Capital One Prices Giant New Preferred Issue

The previously announced preferred stock issue from Capital One Financial Corp (COF).

The non-cumulative issue will carry a coupon of 4.80%.

The issue is split investment grade with only Moodys rating the issue as low investment grade.

The issue will trade OTC Grey Market immediately under ticker CPONZ.

The pricing term sheet can be found here.

Capital One Financial to Sell New Preferred

Capital One Financial (COF) will be selling a new issue of perpetual, non-cumulative preferred stock.

The issue will trade under the permanent ticker symbol of COF-J when it begins to trade on the NYSE.

The issue is likely to be split rated–investment grade by Moodys and a couple notches below investment grade by S&P.

The OTC Grey market ticker has not yet been announced–but it will trade on the OTC prior to NYSE trading.

The company has 5 issues currently outstanding with coupons of 5% to 6.20%. These issues can be seen here.

NOTE–the COF-P 6.00% issue was callable 9/1/2017 and almost certainly will be called. It was trading around $25.60–now at $25.37. The issue is only redeemable on a dividend payment date.

The preliminary prospectus can be read here.

EarlyBird was the early bird on this one.

Stocks Claw Their Way Back While Interest Rates Drift

It looks like the initial selling in common stocks has ended and shares are moving slowly higher. I would think they are in a ‘wait and see’ period. Of course this wait and see could last just hours–or days. Uncertainty will last for a while–no doubt there are more undiagnosed cases of corona virus in the U.S., but if the reports come in slowly and are modest in number things will stabilize.

Interest rates, as measured by the 10 year treasury are now at 1.62%–down 6-7 basis points today. In my opinion rates were going to this level 1 way or another—I just didn’t think it would be a virus that sent them down. Recall that rates on the 10 year were down at the 1.45% in September–so the current rate is not a new low. We all know that rates could spike way up based on inflation or many others reasons–they could also drift lower and lower. So really since I could make a case for either higher or lower rates there is no reason to change anything I have been doing for months and months–probably will have to live with a high level of cash for a long, long time.

The average $25 preferred and baby bond is off 3 cents today–so we are seeing a bit of disruption–but it was long overdue anyway. I am seeing some of the energy shippers off today–Tsakos Energy Navigation (TNP) issues and Teekay Offshore preferreds (now owned by Brookfield Business Partners) as well. For those with a taste for higher risk maybe there is a bargain being created here.

Monday Morning Kickoff

Finally we see a week where stocks ended on a down note. Monday was a holiday and Tuesday, Wednesday and Thursday were fairly flat–as the S&P500 opened the week at 3321 and closed Thursday at 3326. Friday came and shares took a tumble closing the day and week at 3295–still just a measly fall of less than 1%. Whether the Corona Virus gets worse during the coming days or not appears to hold the answer as to the movement in common stocks–and potential bleed over into preferreds and baby bonds.

The 10 year treasury moved lower as it opened the week at 1.79% and closed the week at 1.68%. While a move lower by 11 basis points is substantial, it is not a giant panic–huge panics would show this move lower in a day-versus over the course of 4 days.

The Fed Balance Sheet fell by a relatively large $30 billion. This is the 3rd week in a row of moves of larger amounts–there has been no overall balance sheet growth for weeks now. It shouldn’t be assumed that the FED is withdrawing any liquidity to speak of as likely we are going to see some spring back next week.

We had a new issue sold by mREIT ARMOUR Residential REIT (ARR). The issue carries a 7.00% coupon. The company will call the ARR-B 7.875% issue in full.

The pricing term sheet can be read here.

While we saw a larger downdraft in common shares on Friday the overall $25 preferred and baby bond only moved lower by 2 cents on the week. Banks moved lower by 4 cents. We will see what this week brings as common shares look ready for a large fall.

No More 2 a.m. Posts

Early this morning I wrote the post on the new preferred issue from ARMOUR Residential. The post was not as complete as it should have been and had a couple typos. My apologies.

Last night I had a 8 pm flight out of Minneapolis–which got held up for 90 minutes so they could de-ice-why it took 90 minutes I have no idea. I ended up not getting to my Scottsdale room until about 1:30 am mountain time. I thought I could get the pricing posted in a coherent fashion–obviously not.

The good part is as usual everybody had data in the comments that completed the story. Thanks all.

