Giant MLP Energy Transfer Partners Prices Fixed-to-Floating Preferred

As anticipated and noted by readers Energy Transfer Partners (NYSE:ETP) has priced their new fixed-to-floating rate preferred with an initial coupon of 7.625%.

The coupon will be fixed until 2023 after which it will float at a rate of 3 month Libor plus a spread of 4.738%.  While the initial coupon is fine the spread on the floating portion could be a bit higher–but it is what it is.

The issue will trade with the permanent ticker of ETP-D.  The issue will start trading today under the temporary OTC Grey Market ticker of ETPZF.

The pricing term sheet for the issue can be found here.

We are considering this issue for a small position in both personal portfolios and in the High Yield Portfolio.

We need to perform a bit more due diligence and read what readers have to say on the issue prior to purchase.

Energy Transfer Partners Announces New Fixed-to-Floating Rate Preferred

Giant MLP Energy Transfer Partners (NYSE:ETP) has announced intentions to issue a new Fixed-to-Floating rate preferred stock issue.

Details of the issue have not yet been announced.

ETP had just sold a f-t-f issue in April with an initial coupon of 7.375% which can be found here.  The issue had been trading strong at $25.60/share until the new issue was announced this morning and it is now trading at $25.00.

Preliminary details of the issue can be found here.

Monday Morning Kickoff

Last week was a relatively positive week with the DJIA having a low of 24,518 and a high 25.043 — with a close near the high of 25,019 with shares moving higher based on optimism for announcements of higher earnings in the weeks ahead.  Interest rates didn’t act in the manner that would normally be expected (would expect higher rates with positive stocks) as the 10 year interest rate traded in a range of 2.83% to 2.87% before closing the week at 2.83%.

For the coming week we have the Trump-Putin summit happening on Monday.  We don’t think this has much meaning economically speaking.  Retail Sales are also announced Monday.  Tuesday we have Industrial Production and Capacity Utilization.  On Wednesday we have Mortgage ApplicationsHousing Starts and Building Permits – none of which on their own have the ability to move markets, but may give some economic hints for the next few months.  Also on Wednesday is the release of the Fed Beige Book and this may be somewhat enlightening for the future–but it isn’t going to move markets.  Thursday brings the Philly Fed Manufacturing Survey as well as the weekly jobless claims.   It is interesting that I can remember a time when any one of these items could have moved markets, but for the most part those days are gone.  With the 24 hour news cycle and political considerations on a global basis there are so many items to digest that no single item of economic data any longer dominates markets–all of which are fine with us.  We are always most happy to simply collect dividends and interest as markets remain in Goldilocks mode.

Last week the Fed balance sheet grew by $2 billion so there was no added pressure on interest rates from run off which had been running quite strong the last few weeks.

Last week we didn’t have any new income issues announced–the dog days of summer are upon us in many ways and new issuance is one of them.  We did have 1 new issue start trading and that was the Priority Income Fund term preferred issue.  The issue should be trading today under the permanent ticker (PRIF-A) after closing last week at $24.45.

The average $25 preferred stock last week was off 1 penny with 145 issues now trading under $25/share compared to 140 the prior week.

So with the dog days upon us we will be most likely passively watching the markets.  We continue to be buried with our real estate work, although normally it would be quite slow as August approaches–we would be most happy to have a break from 7 day a week appraisal work.

 

 

CHS Reports Stronger Earnings

As CHS (Cenex Harvest States) is a company which many investors hold preferred shares we note that the cooperative reported earnings yesterday.

The company had net earnings of $229 million against a $45 million loss a year ago.  They did have a $51 million gain on the sale of an insurance subsidiary.

Being a cooperative there are no common shares traded, but there are 5 different preferred issues outstanding all of which trade very strongly.

On Farmland Partners

By now most everyone has read the expose on Seeking Alpha on Farmland Partners (NYSE:FPI).

We have disliked the company since they came public back in 2014.  What we have most disliked about the company was the pricing of the shares (over valued) and the carnival barker like management team–in particular Paul Pittman.

