Giant Telecom AT&T (T) has announced the issuance of a new perpetual preferred stock.
This will be the 1st perpetual preferred issue for the company as far as I can find. They do have some global notes outstanding which can be seen here. Additionally there are 2 3rd party issues outstanding (KTBA and GYC) which we do not cover at this time.
The issue will have an early redemption date starting in 2024. Other terms appear to be fairly typical for a perpetual preferred—cumulative and qualified with quarterly payments.
The preliminary prospectus can be read here.
Thanks to EarlyBird for being the early bird on this one.
Why the junk rating? AT&T common stock has had 34 consecutive years of dividend increases. It seems to me that the preferred dividend should be pretty darn safe.
DEBT, Tom, purely the debt, in my experience. They have levered up so much to buy Time Warner and such, that they are not loved by the rating agencies.
According to Yahoo, Total Debt/Equity (mrq) 101.63%
Caution is always warranted but difficult to verify objectively. Rates will fluctuate! Harhar. Jump your comments over to Sandbox area.
Did anybody see the Gundlach interview on Yahoo yesterday? He repeated some of the same fear-mongering against corporate debt he had earlier this year.
He was wrong about the rate shift early this year. But his premise on the corp. bond is not wrong- and many have warned against the BBB downgrade onslaught since last year. It’s just the when…
So I pared back a few issues. I guess there hasn’t been a real bond bear market in 30 years so most investors including myself don’t really know what a serious bond bear market even feels like. Any tales from the past from those who have?
He’s been dead wrong since 2015.
Hster–when I want a daily dose of scare tactics I go to zero hedge. Unfortunately someday they will be right.
Just for context, AT&T common stock currently yielding 5.35%. Had been well over 6% but stock rose about 8 points this year.
I have a smaller-than-I’d-like position in KTBA. If these preferreds price in line with a BB+ rating, I’d want to pick it up. Something like 5.5% would be very nice. Sometimes you get lucky with a generous coupon on a company’s first preferred. Can’t believe ATT has waited this long to lose its preferreds virginity LOL!
If they’re in line with where TBB and TBC are trading I’d expect more like 5.10%.
Landlord I’l sell you my KTBA. Bought a bunch for the div capture and trying to unload it for at least 29.50. People won’t buy this for 5.9% but they’ll buy the 5% debt.
Martin, I would suggest the reason why is Quantum appears to be wrong. I dug into the prospectus and their are call warrant holders on the issue. When or why they have never been exercised is crazy. Maybe the brokerage being bought out created a lost file or something, who knows.
But if the call warrant holders (most likely issuing brokerage) came out of the weeds suddenly, that would be a nice hair cut at $25.
Martin, would you be willing to sell at 29.25? If so then you have a deal. I bought at 29.90 prior to ex-div and I don’t want to go much higher than that div adjusted.
What is stunning to me is what Earlybird posted in readers alert on this issue.
$250mm (10mm $25 Par)
Expected Ratings: Ba1 / BB+ / BBB
AT&T preferreds expected to be junk status? In 2018, they were BAA2 and BBB. Many analysts said they should have been junk back then. Reality setting in?
SteveA–EarlyBird has been getting the worm all week. We do have folks here that do have some early information.
Yes Earlybird has been a great provider of some very early stuff
Steve, yes their credit quality has slipped through the years a bit…But remember this is a perpetual stock, not a baby bond or subordinated debt issue. So it has to automatically be slotted lower than the previous note issues. So this isnt a reflection on any more of a downgrade. This will be T’s only capital stack preferred issue so far.
Sr unsecured bonds are rated BBB, so the standard two notch adjustment for preferreds get you to BB+. If S&P is rating these BBB, what are they rating the sr bonds?
Quantum shows TBB as Baa2/BBB-….. And I see nothing moodys and BBB by S&P.
But its att and they just did 1.2 billion at 5. Many say they are actively paying off leverage.
They also announced a new global notes series on Monday fwiw
Saw that one mcg–$1000 issue if I remember correctly.
What was the coupon on that Monday note?