Allstate Announces New Preferred Offering – 5.10%

The Allstate Corporation (NYSE:ALL) has announced a new preferred offering.

Eagle eye 730Cap caught this one early so a thanks to him/her for the note in the “Reader Initiated Alerts” segment of the website.

The new offering will be non cumulative of course as all insurance issues are but will be qualified for preferential tax treatment.

As 730Cap noted it is likely that ALL will redeem some of their currently outstanding preferreds as they have 5 issues outstanding and 3 have passed the 1st call dates.

The new issue will be low investment grade (BBB- from S&P and Baa3 from Moodys)

Once again we have investors “asleep at the wheel” as the ALL-E issue has traded as high as $27.50 in the last month and currently is still at $25.86—this is a 6.625% issue that became redeemable in April. Investors need to wake up–there are going to be huge redemptions in the next few months and years at the level of interest rates that are with us now.

You can see the issues outstanding here.

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

47 thoughts on “Allstate Announces New Preferred Offering – 5.10%”

  1. 5 3/8 not enough to entice me for Highland, and 5.1 for Allstate even less so for a perpetual. Biding my time in money market funds.

    1. Gumfighter–you must be even more conservative than me. I have lots of dry powder in money market as well, but with that rate now starting to fall it could get painful in missed opportunity.

      1. Tim,
        Not real conservative. For example, I own SBLKZ (8.3% coupon). I know you’re not keen on shipping companies, but this one’s a baby bond that matures in 2022.

        1. SBLKZ is a very good baby bond to have in your portfolio, and shippers generally are less likely to redeem early because their credit options are more limited. Folks who like their 7%+ coupons in this environment are going to have to learn to love the shipping companies.

      2. Tim – So glad to hear of others with “lots of dry powder.” It sure feels lonesome out here not feeling comfortable jumping into the feeding frenzy on just about anything not nailed down on an all in basis. BTW, love hearing questioning on the Gabelli oddballs. Each oddball except GLU-A represent large positions for me. It will also be interesting to see how the market plays TVC and TVE. Since both are subject to reset to a lower coupon if the 30 yr Treas remains below 2.52% for TVE in May ’20, or 2.61% for TVC in June ’20, both will become puttable if the current coupon rates of 3.36% and 3.55% reset. Maturities = 2027 and 2028.

        1. I know you know this 2WR, but many have in years past havent and bought the Tennessee Valley issues misunderstanding…They NEVER reset higher, just lower. And can only be put with a lower adjustment in yield on reset date.

          1. You are correct Grid–they can not go higher. I almost made the mistake years ago of buying without carefully reading the prospectus on these.

    2. Last year, I did not stick to my guns. This year, I have and I will. We absolutely cannot keep running massive fiscal deficits of 1T+ every year. Washington DC (WDC) stands for We Don’t Care. Ultimately WDC needs to stand for We Do Care. If not, we have to get inflation or another great recession but this time, we don’t have much dry powder for fiscal stimulus. Fed balance sheet high so they used up most of their bullets. Things can not go on. Being in Money market may be the smartest game in town.

  2. 5.1% and big enough to call all the callable and soon to be callable.

    Have been big holder of ALL issues in the past but not this, not at this time.

    1. Thanks for the info! Hey, go over to SA and read the article just posted by someone regarding C-N…safe income. Might create a buy surge if anyone is trying to get out way over par, past call. A true reflection of this market for prefs right now. I think any CFO would lock in capital for as long as possible in this market, just like ALL is doing.
      I thank my folks for forcing me into understanding critical contrarian thinking (Germans!) and not to be right , but know the difference when it’s just not.

  3. Well anybody start a lottery on the coupon rate and while we’re at it an opening price? I spot 5.25%/$25.50.

    1. Joel A–I think maybe in the 5.375% area–I know one thing for sure and that is that I bought the Highland issue that just came out with a A1 Moodys rating and thus a Baa3 should be higher–unfortunately it probably won’t be.

      1. Tim, I know you know this, but I am going to type it anyways, lol…”Names” matter and their reputation helps bring the yield down. And I am a big fan of ratings myself, so dont get me wrong. But I would rather own 10k of Allstate than 10k of Highland. Asset coverage ratios and ratings be damned here for me. Feds tried to shove TARP money at AllState (and about every major financial company) during crisis and they fought it off and won. They didnt need the money and didnt want the money. If this issue had a 6% handle on it, I wouldnt blink to put a super arse load into this company. But it isnt 6%, so I wont, ha. When I first started buying preferreds 6 years ago, after months of dithering and avoiding them all from general distrust, my first two issues bought were AILLL and a long ago redeemed All State preferred. So I have a built in bias here.