Whether the accusations on Seeking Alpha are true or not is for others to worry about as we have no dog in this fight.

We had pondered purchases of the FPI-B preferreds if it reached a current yield of 7% or so, but that is now no longer a possibility.  The only move we see here is a quick flip of the common or preferred for those that are nimble and don’t mind the risk.  In these types of situations the initial reaction is almost always overdone.

 

Trade Tensions Rise While Income Securities Remain Firm

In spite of trade tensions ramping up income securities are steady as interest rates are steady with stock prices falling off a bit.  Thus far the tariffs announced are mostly just announced with just a small portion actually in effect, but we really need to see some progress in negotiating with China and the European Union.

We still believe that it is possible in the next month that we will get a sizable stock selloff because of the trade tensions–nervous nellies selling as more tariffs occur.  Massive selling has already occurred in the ag markets, which we watch closely since we live in the midwest–there will be liquidations of farmland occurring at a faster and faster clip if prices don’t turn around by fall.  We already are seeing some liquidations, but they are at prices that are fairly high for this type of a sale–investors remain in the hunt for land at a reasonable price and they are keeping values at levels which are lower, but only by a few percent.

The economy has now ramped up further as we see consumers stepping up to take down huge amounts of debt–this happens when consumers are overly confident of the future for their own financial situation.

Consumer debt which was announced this week jumped by $24 billion in May against a consensus guesstimate of $12 billion.  A larger than normal portion of this was credit card debt.  While we are not going to worry about these types of things now you can be certain items like these are setting us up for a deep recession down the road (who know when?).

 

 

JMP Group to Partially Redeem 8% Notes

JMP Group has announced a partial redemption of their 8% Senior Notes (NYSE:JMPB) which became redeemable on 1/15/2016.

The redemption will be $10,000,000 of the $46,000,000 outstanding so the majority of the issue will remain outstanding.  The redemption will occur on 7/31/2018. It is likely that holders will receive a notice of a partial redemption of their shares.

A press release announcing the redemption can be found here.

If any new positions are initiated in this security one should not pay more than $25 plus accrued interest on these notes.

Shares closed today at $25.45 and just went ex-dividend on 6/29–thus they have a bit of excess premium in them right now–likely will see a 10 or 20 cent drop tomorrow.

 

Adding Cowen 7.35% Senior Notes to High Yield Portfolio

We have searched high and low for the perfect security (which never really exists) to add to the Enhanced High Yield Portfolio and have settled on adding the Cowen Inc. 7.35% Senior Notes due 2027 (COWNZ)

Cowen had recently (last month) sold a 7.75% baby bond issue, but it doesn’t mature until 2033.  Honestly even the 2027 issue which we purchased is further out in maturity than we really care for, but on the higher yielding baby bonds it maybe is the best of the group.

The Cowen issue has an optional redemption period starting in 2020 and the way things look now there is little chance it will be redeemed then.

This portfolio had jumped up to 30% cash after we sold our Whitestone REIT 3 weeks ago and this is far too high.  With the above purchase we move to about a 20% cash position.

We are still looking to add 1 singular REIT or MLP and readers have given us plenty of ideas, but we simply haven’t had time to do our due diligence.

 

Stocks Shoot Higher While Interest Rates Creep Up

Common stocks are taking a nice leap higher today based upon a super outlook for earnings which will begin to be released for the 2nd quarter.  Obviously this doesn’t make too much difference to us as we seldom own common stocks.  On the other hand we sometimes own a few REITs, but they are not participating in the rally as REITs are off 1% today–just a breather as they have done well lately .

Interest rates are up 2-3 basis points–a meaningless move in the big picture of things–just noise.

Looks like preferred stocks and baby bonds are grabbing another 2 cents/share gain today.  For months preferreds and baby bonds have been relatively stagnant–moving only pennies higher or lower each week.  Now we are seeing gains that are meaningful and I think many of us that hold mostly preferreds or baby bonds have seen some decent gains in the last 10 days.  For us any gains are pure bonuses as we buy them purely for income, but no matter where gains come from we always like GREEN.

