Allstate Calls ALL-A

Thanks to Zwei, who posted in the Reader Initiated Alerts page, we have now seen the official notice of redemption of the ALL-A, 5.625% perpetual preferred being called.

The issue is being called 1/15/2020 which is the next dividend payment date (Allstate preferreds can only be redeemed on a dividend payment date).

It is always amazing that even after the company signaled that they might redeem the ALL-A issue investors kept trading the shares with little caution as it had closed last week right at about $26. Yesterday it fell to $25.77. Only 2 months ago it traded around $26.70.

It is fine to own some potential call candidates, I certainly do, but giving away 1-2% or even more, at this stage is probably a bit silly–I mean ALL sold their last preferred issue with a 4.75% coupon.

The official notice is here.

11 thoughts on “Allstate Calls ALL-A”

  1. “Also the proliferation of pumpers putting people who are new to the risks of income issues who don’t outline the pitfalls?”

    There are next to no FAs buying pfds for their clients. And to suggest a sort of pump and dump is laughable

    1. If you Prefer – “There are next to no FAs buying pfds for their clients.”
      That would put some downward pressure on Pfds and is useful information. How did you get that information?

  2. Maybe the dummies are indexed ETF’s and CEF managers asleep at the wheel? Probably a few long term holders in advisor managed accounts not paying attention either. Also the proliferation of pumpers putting people who are new to the risks of income issues who don’t outline the pitfalls? Getting 3-4% over a 10yr rate on anything rated less than A to me you are asking for it.

    1. Bea–I think some are ETFs and CEFs, but there have been quite a few small trades in the issue (100-1000) and likely those are individual investors.

      I hold 3 similar issues right now–but if I had a cap gain of 4% I would be long gone.

      If we have some newbies in the issue, I guess it is the cost of education–they will look a bit deeper in the future.

    2. That’s mostly bull crud. People own negative ytc preferreds for a variety of reasons

        1. Bea, I really dont consider myself stupid. Its about measuring risk and reward versus expected outcomes. It has never failed me. Sometimes there are reasons for the way things are…..But if you arent willing to find out why or be vigilant when you do, then it isnt a place for you.

          1. my comment was relating to if you buy a pfd at 26.70 with call risk a few months away in a declining rate market then you like to lose capital.. which I don’t.. and that is pure stupidity. I understand the day trading mentality of many of the commenters here which has been successful for many. What I don’t understand and feel is “stupid” is buying a high call risk pfd like Tim said at 26.70 and getting back $25 plus 3m interest.

            1. Without question, Bea. And as you are referring to the highly liquid bigger issuances…With the additional risk of the specific company already showing an active interest in the preferred market. That is a double disaster recipe to lose money. And when you get down to this specific example, the risk/reward in terms of bps, just wasnt there to be exposed in the first place near $26.

      1. If you Prefer, your a little tough here, but yes, I agree. And they have to be selectively targeted to minimize risk. I have done it for years and way above call price and have never been stung with a call loss ever. But you need to tilt the field to owns advantage and not necessarily hold forever.
        As a long time used example, OSBCP. CEO mentioned they are “looking at it” in terms of redeeming on CC a month or so ago. But they said that 3 years ago, also. And he said acquiring another bank would be looked at first, and that was the second option. So clearly this means it may have some time still. Well it sold off anyways a month or two ago and I loaded up at $10.25… Then sold it all at 10.55-10.57 a few weeks later…Now just a couple weeks from going exD, a seller came out and I risked buying a smaller 2000 share purchase back at $10.49. Its already accruing next payment. And this is 500 bps above 10 yr and decent quality TRUP.
        So I know redeeming isnt top priority of bank, its true cost yield is 5.5% so they wont redeem and reissue a QDI. It isnt cost effective. Its either lower the capital tier 1 bar, or leave outstanding. My plan is to collect the interest payment and sell when it falls asleep again after exD a month later. So I have specific reasons to support my play (and history), but there are no guarantees here, and maybe Im wrong. But until I ever am, I play the game. But I do this very little anymore compared to a few years ago. The risk/reward just isnt there as it used to be at least for me.
        Added thought….I never do this with highly liquid issues of bigger float size, and or company is active in issuing preferreds.

        1. Grid – What do you mean on OSBCP when you say “Its already accruing next payment?” With quarterly being .195 and the record date being the business day immediately preceding the relevant distribution date, therefore it’s still accumulating for this upcoming 12/31 dividend, I’m not sure what you’re getting at in relation to buying at $10.49. I’m in for a small amount bot about a month ago @ 10.27. Are you saying counting back in your 30 flip profit?

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