BDC New Mountain Finance Prices New Baby Bonds

Business development company New Mountain Finance (NYSE:NMFC) has priced their new baby bonds at 5.75%.  We note that the company has recently voted to reduce their asset coverage ratio to 150% from 200% as now allowed by law.

The issue will trade under the permanent ticker of NMFX when it begins to trade in the next week or two.  There will not be OTC Grey market trading.

The issue is nice in that it has a shorter dated maturity in 2023 with early optional redemption starting in 2020.

The pricing term sheet can be found here.

We are not very familiar with NMFC, although some readers have made positive comments on the company on our site.  For now we pass, but will consider a purchase once we are able to do due diligence and have some investable cash available.



CMS Energy Prices Baby Bonds

Michigan electric and natural gas company CMS Energy (NYSE:CMS) has priced their new baby bonds with a coupon of 5.875%.

The issue will have normal terms for a utility which means quarter payments and long maturities (2078)–there will be an early redemption available to the company beginning in 2023.   The interest payments are not qualified for preferential tax treatment.

The pricing term sheet can be found here.

High Quality Preferreds Being Slammed

As the more seasoned preferred stock investors know when interest rates rise the preferred that are knocked down the most are the high quality, low coupon, perpetual issues.

We always watch the Public Storage (NYSE:PSA) preferred for hints at direction movement and the size of those moves in quality issues.  PSA has 13 preferreds outstanding with coupons ranging from a low of 4.90% to 6.375%.

Here is a chart of the PSA-D issue which carries a 4.95% coupon showing a 5 day loss of 3%.  This is exactly why many investors stay away from these low coupon issues at this stage of the interest rate cycle.

Associated Banc-Corp Prices Preferred

Associated Banc-Corp has priced 4 million new shares (plus 1.242 million shares for overallotment) of a fixed rate, perpetual preferred with a coupon of 5.875%.

Of course the shares are non cumulative, being a banking company.  Dividends are qualified for tax purposes.

The issue is marginally investment grade–Baa3 from Moodys and BB from S&P.

The pricing term sheet can be read here.

Shares are trading on the OTC Grey market under the temporary ticker of ABCCL.  I see them last trading at $24.60.

CMS Energy to Sell Baby Bonds

In what has become a virtual rush to sell debt and preferreds electric and natural gas company CMS Energy (NYSE:CMS) has announced they will be selling a new baby bond issue.

Details have not been announced as of yet but the preliminary paperwork can be seen here.

The issue will have the ability to have deferred interest payments for up to 40 consecutive quarters without a default being declared.  This is fairly typical in baby bond issues from utility companies.

CMS has 1 other 5.625% baby bond outstanding (NYSE:CMSA) which is trading at $24.37 for a current yield of 5.77%.

BDC New Mountain Finance to Offer Baby Bonds

New Mountain Finance (NYSE:NMFC) has announced their intention to sell an issue of baby bonds with a maturity date in 2023.  The permanent ticker symbol will be NMFX when trading begins in a week or two.

No details have been released yet, but the preliminary prospectus can be read here.

New Mountain had previously voted to reduced their asset coverage ratio needs from 200% to 150%.



BDC Hercules Capital Prices Baby Bonds

BDC Hercules Capital has priced their new baby bonds with a coupon of 6.25%.  This is a full percentage point above the last issue the company sold.

Please note that the maturity date is substantially longer than issues Hercules has sold in the past–it is 2033.  They are paying a premium coupon based, at least partially, based upon the longer dated maturity.

The company has stated that they may call the balance of their 6.25% issue which is due in 2024 (NASDAQ:HTGX).  This issue is now trading at $25.26 so their is virtually no call risk in holding them.  They had previously partially called this issue.

Additionally the company has a 5.25% issue outstanding (NASDAQ:NCXZ) which is due in 2025 and is trading at $24.84.

The pricing document on the new issue is here.  The new issue will trade with the permanent ticker of HCXY when it trades in the next week or so.  There will not be any OTC Grey market on the issue.

Associated Banc-Corp Announces New Preferred

Wisconsin regional banker Associated Banc-Corp (NYSE:ASB) has announced the sale of a new issue of fixed rate preferred stock.

No details of the new issue have been announced as of yet.

The company has 2 issues of fixed rate preferreds currently outstanding–they are marginally investment grade.


The preliminary prospectus can be found here.

Monroe Capital and QVC Baby Bonds Trading

We have gotten notes from readers that the Monroe Capital 5.75% baby bonds (NASDAQ:MRCCL) and the QVC 6.375% baby bonds (NYSE:QVCD) are now trading.

The issues are trading about where I thought they would trade.  MRCCL is a shorter maturity baby bond and last traded at $24.90, while the long dated issue from QVC is trading weakly at $24.25.

We are unlikely at this time to have an interest in these bonds as the QVC bonds are too long in maturity for us and the MRCCL bonds are slightly light in coupon (although at a lower price we would have an interest because of the 2023 maturity date).


JPMorgan Chase Prices Preferred Issue

JPMorgan Chase has priced their new fixed rate perpetual preferred right where it was expected–5.75%.

The issue is a fairly massive issue with 59 millions shares being issued with another 8.85 million available for overallotments.

The issue is normal in all respects–qualified dividends, non cumulative (since it is a bank) and optionally redeemable about 5 years after issuance.

Shares will trade on the OTC Grey market under the temporary ticker of JPMLL.

The pricing term sheet can be seen here.