Just a quick note that we did sell some of our Spark Energy Preferred (NASDAQ:SPKEP) today at the highs.  As we mentioned last week we planned to back off a bit from our holdings as we are nicely in the black and we had about 200% of our normal allocation to the position and we wanted a more normal size allocation going toward earnings next month.

Monday Morning Kickoff

Another week starts with the likely news of the week being tariffs and the Supreme Court nomination. Everything thing else will likely take a backseat.

Last week we had a 10 year treasury which traded in a relatively narrow range of 2.81% to 2.87% before closing the week at 2.83%. As long as global fears remain in the world over tariffs and trade wars investors are more than happy to invest in the safe haven marketplace. At this point in time it would appear that only a sharp spike in inflation (at the consumer level) is likely to get long rates higher.

For the coming week we have 7 Fed president speeches–in the past they were meaningful for the way they jerked the marketplace around with conflicting statements–now no one seems to care. Monday we have consumer credit being announced and on Tuesday we have the JOLTs (job openings and turnover) report. Likely these are of little importance to the marketplace although a large change in the job openings could matter–but it has been running over 6 million openings and the odds that it has changed greatly in a month is not very high–although last Friday with the unemployment rate jumping as more folks enter the job market theoretically more jobs are being filled–we shall see. Also on Tuesday we have producer prices being released–while inflation is a market concern it is not likely that producer prices are the number investors key in on.  Consumer price index (CPI) is released on Thursday and this is probably the only important report of the week for investors–a big spike here would get the attention of the bond market–and thus the equity markets.

The Fed balance sheet ran off by a relatively huge $16 billion last week.  This is one of the largest runoffs  we have seen since they began the runoff.  This is demand that has been pulled out of the government  and mortgage security marketplace.  It will continue to be interesting to see the months ahead.

We had only 1 new issue announced and priced last week and that was the new Term Preferred from the Priority Income Fund.  While we love term preferreds all of the readers are very negative on this issue.  We had time to glance at the issue and it looks like we have no real interest in it—the non traded fund only releases Net Asset Values on a irregular basis and the fees they charge investors are sky high.  The bottom line is that these Term Preferreds will probably perform ok over the long term, but are highly susceptible to surprises.  We will try to review more in depth this week some time.

The average preferred share last week jumped 16 cents last week while the number of issues trading under $25 fell sharply to just 140 issues.  This is the strongest week by far that we have seen in months.

 

Cruising Into the Weekend

Looks like we are cruising into the weekend on a very quiet note.  Apparently all the worrying and gnashing of teeth over the China tariff was done before the actual event as today equity markets are extremely quiet–guess we are also entering the dog days of summer which is a quiet trading time.

Interest rates are off 2 basis points so the drift down in the 10 year treasury continues–as does the flattening of the yield curve.

For us it has been a good week.  After going ex-dividend last week Spark Energy preferred (SPKEP) has been sprinting higher.  We are nicely in the black on it finally and when we receive the dividend payment we should be up 3-4%.  We may lighten up on the shares as we had a huge position and we would rather be at a more normal weighting as earnings will be released on 8/5 or so and we really hate to be overweight until the company ‘proves’ they have the business under control.

Also we had a ‘flip’ position in the new Enstar 7% fixed to floating preferred which we have sold.  This issue opened strong when it began trading a week or so ago and we bought shares at $25.25.  At the time we put in a good til canceled sell order for $25.75.  We were surprised that it was hit so quickly.

Our intention was to get some buying done in the model portfolios but our continuing crushing workload didn’t allow for due diligence–maybe on the weekend, although I will be working my ‘real job’ all weekend.

 

Priority Income Fund Sells Term Preferred

Because of our continuing crushing workload we haven’t been able to always catch new issues.

Fortunately readers can catch them (they always do).  Reader Jon notified us on a new Term Preferred with a mandatory redemption in 2025.

Closed end fund Priority Income Fund has sold the new issue and it has a coupon of 6.375%.. The issue is trading on the OTC market right now under ticker PIFNP and last priced at $24.55.

Note that the Priority Income Fund is not publicly traded.  This is the second term preferred from a non publicly trade fund–the other being the issue from RiverNorth.

