE) sold the only issue last week.

The Junior Subordinated Debentures were priced at 4.375%

No ticker has been announced. It is likely this issue will start trading this week.

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Waiting on Stimulus Common Stocks Don’t Know What to Do

Almost without doubt equity markets are waiting on stimulus from congress. Like a junky looking for their next ‘fix’ this market is built on the Fed printing press and the big spenders in the government. Actually after all the months of crazy large gains in common shares it is nice to see a little reality come into the picture.

Income investors aren’t seeing many bargains in issues above average quality. The average $25/share preferred or baby bond is off just 1.3% this week–and given the level income issues have been trading at most are still at sky high levels—although given the other options available it is understood. Watching the utility issues, where I would like to buy, we have seen a 1% drop in values–still presenting a pretty lousy yield to call picture, but maybe that is simply the way it will be in the future. A number of commenters have noted the low coupons that are being garnered in the bond market–30 year notes down in the 2.5-3% area–why issue high coupon preferreds?

The big losers this week are some of the ‘junky’ issues–i.e. Hersha Hospitality (HT) preferreds, which are trading with suspended dividends. Each of their issues (3 of them) are off $1/share. Honestly the junky issues are just getting ‘put in their place’–trading down where they should be given the high risk they present.

I remain in the 70% area and continue to look for bargains–although I may be looking for a long time. We’ll see if congress rides in on their white horse to save the day—if not bargains may yet appear.

The Ashford Hospitality Death Spiral Continues

Lodging REIT Ashford Hospitality (AHT) continues down the road to insolvency.

It is likely many of you have followed this saga, but new twists and angles continue to be unveiled. I follow it a bit–not close as I have no dog in this fight.

AHT has 5 perpetual preferreds outstanding–which you can see here. Dividends have been suspended on the shares and each of the issues have tumbled another 25% in the last few days as survival seems bleak–all now trading in the $3’s.

AHT has offered an exchange of 5.58 common shares for each preferred share–or alternatively, for a very limited number of preferred holders, $7.75/share.

AHT currently has around 13 million common shares outstanding and the current offer on the table to the preferred holders would expand the number of common shares outstanding to a massive 140,000,000 shares.

Current common holders seem to be screwed no matter what they do. Common shares holders must be asked for approval to issue the new shares to the preferred holders–if they approve the exchange they will instantly be diluted into oblivion–if they don’t they can ride shares into Chapter 11 (maybe).

Preferred holders are pretty well screwed as well. They have been offered common shares which were trading higher when the exchange offer was made–but now are at $1.71/share today. If they do not exchange their shares the company is looking for approval to give them 1.74 common shares for each preferred share, instead of the 5.58 shares noted above.

Pile on top of this Cygnus Capital–a dissident holder has now come out against the exchange offer. Whether they have a clue as to what they are doing is anyone’s guess. Management obviously thinks Cygnus is clueless and has responded.

All I can say is ‘what a damned mess’. AHT now has a market cap of $24 million and debt of $4 billion — at least they had that debt before they turned over the keys on many of their hotels.

Regardless the saga may be drawing to a close soon.

DTE Prices Baby Bonds

DTE Energy (DTE) has priced the previously announced baby bonds.

The Junior Subordinated Debentures are priced at 4.375%–right where razorbackea said they would price.

The company can defer interest payments up to 40 consecutive quarters (10 years) without being in default.

No ticker has been announced. It is likely this issue will start trading next week.

The pricing term sheet can be read here.

DTE Energy To Sell Baby Bonds

Michigan utility DTE Energy (DTE) is coming to market with new junior subordinated debentures.

The company will call their junior subordinated debentures with a 5.25% coupon (DTQ). This issue has been callable since 2017 and is the only issue currently callable.

The company has numerous issues outstanding which can be seen here.

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

j was right on top of this new issue.

Down, Down It Goes Where It Stops No One Knows

But really the selloff of common shares is really quite orderly and certainly is not a panic selloff. We all know common shares have been near la la land–so a 800 Dow point drop is not frightening or unexpected.

Of course I care about baby bonds and preferreds and the damage there is not dramatic. Right now the average share is off 14 cents, but there are over 150 issues down by over 1%. This is a larger reaction than we have seen in recent months to common share selloffs–but still minor.

Interesting to see quite a few utility issues off 1/2%- 2% or so–but given the levels they have been trading at being down 1/2% to 2% doesn’t make them a bargain–but worth watching.

Investors should keep an eye on the S&P500 and DJIA and see if something more serious develops later in the day. If we were to see the 3% drop turn into 5% later today we would start to see some ‘baby going out with the bath water’–maybe a chance to deploy a couple percent of dry powder in quality issues.

