Investment Grade Issues Uniformly RED

I had just looked at the overall picture of preferreds and baby bonds early today and ‘on average’ they were up 2 cents from last week. But on a day where interest rates ground higher (as represented by the 10 year treasury) to close at the high of the day – 1.41% – investment grade issues–lower coupon issues–were pretty much all ‘red’.

Losses were not deep–maybe a dime, but out of the 217 $25/share preferreds and baby bonds I track only 22 issues were higher–with the balance unchanged or lower.

So going back to the ‘olden days’—the days when interest rates used to move in both directions we know a couple things. 1) Higher coupon issues will trade firmer than low coupon issues when rates move higher and 2) issues that are near maturity (baby bonds or term preferreds) and those issues that are ‘anchored to $25’ with a call threat over hanging them will move little with higher rates, except in extreme conditions. In general this will occur irrespective of the quality of the issue.

INPOINT Commercial Real Estate Income is Now Trading on NYSE

As mentioned by J early today the new preferred stock from INPOINT Commercial Real Estate Income (not publicly traded) is now trading on the New York Stock Exchange.

This issue was not able to be purchased by most of us, because of stricter regulation on the OTC grey market, when trading 1st began is now available to all.

The most recent 10Q (quarterly report) from the company can be read here.

The issue is trading under ticker ICR-A and last traded at $24.90.

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So Much For Taper Fears

It is kind of amusing that so much time was spent on speculation on Federal Reserve taper talk–maybe that was what was needed–so much awareness that there was no BAD reaction to tapering timelines in the equity markets.

The 10 year treasury is up 7 basis points to 1.40% right now–so we are seeing a jump in interest rates–but a manageable jump. Remember that the reaction in the preferred stock and baby bond sector will be very muted if changes in rates are slow–over a course of days or weeks. Speed kills–I don’t want to see a 1/8 or a 1/4% move in 1 day–markets will get spooked.

Right at this moment the average $25 preferred stock and baby bond is UP 2 cents from the close last Friday–no overall reaction at all to annoucements or interest rate increases.

B Riley Financial Comes a Calling – Update

Once again serial issuer of baby bonds B Riley Financial (RILY) has announced a new call.

They will call the 6.875% RILYI baby bond issue on 10/22/2021.

UPDATE – Shares closed yesterday at $25.91–redemption is at $25 plus accrued interest and a 25 cent bonus for early redemption. (as Fabrib reminded me)

The press release is here.

Waiting on the Federal Reserve

With equity markets trading higher today it seems like investors/traders are looking for a dovish spin from the Federal Reserve today at 1 pm (Central time).

With the last soft jobs report, Covid 19 Delta and now Evergrande in China the chair has lots of excuses to put a dovish spin on a taper.

Interest rates have remained firm around the 1.30% to 1.35% area–obviously this crowd is not looking for any surprises in the tapering announcement.

Honestly it would be great to have a date to ‘hang our hat on’ relative to the taper—I hear the talking heads continue to harp on an interest rate hike immediately after the taper is complete–what crap!! We can’t even see next month let alone 2023–there is one hell of a lot of ground to cover before we get to rate hikes.

iMedia Brands to Sell Baby Bonds

Interactive TV company iMedia Brands (IMBI) has announced a new offering of baby bonds.

The senior notes will carry a coupon of 8.50% and will have a maturity date on 9/30/2026. 3 million shares (bonds) are proposed to be sold.

As I have come to expect on marginal offerings from B Riley these notes will carry a bonus rate for early redemption starting on 9/30/2023 at $25.75 and reducing to $25.25 on 9/30/2025 until maturity.

The issue should carry the permanent ticker of IMBIL when it trades on the NASDAQ.

The preliminary supplement is here.

Riding the Storm Out

No, I am not talking about the REO Speedwagon song from the 1970’s, but referring to yesterdays stock market and interest rate action.

Long time preferred stock and baby bond investors know that when we have common shares taking a fairly substantial hit on a day like yesterday that the best action is to simply watch–no buying or selling.

