Insurer WR Berkley (WRB) has announced a new issuance of baby bonds.
The company which had sold a 4% $1,000 senior note issue around 9/1/2020 with proceeds going to a partial redemption of baby bond 5.625% (WRB-B) will be using some of the proceeds of the new baby bond to call the remainder of the WRB-B issue.
The new issue will be investment grade so look for a coupon in the mid 4’s.
Data center owner Digital Realty (DLR) has called their 5.875% perpetual preferred today–effective 10/15/2020.
The issue went ex-dividend yesterday for around 37 cents.
The issue has been redeemable since 4/2018, but yet was trading near $26 a day or two before ex–it went ex for 37 cents but bounced right back up toward $25.90. The company dropped the call this morning and shares are now trading at $25.06.
It is interesting that DLR is selling Euro Note debt at 1%–hint–don’t be fiddling with investment grade preferreds past call dates.
Of course we all mostly know this, but I post it as one more example of what a newer investor should not do.
Wesco International (WCC) which merged with Anixter International earlier his year is about to make their 1st dividend payment on the juicy 10.625% fixed rate reset cumulative preferred on the 30th of the month.
The WCC-A issue went ex-dividend today for around 73 cents–the first payment is for slightly over 3 months.
The company is a giant in the business to business distribution and supply chain business with revenue now in the $17 billion area.
You can be certain there is plenty of risk in Wesco as they are rate B1 by Moodys and BB- by Standard and Poors. You can read S&P’s take on the combined companies.
I only mention this issue because depending on your risk tolerance this may be a reasonable holding. The reset period isn’t until 6/22/2025 so at 10.625% there is plenty of ‘meat on the bone’ yet even though shares closed at $28.30 today.
Disclosure–I hold a position in this issue which I bought in the $26.90 area.
Trading in a range of 3310 to 3426 and closing at 3341 last week the Sp500 had a holiday shortened week loss of about 3%.
The 10 year treasury moved in a range of .66% to 72% and closed the week at .67%. Rates continue to hold fairly steady in spite of massive government borrowings–liquidity everywhere looking for a home. Plenty of bank liquidity and banks have had to do little to no repurchase agreements to garner cash.
The FED balance sheet fell by $7 billion last week–once again continuing the saw tooth pattern we have seen since early July.
The average $25 preferred stock and baby bond barely budged last week as the average issue was higher by 3 cents. No sector moved much–CEF preferreds were flat, utility issues fell 7 cents, banks were up a dime, investment grade issues were up 7 cents and the lodging REITs were up 15 cents.
Last week we have 4 new income issues come to market.
American Financial Group (AFG) came to market with a 4.50% baby bond. We haven’t seen trading in this issue yet, although we would expect it this coming week.
First Republic Bank (FRC) came to market with a 4.125% perpetual preferred issue. We see a OTC grey market closing trade at $25 on Friday–plenty of yield hungry folks even at 4.125%.
Small Virginia banker MainStreet Bancshares (MNSB) came to market with a 7.50% perpetual preferred. No OTC grey market ticker has been announced.
Lastly Capital One Financial (COF) sold a new 4.625% perpetual preferred issue. The issue is trading on the OTC grey marekt last trading at $24.67.
Another smaller community banker is getting on the preferred stock issuance train.
Virginia community banker MainStreet Bancshares (MNSB) will be selling a new non-cumulative perpetual preferred.
Note that this is a pretty tiny bank with $1.5 billion in assets.
Also note that the company offered a payment deferral program to their customers during the Covid 19 pandemic and 22.5% of their outstanding loans are now in deferral–likely this could get ugly as time passes. Read their latest release here.
‘Talk’ is they will be selling around 1 million shares in the 7.375 to 7.50% area which would be comparable to what the other small bankers selling preferreds have priced around.
Finally we saw a downdraft in common shares last week as the S&P500 traded in a range of 3350 to 3588 and closed Friday at 3427–a drop from 3508 the previous Friday.
The 10 year treasury traded in a range of .61% to .74% before closing at .72%–close to where it closed the previous Friday. We had a employment report that appeared to be positive, but with seasonal adjustments and hiring for the census and other factors I don’t think anyone has a real clue as to what is happening in the employment arena.
The Fed Balance Sheet rose by $27 billion last week. This continues the sawtooth pattern that has been going on for the last 2 months as plenty of liquidity continues to slosh around the globe. There has been virtually NO REPO action from the FED for months and that continues.
The average $25/share baby bond and preferred stock fell by 26 cents last week. We have rarely seen share prices fall this year, but a combination of common stocks tumbling, plus a large number of ex-dividend dates happening in September set up the move modestly lower. Investment grade moved 24 cents lower, utilities moved 22 cents lower, banks 21 cents lower and mREITs moved 38 cents lower. The only sector moving higher were CEF issues which moved 5 cents higher.
We had 2 new income issues priced last week.
Sachem Capital (SACH) priced a new issue of baby bonds with a coupon of 7.75%. I see this new issue set to trade today or tomorrow most likely.
Also B Riley priced a new issue of perpetual preferred shares with a coupon of 7.375%. There has been no OTC grey market ticker announced–I assume it will go straight to NASDAQ trading.