Below I outline a potential opportunity. Of course the issue is not investment grade and is non cumulative so it may not appeal to many–on the other hand where can you lock up 7.07%? The risk/reward seems reasonable.
Today the 7.00% resettable preferred stock (ARGO-A) from insurer Argo Group International closed at $24.91. This price is down from close to $26 a month ago. The coupon is fixed at 7% until 9/2025—thereafter it resets every 5 years at the 5 year treasury with a nice 6.721% spread. The issue is rated BB by Standard and Poor’s.
Reasonably this issue should trade around $26 or so.
A couple of comparable issues for reference. American Equity Investment 6.625% fixed-rate reset preferred (AEL-B) spiked up today to $26.27. The coupon is fixed until 9/2025 and it is rated BB. After this it resets every 5 years at the 5 year treasury plus a spread of 6.297%.
The Enstar 7% fixed to floating rate preferred (ESRGP) carries the 7% rate until 9/2028 and then floats at 3 month Libor plus a spread of 4.015%. The issue closed at $26.27 today which was a drop of 75 cents. This issue is rated BB+.
As always this is not a recommendation–just an idea.