Yesterday as I watched markets I was primarily watching interest rates. The 10 year treasury was down around 1.30% which indicated to me that the equity selloff likely was not going to last too long–a day or two. If the 10 year treasury would have fallen to 1.20% with stocks off over 1000 Dow points I would have more concern that we would see a deeper market follow through as it might have indicated a massive ‘rush to safety’.

Of course I didn’t do anything in our accounts yesterday—everything was ‘red’, but not harmful in a major sort of way. With a fall in equities of a couple percent we didn’t see the ‘throw the baby out with the bath water’ stage.

So for now I am waiting for the Fed statement and press conference tomorrow. We’ll have to see if we get an interest rate reaction–can’t imagine anything more that a few basis points movement.

Lodging REIT Sotherly Hotels to Sell Baby Bonds

Tiny lodging REIT Sotherly Hotels (SOHO) is selling a new issue of baby bonds.

Of course Sotherly has 3 issues of cumulative preferred stock with suspended dividends (suspended in March, 2020) which can be seen here.

Obviously this is a dicey company at this time–the common shares are trading at $2.62/share.

This new issue has a maturity date in 2026 and will trade on the NASDAQ under ticker SOHOL.

It will be interesting to see the pricing on this issue and to see how well it is received by investors.

The new issue registration statement can be read here.

J was on top of this new issue.

Monday Morning Kickoff

The S&P500 continued to be a little weak last week falling by about 25 S&P points from the previous Friday–about 1/2%. While the index is seasonally weak it remains just 2% more or less from an all time high.

Interest rates which had been as low as 1.26% during the week ended up at 1.37% on the close Friday after being as high as 1.39% which we haven’t seen for a couple of months. Interest rate markets remain on edge as possibilities of the Federal Reserve announcing some near quantitative easing taper. With the Federal Reserve meeting starting on Tuesday and Fed Chair Powell having a presser on Wednesday afternoon anything can happen during this week in regards to interest rates–you know Powell is personally dovish, but he is no doubt going to be pressured to start some sort of tapering soon.

The Federal Reserve balance sheet had a relative explosive week of growth moving higher by $92 billion last week–the largest move higher in the last 2 months.

Once again $25/share preferreds and baby bonds were pretty quiet last week with the average shares moving higher by 4 cents. Investment grade issues were off 2 cents, bank preferreds were up 4 cents and shippers were up 6 cents.

We had 5 new income issues, all preferreds, priced last week. CAUTION–OTC tickers are changing on a regular basis

REIT Vornado Realty Trust (VNO) sold a new issue of 4.45% preferred which is trading under OTC grey market ticker VNOOV and closed last Friday at $24.99.

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mREIT New Residential Investment (NRZ) sold a fixed-rate reset preferred with an initial coupon of 7%, which is fixed for the 1st 5 years. The issue is trading under OTC ticker NRZDP and closed last Friday at $24.88.

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Non publicly traded REiT Modiv Inc sold a new issue of 7.375% fixed rate preferred which is trading under OTC ticker MOIVP and closed last Friday at $25.87.

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Arizona based banker Western Alliance Bancorporation (WAL) sold a reset preferred with an initial coupon of 4.25% which traded up to $26.08 last week on the OTC market under tick WALPV>

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Non publicly traded REIT INPOINT Commercial Real Estate sold a fixed rate preferreed which is trading under IPCRP, but quotes are not posted as it is restricted at this time and most of us can not trade this issue because of a lack of full financial information being filed with the SEC.

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Non Publicly Traded REIT Healthcare Trust Inc. to Sell New Preferred Stock

Non publicly traded healthcare REIT Healthcare Trust Inc. has announced a new preferred stock offering.

Healthcare Trust Inc. has one other outstanding 7.375% preferred stock issue which can be seen here.

The permanent ticker will be HTIBP when it reaches the permanent listing on the NASDAQ. We will wait to see if the issue trades on the OTC grey market–being a non publicly traded company they will need to have full financials filed with the SEC for us to trade it on the OTC grey market. I believe they should qualify for trading.

The preliminary prospectus/registration statement can be found here.

J was on top of this one early today.