While we don’t have time to do due diligence at this moment we may be a buyer of this issue later in the week.

The SEC document can be found here.

Monday Morning Kickoff

So as we expected last week was pretty bumpy—up and down.  While the week ended up down only around 300 points on the DJIA there was plenty of action depending on news on tariffs and trade–honestly this is the news–this is virtually all of the news that markets paid attention to last week–and it will be the key topic for the coming week.  Of course we have a holiday the middle of the week so market volumes will be lite, because all of the important people be “in the Hamptons” (sarcasm intended).

Interest rates (10 year treasury) moved in a range of 2.83% to 2.88% before finally closing on Friday around 2.85%.  Any move higher in rates is simply not possible with the trade issues and tariff possibilities ahead–everyone is looking for the safety safe haven of government bills, notes and bonds.  Of course the final look at 1st quarter GDP was plenty soft at 2%–.2% below the consensus.

As we had noted at some point in the last week we have begun to question whether our personal belief that the 10 year treasury will hit 3.25% is too high.  We really question whether the economy of the U.S. even has the ability generate growth of 4% at this point in time.  The GDPNow site of the Atlanta Fed had been forecasting GDP for the 2nd quarter as high as 4.7% or so a month ago–now the number has started to come back closer to reality at 3.8%.  We really question even this reduced forecast–from 2% to 3.8% in a singular quarter–not really buying it, but we shall see.

For the coming week we don’t have any Fed presidents speaking–thank goodness.  While there are a few minor economic reports coming out only the ADP employment report on Thursday followed up by the ‘official’ employment report on Friday are meaningful.  Consensus is for 205,000 new jobs with an unemployment rate of 3.8%.  It will take a huge miss on consensus to move markets.

The Fed balance sheet fell by a further $10 billion last week which follows up on the $9 billion from the week before.

We had just 1 new preferred issue price last week and that was from Chicken Soup for the Soul Entertainment.  The regular preferred priced at 9.75%.  As one reader said the company name was enough reason to reject this issue–and we agree.  We quickly reviewed the financials of the company and while they are not terrible the revenues projected for 2018 is $36 million and we as conservative investors we really need to invest in more established companies.  The shares are trading under ticker CSSEP.

The average preferred stock was at $25.12 last week with 162 issues under $25/share.  These were virtually unchanged from the week before.

 

 

 

 

B Riley Releases New Quarterly Forecast

As an issuer of a number of baby bonds B Riley (NASDAQ:RILY) is always of interest to us and as such we wanted to pass along the latest forecast from the company for those that may have an interest.

The list of baby bonds outstanding from B Riley can be found here.

The new forecast from B Riley raises their projected net income from $14.3 to $15.3 million from a previous projection of $5.4 to $10 million.  This is one hell of a jump and the common shares have jumped by more than a $1/share which we believe is an all time high.

You can read their press release here.

We have been a bit cautious on B Riley as they are moving into businesses not related to financial services such as the recently announced purchase of voice over internet phone company magicJack.  Additionally the company is in the business of helping failed retailers (or their creditors) liquidate inventories such as BonTon which recently filed for liquidation.

Obviously with this latest news of raised expectations the baby bonds are in super good standing.

 

Chicken Soup for the Soul Entertainment Prices Preferred Issue

Tiny producer and distributor of on line and television programming Chicken Soup for the Soul Entertain (NASDAQ:CSSE) has priced a new cumulative preferred stock issue.

The $25 issue will carry a fixed coupon of 9.75% and will pay monthly dividends. The dividends will be cumulative and will be qualified to the extent the company is profitable–otherwise the dividends paid will be a non dividend distribution classified as a return of capital.

The new preferred issue has just begun trading under the ticker of CSSEP and is trading around $24.90.

The pricing term sheet can be found here.

While we have not done a thorough analysis of CSSE the 9.75% coupon and the $1.50 underwriting discount (about twice the normal discount) given to the underwriters goes a long way toward letting investors know this is a risky, lower quality issue.

We have no interest in purchasing any of this issue.