The other good part is the weather in Scottsdale is beautiful–70’s and sunny–the bad part is that by Sunday night late I will be at my desk–hopefully with enough recharge for a few months.

Armour Residential REIT Prices New Preferred-Updated

Update–The OTC Grey Market symbol has been announced as ARMRP.

mREIT Armour Residential REIT (ARR) has priced their new issue of perpetual preferred stock.

The issue priced at 7.00%–once again lower than the earlier ‘yield talk’.

The issue will be cumulative, non qualified and optionally redeemable starting in January, 2025. This issue will pay a monthly dividend.

The company will be calling a portion of the ARR-B with the proceeds. Initially the company estimated calling 30% of the 6.210 million shares of the B issue, but it looks like they will be able to call as much as approximately 50% if desired as they are selling 3.45 million of the new issue.

The pricing term sheet can be read here.

Stocks and Interest Rates Tumble. What’s Next?

The 10 year treasury is tumbling some today-now off 5 basis point to trade at 1.72%. Apparently the bloom is off the rose in regards to the China trade deal and we have moved into fear of a global slowdown based on a virus. One can never, ever know where these things will take us, but more often than not it is likely we won’t see longer term damage to growth–but the knee jerk reaction is negative. We will just have to wait and see.

Stocks have tumbled as many as 200 Dow points–a non event really–less than 1%. As I have mentioned before I don’t give serious attention to equity moves until we see at least daily moves of say 1.5% or more and then my attention is too watch for more panic moves by nervous nellies bailing out of their income securities.

As mentioned by many in comments today all of the shipping companies are giving up ground–both preferreds and common shares. By far and away they are the biggest and most wide spread losers in the preferred arena.

I do see 1 ‘silliness’ move in the CEF preferreds as someone paid $27.85 for Gabelli Utility Trust 5.625% (GUT-A). This issue is up $1.30 from earlier in the month. The issue has been redeemable since 2008–folks are looking for a bruising as they could call this any minute–no doubt they could garner a 5% coupon (or better). I owned this issue last year and while it was a base holding I exited because of valuation (coupled with call risk).

The average $25 preferred and baby bond is off 3 cents today–no doubt being driven by some of the shippers as most sectors are plus and minus a penny. The only line on our chart moving lower is the 10 year treasury–and I expect that move will continue–slowly.

Costamare Preferreds Falling

Just a note that the 4 preferred issues from container ship owner Costamare (CMRE) are tumbling.

Shares went ex-dividend ex dividend on the 13th–and have just continued to move lower. The high yield issues are now $1 lower since ex date.

A quick scan and I don’t see real news out there (although there may be some), but I think it is more likely simply a sell off on valuation.

Their 4 issues can be seen here.

For those with risk tolerance there may be opportunity here.

mREIT ARMOUR Residential REIT to Sell New Preferred

mREIT ARMOUR Residential REIT (ARR) will be selling a new perpetual preferred in a refinancing transaction.

The company has 1 outstanding issue of monthly paying preferred, the ARR-B 7.875% issue which will be at least partially called. It has been redeemable since 2/2018. The ARR-B issue has been trading right around $25 for many months, but moved higher 5-6 days ago and is now at $25.34.

The new issue will carry on the tradition of paying monthly dividends and will be cumulative, but non qualified.

The preliminary prospectus can be found here.

Thanks to EarlyBird and Ptrader for being on the ball this morning and spotting this new issue only minutes after it was posted.

Potential Market Disruption Ahead

Early next week (Monday the 27th) we will see ‘rebalancing’ announcements being made by Wells Fargo on a number of Indexes. Below is a list of mostly preferred stock indexes that will announce rebalancing.

As you can see the announcement will be made Monday with actual rebalancing occuring on the next Monday (2/3).

Many ETFs track these indexes and I randomly checked a few of them and there is sizable potential volume that could occur in many issues–whether it is orderly or not is anyone’s guess. There may be issues “dumped” that would allow a few issues to be picked up at more bargain prices. We will wait and see what happens.

NOTE–the ETFs tracking these indexes are not the mega sized ETFs, but as a group they are sizable.

More Quiet Markets

With no China news-except for the virus which looks to have already played out (as far as markets are concerned) we are having a quiet day everywhere.

The 10 year treasury is at 1.765% which is less than 1 basis point (1/100% of a percent) changed from yesterdays close.

