JMP Group Prices New Baby Bonds

Thanks to all those folks who highlighted this new issue on the Reader Initiated Alerts page.

Financial services company JMP Group (NYSE:JMP) has priced a new baby bond ($25 Senior Notes). The company had originally filed their registration statement 1 month ago. The issue has a maturity date of 9/30/2029–the early optionally redemption period starts 9/30/2021.

The coupon will be a fixed rate of 6.875%. The bonds are rated BBB by Egan Jones.

They have sold 1.44 million shares (bonds) and the company intends to call the 8.00% JMPB Senior Notes with a portion of the proceeds. The company has other outstanding baby bonds and they can be seen here.

There is no OTC market trading in this issue and the permanent ticker has not been released (although we would guess JMPE).

The pricing term sheet can be read here.

B Riley Prices New Baby Bond for a Refi

This issue was noted and discussed on the Reader Initiated Alerts page by many different folks yesterday–thanks.

Financial services company B Riley (NASDAQ:RILY) has sold a new issue of baby bonds. The company plans to redeem their 7.50% 2021 bonds (RILYL) with the proceeds.

The new issue of 4 million shares (bonds) will be priced with a fixed rate coupon of 6.50%. The bonds will have a maturity date of 9/30/2026. There are an addition 600,000 bonds available for overallotment.

Like some other B Riley issues these baby bonds can be redeemed early with bonus rates. On or after 9/30/2022 to 9/29/2023 at $25.50, on 9/30/2023 to 9/29/2024 at $25.25 and after this time at $25 plus accrued interest.

The bonds are rated BBB+ by Egan Jones, although they are not what we normally consider a “major” ratings agency. I believe these baby bonds would be considered “junk” rated by either S&P, Moodys or Fitch.

These bonds will trade under the ticker RILYN. There will be no OTC Grey market trading.

The company has numerous other baby bonds outstanding which can be seen here.

The pricing term sheet can be found here.

Waiting on the Fed

Wednesday has a chance to be exciting–or it could be as boring as watching paint dry. Regardless of what the FED does with the Fed Funds rate (no cut, 1/4% cut or even a 1/2% cut) we won’t react to it. Our investment methods do not really allow us to react quickly to interest rate changes and our personal experience is that quick reactions are most bound to be a mistake.

With a stack of cash if we did see movements in income issues over the next couple of days we will look for bargains–but we are in no rush to make rash buys.

In the last week we added more Kayne Anderson 3.50% monthly pay term preferred (KYN-F) when opportunity presented itself down around $25.06. The issue has a mandatory redemption on 4/15/2020. I now hold around 1500 shares–in lieu of cash, but there are limits and I will buy no more.

The Fido Government Cash Reserves (FDRXX) is paying 1.91% right now and the Gabelli US Treasury Money Market (GABXX) is right at 2% so the large stashes of cash continue to work for us–albeit in a modest way.

Financial Services Company Athene Holding Inc to Sell Preferred Issue

Athene Holding (NYSE:ATH) has announced a new fixed rate non-cumulative preferred issue.

Of course no details are known yet except for the typical terms–non-cumulative (being a financial company), quarterly payments and qualified for preferential tax treatment.

I expect this issue to be low investment grade.

The company sold a fixed-to-floating rate issue in June with an initial fixed coupon of 6.35% which can be seen here.

Preliminary information is here.

Note on Political Discussion

We note there has been a vigorous (but civil) political discussion occurring on one of the old threads and want to remind everyone that we try to discourage political discussion as it tends to get a bit contentious.

Personally we are not worried about this discussion as long as it is civil, but let’s not let it break down into any nastiness.

Thanks to everyone for being really good about keeping politics out of the discussion – as difficult as it is.

Monday Morning Kickoff

We are staring into a potentially exciting week with spiking oil prices, because of the Saudi attacks and because of the 1/4% Fed Funds rate cut we will most likely see on Wednesday.

Last week the S&P 500 traded in a range of 2969 to 3020, within a hair of a new high.

The 10 year treasury traded in a wide range of 1.50% to 1.90% before closing the week at the high at 1.90%.

The average $25/share baby bond and preferred stock closed the week at $25.22 which is a full 20 cent drop from the previous week.

We have 146 issues trading under $25/share now compared to 130 issues the week before.