        1. “But I would rather own 10k of Allstate than 10k of Highland. Asset coverage ratios and ratings be damned here for me.”

          Please give more color to this statement. Capital invested in the Highland pfd is protected by the asset coverage rules. Just like the pfd’s from Gabelli and Allianz and Kayne Anderson and others. It’s as safe as safe can be. I know Highland isn’t Gabelli but rules are rules.

          What am I missing? Is this just another flipper vs. anti-flipper difference of opinion, or is there a real serious reason to avoid Highland? I’d really like to know.

          1. My statement wasnt a knock on Highland. It was only meant in terms of my personal trust in Allstate. Despite the wide rating discepancy between the two ratings. I wouldnt have been surprised if the Allstate issue had a lower coupon. Funds will gobble this one up. Based on where I am at, I probably wont own either though. I can see All being a modest run up (and Highland also). But I like what I have. Could peel off some overbloated position in The PPL 5.9% issue but like how its trading after I repurchased.two days ago.

            1. No offense taken here with your opinion—we all have them of course and good thing or this site would be very boring.

        2. You’re right that names matter and Allstate will trade stronger—but the point is what kind of sense does it make for Moodys to assign a Baa3 to Allsate and a A1 to Highland and then the underwriters bring them out at essentially the same coupon–something is just not right with that.

          1. Tim, now that doesnt surprise me. I was surprised that 5.375 being tossed around as that seemed a bit rich in yield for this name issue. That lower 25 bps is $1 less backside price support. I definitely am not interested in a play now.

        3. Funny your remarks about ALL make me think of two issues I disclosed that I own ESGRO and GBLIZ. Both have huge legacy, very high rated bond pools and growing earnings, reserves, ability to raise premiums and drop duds on an annual option and had good net income last I looked. The cash flow off that legacy pool goes way back and is still churning it out AND the principal is liquid! It makes me drool on the keyboard like a Simpson’s character. When I worked at TIAA I was shocked at the ancient legacy pools of thousands and thousands of pension assets. It flat out works and smooths. I want to make a commentary here re: SocSec, but will not.

          1. In reply to myself and any readers: In regards to the two insurers mentioned above I wrote from a distant memory and did not do more work before typing my reply above. Both issues deserve a very close scrutiny and indeed I did some after dining tonite and see that things do change over even a few quarters! Please do all personal diligence on your own. I found two new strikes against GBLIZ for instance that have recolored my viewpoint here. May be a sell now?!

      2. Hello Tim – I too bought some HFROP. But I think investors need to be careful here. This fund is a black box, some might call it a hedge fund in a cef wrapper. Take a look at it’s portfolio. The value of some of this stuff is probably whatever they choose. In my view if the NAV is questionable or dubious then so too is the coverage ratio. I don’t think this is sock drawer – despite Moodys.

        1. Husker–I agree with you. It is in my underwear draw–that is for less quality issues. I read the stuff over which is why I noted yesterday I was less excited about this one–I like the level 1 assets (stocks) the best and this Highland has hardly any level 1.

          1. Whoaaaa! So we’re putting the really good stuff into the ‘sock drawer’ and only ‘just ok’ stuff into the underwear drawer? Sounds backwards to me. I’d rather have it the other way around! lol

            1. A4I—I had to use underwear–Grid had already commandeered the sock drawer definition.

  4. Glad to see many here are mindful of “culling the call herd” when it is obvious to avoid a capital ding. Many preferreds within two years of approaching call date or even past call one runs the risk of “eating their own seed corn”. Be it with a call loss smack post call, or watching their $2 above par price wither away with each passing dividend as it descends towards par.
    I personally detest call losses, as it is one variable I can control. My only real exposure from my 20 issues is PPX. My only issues I own that are above par and ever callable are GLP-A and CNIGO (term dated). At one time all I had was way above par, past call issues with well above market yields. But they served as a backstop in a rising yield environment and odds favored a disinterested company in redeeming. It worked well. Owning 5.7% issues $2 plus above par serve no interest to me. But to give up some risk, usually one has to assume a different type of risk to mitigate it. So it is what it is and one takes their chances…..

    1. Fidelity newsletter, 8/1/, notes their income funds manager believes preferred are at a high thus not good investments. huh??

      1. They generally should be high or something is very wrong. Glad the fund manager is as insightful as we are, lol… If your in, your in, and I get that…I am too despite no bargains. But you can still tweak to bit when possible. Say as an example you have a 5.8% issue that has raced off to $27 plus and a new issue of equal quality of say 5.5% has just been issued. One may be better served rotating into that issue if able to purchase at par. It wont protect against rate rises, but could provide a better current yield and better YTC. Small comfort yes, I know. 🙂

        1. Grid, your good advise I think. I look at Tim’s YTW and can’t help but feel that is the mark to market on the security. Why not just forget the price? Most decent issues are 3.xx%. From that standpoint I should dump many holdings in favor of new issues even if issued at 5%. If true and everybody did it can you imagine? And what happens when, not if, interest starts back up? I’m always interested in a good swap and right now is no different so guess what. I don’t fall in love with anything all just utilitarian to me. There are market darlings that have undue value and those are bigger riddle to solve. This what makes it fun for me.

