American Equity Investment Life Holding Prices Preferred

Annuity provider American Equity Investment Life (AEL) has priced their new fixed-rate reset perpetual preferred with a fairly tasty initial coupon of 6.625%.

More importantly the issue, which will have the 1st coupon reset on 9/1/2025 has a ‘spread’ of the reset at 6.297%. The spread will be added to the 5 year treasury every 5 years to ‘reset’ the coupon.

This issue is non-cumulative, qualified, and NOT investment grade.

The issue will trade immediately on the OTC grey market under ticker AEIHL

The pricing term sheet can be read here.

15 thoughts on “American Equity Investment Life Holding Prices Preferred”

  1. Hmm… I guess A M Best doesn’t count- -however, at QO they have it at BB, otherwise, NR up above.

  2. For the life of me i cannot figure out how some of these Preferreds and Baby Bonds are coming out in the 6.5% to 6.9% range with interest rates so low.These are quality companies that used to list in the 5% to 6% range..Even Wintrust put out a 6.875% a couple weeks back.Ive been investing in Preferreds for 30 Years now and ive never seen such a difference between the 10yr yield and these new issues.Its an amazing time and opportunities are everywhere.

    1. Bob, there is a bifurcation though. Known proven quantities like PSA just sent out a record low yield. All while some like these are huge spreads as you stated, but coming from an embattled sector. Investors are suspicious this capital isnt being raised to grow the company from a capital base, but being used as a buffer to paper over upcoming losses and possibly big ones.

      1. Ahhh. Thank You..I did notice that PSA issue.I think it is in the 4.6% range.But then again they are Cash Flow machine Year over Year and if i remember correctly from the Financial Crisis in 08 and 09 PSA actually benefited more so when unemployment numbers skyrocketed because Millions of people had to use storage companies after losing their homes.I think they went up something like 400% in their common in 5 or 6 years..

      2. Put another way, the risk spread has increased. As it should have. Perhaps most noticeable in sub-IG financials. Issuers like CUBI and ZION are yielding big numbers.

  3. Based on where they are trading right now, if I owed the A issue I would swap it for the new B.

    The current yield will be a bit less with the B but the spread on the B, 6.297%, is a monster. Just in cases rates ever so go up again.

    I own a small bit of the A and would follow my own advice except that Vanguard won’t let me trade the issue, probably until tomorrow. Same old problem with Vanguard – their system picks up every new issue as a penny stock. The issue could be AAA rated and they still won’t let you trade it.

  4. Weird that first coupon payment isn’t till December don’t you think? Thinking about a small nibble but that gives me pause….

    1. When a company issues a new preferred it has a choice of a “long” first dividend, or a “short” first dividend. AEL went with the long on this new issue. Most companies go with the long.

      A long first divi troubles me not at all.

    2. Where is info stating the first div is Dec. Don’t see it on QO or in a brief look at the prospectus. Also- will they be paying from the IPO date ( I would hope)?
      thx

      1. Here it is Gary. Note this is when it is paid, not when it goes exD first time.
        Holders of Series B Preferred Stock will be entitled to receive dividend payments only when, as and if declared by our board of directors (or a duly authorized committee of the board), out of funds legally available for the payment of dividends. Any such dividends will be payable on a non-cumulative basis quarterly in arrears on the first day of March, June, September and December of each year, commencing on December 1, 2020. Dividends will accrue on the stated amount of $25,000 per share of Series B Preferred Stock (equivalent to $25.00 per Depositary Share) (i) from the date of original issue to, but excluding, September 1, 2025 at a fixed rate per annum of 6.625% and (ii) from, and including, September 1, 2025…..
        I bought 200 today at $24.25, with no expectations.

      2. Whew, Gary! That must have been a REALLY brief look at the prospectus…. It’s in the second paragraph……….. LOL…. funny how the eyes sometimes just completely gloss over……….it happens to all of us…..

        1. 2w-
          Whew is right- hate it when I do that.
          Thanks guys– so it might be awhile if the find the change in the couch.
          Down today- looks pretty good.

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