Another smaller community banker is getting on the preferred stock issuance train.
Virginia community banker MainStreet Bancshares (MNSB) will be selling a new non-cumulative perpetual preferred.
Note that this is a pretty tiny bank with $1.5 billion in assets.
Also note that the company offered a payment deferral program to their customers during the Covid 19 pandemic and 22.5% of their outstanding loans are now in deferral–likely this could get ugly as time passes. Read their latest release here.
‘Talk’ is they will be selling around 1 million shares in the 7.375 to 7.50% area which would be comparable to what the other small bankers selling preferreds have priced around.
Insurer American Financial Group (AFG) will be selling a new issue of baby bonds.
Like all of the AFG baby bonds they have the right to defer interest payments for up to 5 years without a default.
The issue will be rated investment grade by Moodys and Standard and Poors.
The subordinated debentures will likely be listed under ticker AFGE, which is an old ticker that has been used before–the previous issue was called in 12/2019.
The company mentions a possible redemption of their 6% baby bonds (AFGH) which become callable on 11/15/2020.
Finally we saw a downdraft in common shares last week as the S&P500 traded in a range of 3350 to 3588 and closed Friday at 3427–a drop from 3508 the previous Friday.
The 10 year treasury traded in a range of .61% to .74% before closing at .72%–close to where it closed the previous Friday. We had a employment report that appeared to be positive, but with seasonal adjustments and hiring for the census and other factors I don’t think anyone has a real clue as to what is happening in the employment arena.
The Fed Balance Sheet rose by $27 billion last week. This continues the sawtooth pattern that has been going on for the last 2 months as plenty of liquidity continues to slosh around the globe. There has been virtually NO REPO action from the FED for months and that continues.
The average $25/share baby bond and preferred stock fell by 26 cents last week. We have rarely seen share prices fall this year, but a combination of common stocks tumbling, plus a large number of ex-dividend dates happening in September set up the move modestly lower. Investment grade moved 24 cents lower, utilities moved 22 cents lower, banks 21 cents lower and mREITs moved 38 cents lower. The only sector moving higher were CEF issues which moved 5 cents higher.
We had 2 new income issues priced last week.
Sachem Capital (SACH) priced a new issue of baby bonds with a coupon of 7.75%. I see this new issue set to trade today or tomorrow most likely.
Also B Riley priced a new issue of perpetual preferred shares with a coupon of 7.375%. There has been no OTC grey market ticker announced–I assume it will go straight to NASDAQ trading.
You can find the most recent update to the preferred/baby bonds spreadsheet here.
This contains more newer issues (although still maybe 5 or so are not on there yet), called issues removed, tweaks to ‘yield to worst’, corrections to any errors I find and some updates to credit ratings.
You can check back to this page once a week or so and I will likely have updates weekly. Primarily I make updates as I can find 30 minutes to make additions every few days.
Remember that you need to follow the instruction on the sortable spreadsheet page which means to ‘turn it on’ you need to make your own copy.
The S&P500 is down around 3.50% right now with NASDAQ being off almost 5%.
The Yahoo Finance headline is “Why the Explosive Stock Market Rally is Crumbling”. What baloney that headline is–why is a 1 day move lower a cause for the use of ‘crumbling’ in a headline. I think that most everyone is somewhat welcoming of a move lower–I know I am.
On the other hand when I checked my accounts they were almost perfectly flat–some lower, some higher, but overall almost no movement. No bargains are being created in preferred stocks and baby bonds based on this common stock movement–this is normal. If common shares move down 1000 points or more in a day–with maybe consecutive days down we might see small bargains created in income issues–moves like this create bargains in income issues when folks decide to ‘throw the baby out with the bath water’ and that isn’t the case now.
I will continue to watch for bargains in quality income issues–but I will not be holding my breath waiting on a piddling 3-5% move lower in common stocks with interest rates on the 10 year at .62%.