The Fed Balance Sheet grew by $8 billion last week which seems to point to a leveling out of the balance sheet asset total–we will need about 4 more weeks to confirm that the Fed is neutral in this particular aspect of Fed policy.

Last week we saw a number of new income issues announced.

South Jersey Industries (NYSE:SJI) announced a new baby bond with a coupon of 5.625%.

Saul Centers (NYSE:BFS) announced a new fixed rate preferred with a coupon of 6%.

Bank of America (NYSE:BAC) announced a new 5% non cumulative preferred.

mREIT AG Mortgage Investment (NYSE:MITT) announced a new issue with a a fixed-to-floating rate coupon. The initial rate is 8%.

Fifth Third Bank (NASDAQ:FITB) announced a new preferred with a 4.95% fixed rate coupon.

Lastly Rexford Industrial Realty (NYSE:REXR) announced a new fixed rate 5.625% preferred.

More data on all these issues can be bound by skimming down homepage where all data is announced and kept.

Updated Leverage Ratios of Closed End Funds (CEF)

As most all of you know closed end funds (CEFs) offer some of the highest quality preferred stocks available. In fact this is our favorite “shopping” place–although in their current overvalued state there are not many bargains.

The safety of these preferreds is ensured by the requirement that these CEFs have an asset coverage ratio of 200% or GREATER. For us the more the merrier.

One of our favorite issues, the Tri-Continental 5% preferred (NYSE:TY-P) which was originally issued in 1963, has a coverage ratio of 4400%.

We have updated a good share (most) of the coverage ratios for the CEF preferreds outstanding. The leverage ratios are generally published twice a year by the CEFs in their semi-annual and annual reports.

The updated list can be found here.

These high quality, but modest coupon issues, mostly have great safety, BUT if interest rates spiked very high the share prices would take major hits.

Disclosure – we own numerous issues on this list–multiple Gabelli Issues, the Bancroft Fund issue, the Ellsworth Fund issue, the AllianzGI issues and the Tri-Continental issue.

Oil Prices Set to Spike on Saudi Attacks

As those folks that have been following the news this weekend already know a drone attack on Saudi oil fields and facilities has forced Saudi Aramco to shut down over 5 million barrels of oil production–about 1/2 their production. We can expect to see a spike in crude prices Sunday when global trading restarts.

On a global basis there are plenty of crude reserves to serve the needs of everyone, but as we all know there will be knee jerk reaction of some sort–will it be $1 or $10 dollars (or more) is the question. Additionally whether this is a short term issue or will it take some time to bring production back on line.

Lots of Red in Income Markets

A confluence of ex-dividend dates with relatively rapidly rising interest rates is forcing many, many preferreds and baby bonds lower by 25 or 50 cents this week–some much more.

With the 10 year treasury trading around 1.89% after being at 1.43% just 10 days ago you might expect some give back on the easy capital gains we have all garnered recently. Personally our accounts are off about $1,000 bucks this week–no big deal–mostly because we have such a high cash position.

I am personally watching certain quality issues–for instance the AllianzGI Convertible and Income Fund 5.625% preferred (NCV-A) is trading down 60-65 cents in the last 2 days (about 1/2 is due to ex dividend) bringing the current yield to 5.41%. I have more than a full position, but could add a little more.

Some of the other big losers simply are some quality issues that were getting ahead of themselves such as Digital Realty 6.35% preferred (DLR-I) which had traded up to $27 a couple of days ago and now with the combination of ex-dividend and rising interest rates have knocked it down to $25.93 It should be noted this issue has early redemption available in 11 months and many times when an issue is trading with such a large premium to a $25 redemption once it gets closer to the potential redemption is will fall on ex-dividend date and never recover.

The preferreds list showing losses can be seen here–maybe it is a shopping list?

Rexford Industrial Realty to Sell New Preferred

REIT Rexford Industrial Realty (NASDAQ:REXR) will be selling a new preferred stock issue. The issue will trade under the permanent ticker of REXR-C when it begins to trade on the NYSE—after a short stint on the OTC Grey market. The temporary OTC ticker has not yet been announced.

The issue is the typical REIT issue with cumulative dividends, but being non qualified.

The company currently has 2 preferred issues outstanding, both with 5.875% coupons which can be seen here.

The preliminary prospectus can be read here.

mcg had this posted in Reader Initiated Alerts a couple hours ago.