      2. bill o: This site offers a different outlook. It may take time to wrap an independant skill set around it. Compared to WHAT a high fee, leveraged CEF or mutual fund half full of junk? Dividend Titans? HiY Equity? Cash!? It’s easy to make a half statement in a dark suit, get a churn paycheck and sound like a champ. I know I worked with them,, “gather assets and re-allocate (crack whip here)”
        Thanks but…I think you’ll find writers here give the other half of their independant statement allocations AND live off it. It is a different path (lane), I did not say correct. They will help and challenge you too!!

      3. bill o – they may be right–or not. Many–maybe most, of the folks on here have been buying/owning preferreds for 15-20 years (maybe more) and we have seen highs and lows so these kind of warnings are not telling anyone anything here I guess. I know for me I want the income stream and maybe won’t be so sensitive to capital movements at my age.

    2. Grid, A past call IG with a 6.63% coupon (especially up to $2 over par) was a train horn waiting to go off. Even so, can’t help but wonder why the ALL board didn’t act sooner as the redemption isn’t effective until 6 months after the prospectus call date. If we comprised the ALL board, guessing most of us here would have paid that thing off on “the” day.

      But not all past call over pars are created equal. I’m still sitting in VER-F which had a partial (10%) redemption a few months back. It still resides in the under $26 neighborhood and carries a 6.54% current yield. While a safer issue, the company has been distracted by the need for ongoing litigation reserves which could drag out for some time. Having acquired near par, the risk of capital loss is near zero while monthly distributions are ongoing. Of course, if it were $2 over par, that’d be an instantaneous sell.

      1. Yes, it all depends, and that is why everyone should be aware of call dates and time window in which they can redeem, as some vary. I did a quick flip of ALL-E but it was an earlier in year one divi capture play. Now 2WR, stayed in it longer…But with a purpose. He wanted a “short rope” call screaming issue like E was. Plus he knew it could only be redeemed on each payment date. So there was no quick hook possibility after it went exD. Then it simply becomes a math equation of price entry point and yield to worst to determine interest level. The D issue just went nuts for some reason totally unanchored to E which made no sense at all.

  5. Way to get it mileo! Now where will it open?? (HA)
    I’ll take LUCK and measured sell limit risks. Some times Pete Rose fundamentals works altho it has stymied me at different times, different markets.
    Held on to the plum, ALL-G, until div on 7-15 and had sell limit at 26.80 taken on 7-24. I don’t even know the CFO!
    Sold BANFP my last past call issue on 7-31 at $27.25 after the div on the 15th the same way. Some LUCK too.
    I like the value-add of managing my own accounts.
    Almost everything I own I have a sell limit on. No open buys anywhere.
    If there is a long term price down, anything way over par will prob have a waiting period of boring coupon cutting, but with rates and TLT over new highs, might be time for a daily sharp shoot turkey hunting.
    PS: MET just announce a $2B common buyback. Good for pref coverage and earnings if you had bot right in Dec/Jan. I looked at these two prefs on routine a few weeks ago, but remember one is way over par and call, the other way over par and YTC crappy. May see an offering here??
    Happy Hunting! JA

    1. Schwab is trying to see if they can set ALLZL up trading and will get back to me.I was told CUSIP is 020002838.

      1. Schwab alled right back and said ALLZL would be available to trade online tomorrow, Friday morning.

  6. Thanks Tim and 730CAP for the early warning.
    Had owned ALL-D since issued in early 2013. Sorry to see it go, but got out at 26.05.
    Ploughed it back into ALL-A. A whole 1% lower coupon. It is callable, but there are 3 issues above in stack callable by Oct. Fingers crossed.
    The new reality. Not pleasant.
    Felt like being halfway though eating a fine Sirloin, only for the waiter to whisk it away it and replace it with a burger.
    The Powell burger may be on the menu for a while.

    1. Yes Adrian—get used to the new normal–we’ve been here before and we all will do just fine–but maybe we will have to eat burgers instead of steak.

  7. Missed the boat on this one. Actually, all decent (investment grade) pfds. are above issue, so I’ll do-nothing for a while.

  8. Don’t forget ALL-E and ALL-D are only callable on an coupon payment date, so no matter what they will be outstanding until 10/15/19

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