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Allstate to Issue New Preferred Stock


Giant property and casualty insurer Allstate (ALL) has announced a new issue of preferred stock.

The issue will be a fixed rate issue and will join a number of issues already outstanding which can be seen here.

Thanks to EarlyBird for the heads up.

The issue is expected to be rated BBB/Baa2–investment grade. Coupon should be between 7.375-7.625%–pretty tasty. The issue will be non cumulative, but qualified.

The preliminary prospectus can be found here.

29 thoughts on “Allstate to Issue New Preferred Stock”

  3. It says they will use the proceeds for:
    general corporate purposes, due in part to the redemption of all outstanding shares of our Series G Fixed Rate Noncumulative Preferred Stock and the corresponding depositary shares on April 17, 2023.

    Seems kind of strange since the series G only had a coupon of 5.625% not to mention all the fees involved with a new issue preferred. Either they are making poor management decisions or having some financial troubles.

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    1. Very strange indeed. Even if they were in financial trouble (which they’re not), I don’t see how refinancing a lower coupon for a higher coupon would help.

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      1. It’s also worth mentioning that ALL-G was trading below par when the call notice was issued.

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      2. Folks – not an expert, but upon a short review of the Series G prospectus on page S-23 there is a paragraph entitled “Restrictions on Declaration and Dividend Payments” this paragraph discusses restrictions on dividend payments based on financial metrics. This is in the G prospectus.

        Scanning the Series H and J prospectus documents I didn’t see a similar paragraph.

        Maybe this explains why they would call the G and issue the J? There is obviously a good reason for it beneath the surface perhaps this is it?
        Interested in any feedback.

        At 7 3/8% coupon trading near par this is not all that different from the yield on the MS-E IMO (now that it won’t float). It looks like a fixed 7% is the new fixed 5%.

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        1. August – I spoke with IR today and it sounds like the section you cited is the reason for calling Series G and reissuing. Nice find.

          I didn’t think there was a good explanation for why the coupon on Series J was so high though. It looks like it closed above $26 today so clearly it could’ve been issued for a lower coupon. Is this the advisors just doing a bad job?

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          1. Dick, considering my H series is up a buck from yesterdays purchase already and present paying yield is under 6% again, I suspect you are right.

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            1. I mentioned to the guy from IR that ALL picked a coupon that is almost identical to the current yield of a Western Alliance preferred. I also mentioned that WAL is mentioned in the financial news almost daily and it’s common stock has been frequently halted for trading over the last several weeks.

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              1. Dick, The underwriters did well on that one. But if there are 5 companies I absolute trust and dont even worry a sec on payment, 4 would be old subsidiary utilities and the other AllState. As I mentioned before, they will be around insuring cockroaches long after the human race is gone. I probably need to peel off some of my H purchases as I bought more than I wanted to but it just seemed like a flip layup. And between them and two other bigger AllState issues I bet over 10% of my stash is “In the Good Hands”. It wont stay that way indefinitely though.

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          2. Hey DW and thanks for checking. That clause was actually kind of strange because applied to the G but not the other series of preferred.

            The way I read it was as follows:

            If the ALL financial ratios would have triggered this clause, then the G would have to stop paying dividends. The other classes of preferred that are at parity with the G would have had to stop paying dividends as well. This must be the case because if H & I (for example) were paying dividends and G had to stop, then they would not be a parity.

            One can see why this would be an issue, and why they would want to clean it up. However, one is also free to wonder about the timing. Does ALL management feel that they might be getting closer to triggering this covenant and therefore decided to move now.

            I say this because the G was issued in 2018. The H and I were issued in 2019. Why did it become an issue in 2023? It is just kind of weird. I could not imagine that they were unaware of this clause as the time the H&I were issued.

            Anyway

            If the ALL issue had a current yield of 8%+ I would see it differently, but
            I am of the school of thought that says if I can get a non cum issue from a too big to fail firm like MS with a 7% yield, then why take a risk on a non cum issue with similar yield from a firm that is not too big to fail like ALL.