More Official Redemption Notices

As noted a couple days ago a call was expected on the National Retail Properties 5.2% perpetual preferred. Ken posted the press release on the call here. The call occurs on 10/16/2021.

Ken also posted the press release on the call of the Southern Company SOJB issue. The issue is a 5.25% junior subordinated note due 10/2076. The call is for October 18th. The press release is here.

A non official call is reflected below–

J posted that The Hartford Financial Services Group (HIG) has pre-announced a redemption on their 7.875% fixed to floating rate debentures (HGH) which is not redeemable until 4/15/2022. Shares are at $26.36 right now. With 3 interest payments of 49 cents each at this price it is about a breakeven. Will be curious to see who forgets about this pre announcement and keeps the price in the mid $26’s until March. The ‘use of proceeds’ statement is here.

I Bought the New Residential Fixed Rate Reset Issue

While I try to not hold too many mREIT issues I did buy the new issue from New Residential (NRZ) issue. I paid $24.73

This issue is a 7% fixed rate for 5 years and then reset every 5 years at the 5 year treasury plus a fixed spread of 6.223%.

At the time I bought this issue it appeared to be superior to the other 3 issues of fixed-to-floating rate issues outstanding from New Residential (NRZ). NOW a few days later it looks to be a ‘coin toss’ as the outstanding issues have dropped 1-2%.

Just the same the ‘reset’ terms are preferred to the floating rate terms–a strong 6.223% spread is superior to the terms of the floating rate terms and the 5 year reset is preferable to the ongoing floater reset.

I plan to hold the shares.

INPOINT Commercial Real Estate Income Prices New Preferred

INPOINT Commercial Real Estate Income (not publicly traded) has priced the previously announced preferred stock.

The issue prices at 6.75%, is cumulative and non qualified.

The issue does have a 1% failure to redeem clause which kicks in on 9/30/2026 and 1% more each 9/30 to a maximum of 10%. So 9/30/2027 rate is 7.75%, 9/30/2028 8.75% etc.

The issue trades immediately under OTC grey market ticker of IPCRV.

The pricing term sheet can be read here.

Western Alliance Bancorporation Prices Preferred Issue

Arizona banker Western Alliance Bancorporation (WAL) has announced pricing of their new Fixed-Rate Reset preferred.

The issue prices with a meager coupon of 4.25% which will remain fixed about the first 5 years. On 9/30/2026 the coupon will reset to the 5 year treasury plus a fixed spread of 3.452%. After this point the issue will reset every 5 years with the fixed rate spread added to the 5 year treasury.

The issue is non-cumulative and qualified. It is rated Ba1 by Moody’s (1 notch below investment grade) and BBB by Kroll–note that Kroll doesn’t call this investment grade..

The issue trades immediately on the OTC grey market under temporary ticker WALPV.

The pricing term sheet can be read here.

Call Action Remains Fast and Furious

Some of the items I have seen on Reader Alert.

Telephone and Data Systems (TDS) has announced a call on their last outstanding baby bond. This is the TDA 5.875% baby bonds due 2061 (but redeemable since 12/2017. Press release is here.

NWGG posted that Aegon NV has called the AEB Floating Rate Capital shares which have been callable since 2010. These were floaters with a 4% minimum.

As noted by J the National Retail Properties NNN-F 5.20% perpetual will be called as the company has sold notes with the ‘use of proceeds’ announcing the upcoming call on this issue. The use of proceeds is here.

J and Dick Whitman posted on Ally Financial (ALLY) calling for the last of the 8.125% trust preferred to be redeemed. The effective date is 10/15/2021. The issue was trading up around $26.75 a couple days ago–not now–it is at $25.28. This one has been partially redeemed numerous times in the past so no surprise a full call comes.

With 4-5% issues being called it would look like we are going to be stuck playing in the junk patch–not what I want really, but you have to do what you have to do.

INPOINT Commercial Real Estate Income Announces New Preferred – Ticker Update

UPDATE TICKER–as noted by mbg below the OTC grey market ticker is IPCRV (subject to change of course).