Monday Morning Kickoff

The S&P500 fell by 22 points last week–about .6%. The index traded in a range of 3292 to 3429 closing toward the bottom of that range at 3319.

As has become the norm the 10 year treasury traded in a range of .65% to .70% closing the week at .69% 2 basis points above the week before.

The Federal Reserve balance sheet grew by a stout $54 billion proving that quantitative easing is alive and well.

The average $25/share baby bond and preferred stock moved higher by a meager 7 cents. Investment grade was unchanged, utilities were 6 cents higher, CEF issues were down 12 cents (but 1/2 the issues were ex-dividend Friday). banks were 2 cents higher with shipper up 4 cents. Lodging REIT preferreds were the strongest–up by 45 cents.

Last week we had 6 new income issues sold.

Business Development Company OFS Capital (OFS) sold a new baby bond.

The issue priced at 6.25% which at first glance seems low–but the issue is just a 3 year issue, maturing in 2023 and shorter dated maturities price lower.

There will not be OTC grey market trading. The issue should begin trading in the next week or so.

Brookfield Infrastructure Partners (BIP) sold a new issue of preferred stock units.

The issue priced at 5.125%.

The issue is investment grade–although low investment grade at BBB- from S&P.

This issue is trade on the OTC market closing at $25.16 on Friday.

Franchise Group (FRG) priced a new issue of preferred stock.

The coupon is 7.50% and the issue will be cumulative and qualified.

There is no OTC ticker or trading, but it will trade today or tomorrow under the permanent ticker.

The Southern Company (SO) has sold a new issue of baby bonds. The coupon will be 4.20%–plenty low, but it will be strongly bought.

As announced the company will be calling all or a portion of the 6.25% Jr subordinated debentures (SOJA).

The issue is investment grade.

The issue is not yet trading.

Insurer WR Berkley (WRB) has sold a new issuance of baby bonds.

The coupon is set at 4.25%. The bonds are investment grade.

The bond will mature in 2060 and will have an optional redemption starting in 2025. The company may defer interest payments for up to 5 years (multiple times) without being in default.

Proceeds from this issue will be used to call the balance of the WRB-B 5.625% baby bonds.

The issue is not yet trading.

Affiliated Managers (AMG) sold a new baby bond.

The coupon will be 4.75%. The issue is investment grade being Baa1 by Moodys and BBB- by Standard and Poors.

The issue has a maturity date in 2060 and an optional redemption period starting in 2025.

The company can defer interest payments for 20 consecutive quarters without being in default.

Affiliated Managers Prices Baby Bonds

Affiliated Managers (AMG) has priced their previously announced baby bond.

The coupon will be 4.75%. The issue is investment grade being Baa1 by Moodys and BBB- by Standard and Poors.

The issue has a maturity date in 2060 and an optional redemption period starting in 2025.

The company can defer interest payments for 20 consecutive quarters without being in default.

The pricing term sheet can be found here.

Affiliated Managers Group Joins the Baby Bond Issuance Parade

Another investment grade baby bond is being issued by Affiliated Managers (AMG).

The company joins the issuance parade of investment grade firms selling baby bonds to lock in some nice coupons. The company is rated BBB- by S&P and Baa1 by Moodys.

The new issue will have a maturity date of 2060 with an early call in 2025.

The company may defer interest payments for up to 20 consecutive quarters without a default.

The company has 1 other baby bond outstanding as well as 1 convertible trust preferred issue which is callable now. These issues can be seen here.

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

mcg was on this one.

WR Berkley Prices Baby Bonds

Insurer WR Berkley (WRB) has priced their new issuance of baby bonds.

The coupon is set at 4.25%. The bonds are investment grade.

The bond will mature in 2060 and will have an optional redemption starting in 2025. The company may defer interest payments for up to 5 years (multiple times) without being in default.

Proceeds from this issue will be used to call the balance of the WRB-B 5.625% baby bonds.

The pricing term sheet can be found here.

WR Berkley Announces New Baby Bond

Insurer WR Berkley (WRB) has announced a new issuance of baby bonds.

The company which had sold a 4% $1,000 senior note issue around 9/1/2020 with proceeds going to a partial redemption of baby bond 5.625% (WRB-B) will be using some of the proceeds of the new baby bond to call the remainder of the WRB-B issue.

The new issue will be investment grade so look for a coupon in the mid 4’s.

The preliminary prospectus can be seen here.

j was on top of this new issue.

Southern Company Prices Baby Bonds

The Southern Company (SO) has priced their previously junior subordinated debentures.

The coupon will be 4.20%–plenty low, but it will be strongly bought.

As announced the company will be calling all or a portion of the 6.25% Jr subordinated debentures (SOJA).

The issue is investment grade.