The DJIA and S&P500 are up a tiny amount–a rounding error.

$25 preferreds and baby bonds are moving by a penny here and a penny there. Again only banking issues moving much–off a couple cents. There was little ex-dividend action today so no movement because of ex issue. So since the 1st of the year we have seen almost no action in these issues–we actually like that–quiet is good.

Complacency is definitely high in these markets–and black or grey swans at this point in time could be really, really painful.

An Article–A Warning

Today ChuckP posted an article that is currently on Barrons. It is not unlike many we have seen in the past and most of us that have been investing in baby bonds and preferred stocks are well aware of the risk that is out there.

We are posting this because it is a reminder that markets are dangerous and even if you own bonds and preferred stocks there is danger. Newer investors in these areas need to know that it isn’t just about earning an easy (although modest) return by collecting interest and dividends.

Essentially it is reminding investors that chasing yield is getting a bit carried away—of course most of us know that, but it has been going on for years–when does the music stop?

Here is the article “Ponzi Market”. I believe Barrons will allow you to read this once only before the paywall comes up.

Let’s Do It!!

Let’s Do It!!

That is what I have to tell myself each day to force myself to buy riskier assets than I really want to hold.

Like many of you I have piled up cash positions that are too high–that means around 30% and I will have a few more percentages coming in when the Kayne Anderson 3.50% issue (KYN-F) money comes in on redemption. New issues being offered are either too low in coupon or simply are not issues that are really in my wheelhouse–i.e. too high of a perceived risk.

So each day I have to force myself into riskier assets. Actually I don’t have to–but I want to–I think it is the right thing to do even though it doesn’t always feel good.

Given that I have 50-60% of my funds in base portfolio positions that I have held for a long time it makes some sense to ‘force’ myself out into risk.

I certainly don’t think that others should move out to riskier assets–each person has their own needs.

Here is what I have forced myself to do in the last week or so.

I bought ($25.43) a full position in TravelCenters 8% baby bonds (TANNL). The issue goes ex on 2/13 for 50 cents. There is a bit of call risk–but there is a 8.25% issue that is callable which would go first and it is likely these won’t be called anyway (although one never, ever knows for sure).

I bought ($25.71) a full position in B Riley 6.75% baby bonds (RILYO). The issue just went ex for 42 cents a few days ago–I bought before the ex date.

This morning I bought ($25.09) a position in UMH Properties 6.37% perpetual (UMH-D). The issue will go ex on 2/14 for 40 cents.

Each of these had other issues that could have been bought, but considering YTC, ex dates etc. these seemed the best for me at this time–other folks may look at things differently.

I won’t likely hold long term on these issues, but would like to realize a 1-2% short term gain before considering selling them.

Slight Website Tweaks

I have made a couple of tweaks today–hopefully not anything that is very noticeable.

The fonts on the right margin have been reduced 1 font size. I am always looking to gain ‘space’ and I a trying to squeeze in some new stuff on the right margin. Hopefully this is not too small for folks.

2ndly – today David and mcg were discussing a weird situation that popped up before, but I couldn’t isolate the issue, but this time they noted the issue more precisely so I could address it. When you are commenting there was a block that said “website”–honestly I don’t even know what it was for–some default setting I guess. Anyway when anything was put in that box it converted into a link which attached to the commenter’s name. This was not harmful, not any security issue, but it was annoying. The box ‘website’ has been eliminated so that annoyance should go away.

Triton International Dividends

This is just in case others were unclear as to the status of the dividends paid by Triton International (TRTN) on their preferred stock. The prospectus on the issues have always been unclear as to whether they pay qualified dividends or not.

ALL DIVIDENDS PAID ON THEIR PREFERREDS THUS FAR ARE ‘RETURN OF CAPITAL’.

Data on the status of the various dividends can be found here.

As most of you probably know when a dividend is designated as ‘return of capital’ it reduces your cost basis of the shares.

For Instance

If you pay $25 for a share and receive $2 in return of capital distributions your cost basis in now $23. If you sell it for $25 you will have a $2/share gain since your cost basis had been reduced to $23 through receipt of a return of capital distribution.

The return of capital is not taxable – but upon the sale of the shares you may have a capital gain (or loss) and you will need to then pay taxes (if in a taxable account).