BDC Hercules Capital to Sell Baby Bonds

Business development company Hercules Capital  (NASDAQ:HTGC) has announced the issuance of new baby bonds.  The issue has not yet been priced.

The new issue will have the normal terms, but the maturity is a bit further out than we prefer as it is in 2033.

The new issue will trade with a permanent ticker of HCXY when it begins trading in the next couple of weeks.

The company had last issued baby bonds on 4/23/2018 at a coupon of 5.25%–those bonds are now trading at $24.85.

The company has announced that they may use the proceeds to redeem the 6.25% 2024 issue which had partially been redeemed on 2 previous dates.

The preliminary prospectus can be read here.


Specialty Insurer Conifer Holdings Announces Senior Notes (Baby Bonds)

Conifer Holdings (NASDAQ:CNFR) has announced the sale of a $25 senior note offering.  The baby bonds carry a coupon of 6.75% and will mature in 2023.

The company is selling 800,000 shares with an additional 120,000 being available for overallotment.

The new issue will have an anticipated ticker of CNFRL.  The baby bonds should trade on NASDAQ in the next 10 days or so.

Conifer is a small property/casualty insurer headquartered in Michigan and they target niche and under served segments.  The company was formed in 2012 and focuses on insurance for bars, restaurants and convenience stores etc.

The registration statement for this new issue can be found here.

This FWP (free writing prospectus) contains a company presentation with pricing as well as other details about the company.  Potential investors would do well to review this FWP prior to purchasing any shares.  This is a small company and we are not familiar at all with them, but as always we certainly like the short maturity.


JP Morgan Chase Announces New Fixed Rate Preferred

Giant banker JP Morgan Chase (NYSE:JPM) has announced a new issue of fixed rate preferred stock.

The issue will pay qualified dividends for tax purposes and the shares will be investment grade—Baa3 from Moodys and BBB- from Standard and Poors.  Of course, being a banking issue, it is required to be non cumulative to be used as Tier 1 capital.

The pricing of the issue has not been announced as of yet but it will be between 5.625% and 5.875%.  We expect pricing soon.  No OTC Grey Market symbol is available as of yet.

JP Morgan currently has 6 $25/share issues outstanding (shown below) and all are fixed rate.  JPM has a number of fixed-to-floating issues outstanding but they are $1000/share issues.

The preliminary prospectus can be seen here.




Monday Morning Kickoff

The DJIA traded in a range of about 25,850 to 26,211 last week which is a wider range than we have seen for a few weeks, but generally is still pretty quiet.  The 10 year treasury traded in a ranger of 2.93% to 3% and at this moment is trading right at 3%.

Last week we had Consumer Credit released and it grew by $17 billion in July which is a sizable jump and reflects the level of consumer confidence we have observed for many months now.  Also last week we had the Produce Price Index released at a -.1% and the Consumer Price Index came in right at consensus at .2% higher.

For the coming week we have bunches of housing numbers being released.  Home Builder Index is released on Tuesday, Housing Starts and Building Permits are released on Wednesday and Existing Home Sales are released on Thursday.  These number have been running weak in the last few months and we expect that to continue.  Leading Economic Indicators will be released on Thursday and while the number could be important there are none of the economic releases this week that anyone will pay too much attention to as far as interest rates and equity indexes are concerned.

Economically speaking the new tariffs to be announced on China by the U.S. are the biggest news and could eventually cause havoc in the markets–but predicting major market events based on tariffs has proven fairly futile thus far.  All we can do is wait and see.

The Fed Balance Sheet grew last week by a couple of Billion $, but overall continues on a downward trend.

For last week we had quite a number of new income issues announced.  Duke Energy (NYSE:DUK) announced a 5.625% baby bond.  REIT American Homes 4 Rent (NYSE:AMH) sold a new preferred stock with a coupon of 6.25%.  Container shipping company Seaspan (NYSE:SSW) sold a new 8% fixed to floating rate preferred.  mREIT Chimera Investment (NYSE:CIM) announced a 7.75% fixed to floating rate preferred.  Lastly AllianzGI Convertible & Income Fund (NASDAQ:NCV) announced a very high quality fixed rate preferred with a coupon of 5.625%.

We personally have no long term interest in the issues announced last week–BUT we could see a potential ‘flip’ of the Chimera issue depending on where one can buy it in the OTC Grey market.  The issue is trading under ticker CIMPP and closed at 24.85 on Friday.  We could see a 40-50 cent flip over the next 30 days if one can buy right in this price area.

We have 170 $25 preferred stocks trading at $25 or lower and the average price of a preferred stock fell by a full dime last week.  This is the largest drop we have seen for quite a while and mirrors the rise in interest rates last week.  As we have written about over the years in an orderly market–kind of Goldilocks when rates are rising slowly over time you can lose 1-2% in share price and not really notice.  As share prices fall a few pennies here and there another dividend is collected–at the end of the quarter you end up ‘even’ etc.  We like orderly price adjustments and interest rate transitions,

mREIT AGNC Investment Releases New Presentation

From time to time we like to mention new investor presentations from companies which may have some importance to income investors.

mREIT AGNC Investment (NASDAQ:AGNC) recently presented at the Barclays Global Financial Conference and you can find their presentation on the following link (it will open a new PDF on your computer).

AGNC Barclays Presentation.

AGNC has 2 perpetual preferred outstanding which income investors may own-or have an interest in.

You can see their preferreds here–as well as a listing of all mortgage REIT preferreds.