            COF preferred might be a better deal as well. It is close to 7% and trades at a large discount to par. It is not too big to fail, but with the preferred you are Sr to Mr Buffet’s new position in the common. I would much rather have a 7% yield in a position that is senior to Buffet than a 7% yield in ALL J.

            (I used the same logic in OXY junk bonds and in several other cases as well)

            At these prices I would pick both MS and COF preferred over any ALL issue.
            If the ALL J drops in value to be priced to yield 100 bps over the MS E or the various COF issued I might change my tune.

            FWIW

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  4. i bought 300 shares of ALL-i at 21.20 20 minutes ago lowering cost a lot i’ll take it

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    1. Mike, I bought 200 of the H series at 20.92 just as a placeholder before market closed. If they price this new one at the suggested range we should get a better opportunity. One never knows of course. Being I have 2 other ALL debt issues already, both at higher paying yields, I need to be a bit more patient to make this a good purchase for me.

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    1. The original price talk was…7 3/8’s. Anything under 7 would be a shock. I expect 7 1/4…..Still don’t see pricing

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      1. I guess I’m having a heck of a time understanding why the coupon would be over 7% on this new ALL pref given where current yields sit on almost every other IG preferred. It’s even weirder given that they just called ALL-G at 5.625%.

        What am I missing here? Is there a problem with ALL?

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        1. Dick, Short answer no…Look at this senior unsecured 2033 note. Over par and 5.02% YTM.
          https://finra-markets.morningstar.com/BondCenter/BondDetail.jsp?ticker=C165090&symbol=ALL.GS
          I bet like another poster mentioned this par yield gets walked back a bit. This is my theory. Old money chasing old preferreds has kept most yields down. Its when an IPO comes up that new money in volumes is needed to soak it up. And there has been very few IPOs one has noticed. EIX had to issue a sub note 8% with BB+ a couple months ago. Look at what Jacksons and Lincolns coupons went for. I bet this one will trade very sturdy if plus 7%. Lets see what it is issued…And how quick the minions can get in on ground floor if they can at all.

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        2. This one doesn’t make any sense to me – why call the ALL-G? The ALL-G was a $500M issue. Could ALL have already bought and cancelled some of the outstanding shares? How big is this new issue? Several billion; did ALL need more capital than ALL-G was providing?

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          1. Looks like it’s a smaller issue than ALL-G. I wonder if they have covenants that somehow forced them to call ALL-G and then create this smaller issue?

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            1. Well, once all was said and done the new issue looks like it was over $600M. All-G’s redemption cost $575M.

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              1. Does this deal make any sense to you? It still doesn’t make sense to me.

                “NORTHBROOK, Ill., May 16, 2023 – The Allstate Corporation (NYSE: ALL) announced that on May 15, 2023 it priced a $600 million public offering of 7.375% Fixed Rate Noncumulative Perpetual Preferred Stock, Series J (Series J Preferred Stock). The company intends to use the net proceeds for general corporate purposes, due to the redemption of all outstanding shares of Series G Preferred Stock on April 17, 2023, at par for a total redemption payment of $575 million. Loop Capital Markets is a bookrunner on the transaction, making this the first time a minority-, women- or veteran-owned business enterprise has acted as a joint bookrunner on a preferred stock issuance.”

                https://www.sec.gov/Archives/edgar/data/899051/000110465923061165/tm2310215d6_fwp.htm

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  6. For the small allocations allotted I’d be surprised to see anything over 7.25…. And if we do, it’d be a sign of weakness for the market as a whole. When Allstate has to pay thru the teeth…… Then all 6’s may be in for a test.

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    1. Jay – it has not been priced and the OTC does not list a temp symbol – it will be ALL-J eventually. Not sure what Mseni19 is seeing.

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