Rates Back In Drift Down Mode

The 10 year treasury has moved back into the drift down mode–no economic news to move rates higher. Maybe moving lower on Chinese virus outbreaks. Seems we are always talking about China–one way or another. Now trading at 1.77%–down 7 basis points.

Preferred stocks and baby bonds are darned close to totally flat–the average of all $25 issues is the same as the close last Friday at $25.97. Most sector averages are plus and minus 1 penny. The biggtest mover I see in preferreds is the Kansas City Southern 4% non-cumulative (KSU- or KSU-P). This is an old (1962) illiquid issue and someone lost their mind in late December and drove the price up to $33 and now it is down to $28.98–still a crazy high price.

I am really surprised we are not seeing more new issues–2 last week and 2 the week before–a grand total of 4 issues this year.

Also I saw a dude on CNBC today pitching preferred stocks–that is really unusual–probably means we will have a little more competition hunting for yield–we sure don’t need more buyers–I would like to see some sellers.

Watch These Indicators For Weakness

I have always watched the consumer for weakness in the economy–sometimes I simply watch the Univ of Michigan consumer sentiment survey (below)-

At other times I watch some data which is a little more detailed–plus it comes to me in a RSS feed. Below you can see the consumer credit defaults for auto loans, credit cards and mortgages.

Property of Standard and Poors

While I seldom have worries about my investment grade holdings–the net asset value may moves, but I know the income stream will remain in tact. On the other hand many other holdings that are unrated or just ‘junky’ I worry most about a recession and the consumer being 70% of the economy will likely signal ‘recession ahead”.

It is only common sense that the above data should dovetail nicely with employment–so, of course, we watch those number closely as well.

I know the charts above are a bit hard to read–but I think they show that the consumer is generally healthy–coupled with employment being strong–I think it is safe to say if the status quo remains we are good for the next number of months (short of a black swan).

Monday Morning Kickoff (on Tuesday)

The S&P500 traded in a range of 3268 to 3330 last week which is where the index closed–up darn near 2%.

The 10 year treasury traded in a range of 1.78% to 1.85% and closed the week at 1.84%–which is exactly where it had closed the previous week.

The FED Balance Sheet rose by $26 billion last week. Recall that the balance sheet fell by $24 billion the week before–I was under no illusion that the FED would reduce overall liquidity for more than a week as equity markets would throw a tantrum.

Last week we had a couple of new income issues sold.

Wells Fargo & Company (WFC) sold a new issue of perpetual preferred stock with a 4.75% coupon.

The issue is trading on the OTC Grey Market under temporary ticker WFCZL and last traded at $25.04 last week.

Container leasing company Triton International LTD (TRTN) sold a new issue of perpetual preferred shares which carry a coupon of 6.875%. This issue opened strong at around $25.25 and closed the week at $25.50

The average $25 preferred and baby bonds closed a bit lower last week–2 cents overall. Banks were the only sector that closed notably lower being down 8 cents. We will have a total of around 17 issues going ex-dividend this week. Next week we will see around 30 issues going ex-dividend.

Slipping and Sliding Into the Weekend

The weather is lousy in Minnesota with a big snowstorm and high winds forecast–I hate this weather–guess I need to go to AZ on a permanent basis. Oh well, guess I am stuck here with my wife who isn’t likely to move 1000 miles away from the grandkids. So I will just take a look at markets and see if there is any cheer there.

After the December holidays the new issue market doesn’t seem to be very active–am sure it will change. This week we had the new 4.75% perpetual priced by Wells Fargo (which I bought for hopefully a steak dinner flip–won’t hold too long) and the Triton International 6.875% perpetual, which I had hoped to buy, but decided not to chase it as it opened high and has traded in the 25.28 to 25.50 area.

Some folks on the Reader Initiated Alert page have noted that Seaspan (SSW) is going to delist their 7.25% baby bonds (SSWA) and plans to call them on 10/10/2020. Seaspan is doing some reorganization into a holding company structure. The press release is here.

The Fed has done relatively normal type REPO operations the last couple of days. Yesterday they did $39 billion in an overnight operation as well as a $35 billion term operation (14 day). Today they did a $53 billion 4 day operation (because of Martin Luther King day on Monday). As I noted earlier in the week the REPO plans for the next month were released and beyond a $5 billion reduction in the 14 day operation mid February it looks like liquidity will continue to be required at the levels we have seen in the last month or two.