Inpoint Commercial Real Estate Income Inc. (not publicly traded) has announced they are selling a new perpetual preferred stock issue.

Inpoint is a non publicly traded commercial mortgage REIT and as a REIT the terms of this new issue are that it is cumulative, non qualified and I believe it will be unrated (still checking).

This is not a large company with just Net Asset Value of just $230 million as of 6/30/2021 so due diligence is necessary.

The ticker will be ICR-A and the OTC ticker has already been assigned as IPCRV

The registration statement is here.

Western Alliance Bancorporation Announces New Preferred Issue

Arizona banker Western Alliance Bancorporation (WAL) has announced they are selling a new issue of fixed-rate reset preferred stock.

The company has mentioned the possibility of calling their WALA 6.25% subordinated notes which are outstanding and have been optionally redeemable since 7/21.

The preliminary prospectus can be read here.

EB was on top of this one and posits a 4.50% initial fixed portion.

New Residential Investment Prices Fixed Rate Reset Preferred – Ticker Update

UPDATE–this is trading under NRZDP

Mortgage REIT New Residential Investment Corporation (NRZ) has priced their new issue of fixed-rate rest preferred stock.

The issue prices with an initial fixed rate of 7.00% which will ‘reset’ on 11/15/2026 at the rate of the 5 year treasury plus a spread of 6.223%. The issue will reset every 5 years there after.

This is a large issue with 17 million shares being sold with another 2.55 million available for over allotment.

This issue is unrated, cumulative and non qualified.

The company has 3 other preferreds outstanding–all fixed to floating rate and they can be seen here.

It will begin trading immediately under OTC ticker NRZDV–look for this to change in 3 days.

The pricing term sheet can be read here.

Mortgage REIT New Residential Investment Corp to Sell Fixed-Rate Reset Preferred

Mortgage REIT New Residential Investment Corporation (NRZ) has announced they will be selling a new issue of fixed-rate reset preferred.

Fixed-rate reset preferreds adjust every 5 years to the 5 year treasury rate plus a fixed spread–generally the spread is quite large and FRR preferreds have been well accepted by the marketplace.

NRZ has 3 fixed-to-floating rate issues currently outstanding which can be seen here. None of the 3 are currently redeemable.

The preliminary prospectus can be read here.

Kent was right on top of this one with EarlyBird chiming in with yield talk on the resettable around 7%.

Vornado Realty Trust Prices New Preferred Issue – UPDATE Ticker

The OTC grey market ticker is VNOOV

REIT Vornado Realty Trust (VNO) has priced their previously announced preferred stock issue.

The issue prices at 4.45% and is split investment grade–BB+ from S&P and Baa3 from Moody’s.

This issue is large at 12 million shares and proceeds will be used to call the VNO-K 5.70% issue.

As of this moment NO OTC grey market ticker has been announced–but will be, likely this morning.

The pricing term sheet can be found here.

Southern Company to Call $25 Subordinated Debentures

The Southern Company (SO) will be calling their 5.25% junior subordinated debentures soon.

The issue to be called are the Series 2016A 5.25% shares (SOJB). At this moment these baby bonds are trading at $25.35.

No definitive date for the call is set, but they become callable on 10/1/2021.

The company has sold an issue of 1.875% notes in which they have stated the ‘use of proceeds’ is the call the above notes. Data is here.

Modiv Inc. to Sell New Preferred Offering

Modiv Inc (Not traded) has filed to sell a new issue of perpetual preferred stock.

Modiv is a REIT, and not publicly listed. They own 38 properties which cover the span of office, retail, industrial and others–do your due diligence as this company is small and being non traded has minimal information available (until now)

The registration for the new issue can be seen here.

EarlyBird caught this registration statement.

Huntington Bancshares Comes a Calling

Huntington Bancshares (HBAN) has announced the redemption of the HBANN 5.875% perpetual preferred issue. This issue originally was a First Merit issue which was acquired by HBAN. The redemption is for 10/15/2021.

Markets are sleeping–the issue is trading at $25.87—50 cents above value (redemption is at $25.37).

The press release is here.

J was on top of this and posted in the Reader Alerts section