The pricing term sheet can be found here.

Franchise Group Prices New Preferred

Franchise Group (FRG) has priced their previously announced new cumulative perpetual preferred issue.

The coupon will be 7.50% will be cumulative and qualified.

No OTC grey market ticker has yet been announced–the trade on the issuance doesn’t take place until today so I suspect we will see the OTC ticker sometime today.

The pricing term sheet can be see here.

Past 1st Call and Trading Above Liquidation Preference–Until It Isn’t

Markets are dangerous for snoozers and dreamers.

Data center owner Digital Realty (DLR) has called their 5.875% perpetual preferred today–effective 10/15/2020.

The issue went ex-dividend yesterday for around 37 cents.

The issue has been redeemable since 4/2018, but yet was trading near $26 a day or two before ex–it went ex for 37 cents but bounced right back up toward $25.90. The company dropped the call this morning and shares are now trading at $25.06.

It is interesting that DLR is selling Euro Note debt at 1%–hint–don’t be fiddling with investment grade preferreds past call dates.

Of course we all mostly know this, but I post it as one more example of what a newer investor should not do.

Southern Company to Sell Baby Bonds

Giant utility Southern Company (SO) will be selling a new $25 baby bond. It is noted that the company will be selling a $1,000 series at the same time.

This baby bond will have a maturity in 2060 and proceeds will be used to redeem all or a portion of the 6.25% Junior Subordinated Notes (SOJA).

The issue will be investment grade.

The company has numerous issues outstanding which can be seen here.

The preliminary prospectus can be read here.

EarlyBird got the worm on this one and posits a coupon in the 4.375%-4.50%.

Franchise Group Inc to Sell Preferred

Franchise Group (FRG), an operator of franchised businesses, has announced a new offering of cumulative preferred stock.

The issue will be cumulative and qualified.

I am not familiar with this company, but it looks like they operate vitamin stores, sell furniture and has a tax preparation business. Obviously plenty of due diligence needs to be done on this issue.

The preliminary prospectus can be read here.

mcg was on top of this one with EarlyBird chipping in with ‘yield talk’ around 7.5%.

OFS Capital Prices Baby Bonds

Business Development Company OFS Capital (OFS) has priced their new issue of baby bonds.

The issue priced at 6.25% which at first glance seems low–but the issue is just a 3 year issue, maturing in 2023 and shorter dated maturities price lower.

There will not be OTC grey market trading. The issue should begin trading in the next week or so.

The pricing term sheet can be read here.

Brookfield Infrastructure Partners Prices Preferred Issue

Brookfield Infrastructure Partners (BIP) has priced there new preferred unit offering.

The issue priced at 5.125%–about where the guesses were at yesterday.

The issue is investment grade–although low investment grade at BBB- from S&P.

This issue should trade immediately under OTC grey market ticker BIPPF. I plan to buy a taste of this issue for a long term holding.

The pricing term sheet can be read here.

Wesco International to Make 1st Juicy Dividend Payment

Wesco International (WCC) which merged with Anixter International earlier his year is about to make their 1st dividend payment on the juicy 10.625% fixed rate reset cumulative preferred on the 30th of the month.

The WCC-A issue went ex-dividend today for around 73 cents–the first payment is for slightly over 3 months.

The company is a giant in the business to business distribution and supply chain business with revenue now in the $17 billion area.

You can be certain there is plenty of risk in Wesco as they are rate B1 by Moodys and BB- by Standard and Poors. You can read S&P’s take on the combined companies.

I only mention this issue because depending on your risk tolerance this may be a reasonable holding. The reset period isn’t until 6/22/2025 so at 10.625% there is plenty of ‘meat on the bone’ yet even though shares closed at $28.30 today.

Disclosure–I hold a position in this issue which I bought in the $26.90 area.

Brookfield Infrastructure Partners to Sell Preferred Issue

Canadian company Brookfield Infrastructure Partners (BIP) has announced a new issue of $25 preferred stock units (called units not stock if issued by a partnership).

This is a quality issue, but will come with a K-1 at tax time since it is a partnership.

BIP owns power generation, transportation assets, cell towers and other critical assets.

Yield talk is in the 5.25% area.

The preliminary prospectus can be read here.

EarlyBird was right on this one. Potter followed up with a likely BBB- rating.

BDC OFS Capital to Sell Baby Bonds

Business Development Company OFS Capital (OFS) will be selling a new issue of $25 notes.

The company already has 3 issues outstanding with coupons ranging from 5.95% to 6.50% and you can see them here. All issues are trading substantially under $25.

The preliminary prospectus can be read here.

Fabrib was right on this one with EarlyBird noting ‘yield talk’ at 6.125-6.25% with a Egan-Jones BBB- rating.