The FED Balance Sheet data was released today and overall (REPO balances and FED buys/sells) the balance sheet grew by $26 billion in the last week–so ‘party on’ like its 1999. I didn’t think we would see multiple down weeks, because the ‘ball babies’ in stocks would cry.

Of course everybody is aware of the very low coupons we are seeing in the U.S.–but it is nothing compared to the rest of the globe. Giant self-storage company Public Storage (PSA) just sold a 500,000,000 Euro note with maturity in 2032 and a coupon of .875%–YIKES!! We are going to have to rewrite the playbook if this comes to the U.S.

At 1:30 PM CST we have the following pricing in preferreds and baby bonds. You can see that for the 1st time in 6 weeks $25 preferred stocks and baby bonds have tilted lower–not by much, although banking issues are off 5 cents in a week. Much of this downward tilt may be because we saw 72 issues go ex-dividend this week, but on the other hand we had big ex date weeks in December (for instance the end of December we had a week with about 130 issues going ex) that didn’t tilt the average price lower. So does this mean we have seen a peak? Guess we’ll know for sure in a few weeks.

Triton International Preferred Rockets Out of the Gate

In just one more example of chasing yield the new 6.875% Triton International perpetual preferred has shot higher this morning in early trading. Last I looked it was trading at $25.40.

I had hoped to buy some of these shares for a quick ‘flip’, but am not going to pay this price for the shares so I will move on.

Potential buyers of this new issue can consider the 7.375% TRTN-C issue which has a current yield of 7.04%. Note the yield to worst is lower, but with almost 5 years to first call date this is a minor factor.

Folks are saying that Fidelity is charging an extra $50 charge on commissions for Triton being foreign. I know eTrade doesn’t charge this, but some others may.

Triton International Prices Preferred Issue

As has been the case lately all coupons seem to come in 1/8% under the “price talk” number.

Container leasing company Triton International (TRTN) has priced a new issue of perpetual preferred at 6.875% (price talk number was 7%).

The company has 3 other issues outstanding which can be seen here. Investors will have to see where this new issue trades and then by comparing to those issues outstanding determine which best fits their needs.

The pricing term sheet can be read here.

Container Leasing Company Triton International to Sell New Preferred

Large container leasing firm Triton International (TRTN) has announced a new perpetual preferred stock issue.

The issue will have a early call date of 3/15/2025. The issue will be cumulative. It is likely that S&P will rate the issue B+ (non investment grade-speculative)

The issue should trade on the NYSE under TRTN-D when it hits the permanent exchange. There will be OTC Grey market trading, but the ticker has not yet been announced.

The company has 3 issues outstanding already with coupons of 7.375% to 8.5% which can be seen here.

The preliminary prospectus can be read here.

Thanks to mcg and EarlyBird for being on top of this new issue. EarlyBird is hearing coupon talk in the 7% area.

Wells Fargo & Co Prices Preferred Issue

Wells Fargo & Co (WFC) has priced the previously announced new preferred stock.

The company will sell 70 million shares with a coupon of 4.75%. There will be 10.5 million shares available for over allotment.

The issue will be investment grade, non-cumulative and qualified.

The issue will trade immediately on the OTC Grey market.

The pricing term sheet can be read here.

Interest Rates in Drift Lower Mode

Since we have all the euphoria of the “China Deal” behind us I guess there is no reason to drive interest rates higher (at least that is what the 10 year treasury is saying).

Previous to today when the “China Deal” came to the forefront rates would spike a few basis points higher as the talking heads would have us believe this is going to make GDP move bunches higher–something I don’t buy. Maybe the Chinese buy more from us–and maybe they don’t, but they can promise anything and do nothing–we will wait and see. Rates drifting lower tells me there are a lot of folks that are NOT buying the Chinese deal story.

The 10 year is now at 1.79%–off almost 3 basis points.

The FED REPO this morning was a $47.5 billion deal–the FED took Treasuries as collateral in the amount of $26.5 billion and $21 billion in agency mortgage collateral.

With a fairly large calendar of ex dividends yesterday we are seeing just a slight amount of give back in $25 baby bonds and preferreds stocks. 47 income issues went ex yesterday. Overall the average price is off 2 cents while investment grade preferreds are off 5 cents–maybe folks are tired of paying sky high prices for 4.75% coupons–I doubt it really.