Innovative Income Investor | Innovative Income Investor

A Couple Partial Calls in BDC Baby Bonds

As pointed out by readers in the last couple of days there have been a couple partial calls of baby bonds by 2 BDCs.

Capital Southwest Corp (CSWC) today has announced a call of 1.4 million shares (just under 50% of shares/bonds outstanding) of their 5.75% Notes (CSWCL) Due 2022. The partial call will take place on 4/3/2020. Shares closed at $25.40 today.

MVC Capital (MVC) has announced last week that they will call 800,000 shares of their 6.25% Senior Notes (MVCD) due 2022–this is less than 20% of the baby bonds outstanding. The call is for 3/26/2020. These shares/bonds closed at $25.56 today.

Spam Filter is Being Touchy

Everyday for the last week I have found comments in the spam filter which I have had to manually approve. Most of these I find no reason for why the ‘system’ rejected them.

The spam filter is set up to flag the most serious 4 letter words–not all, but the worst of them.

Additionally it is set to ‘kick out’ anything from one particular commenter who I banned at least 18 months ago (the only person ever banned).

So if a comment section is not taking your comment, don’t take it as a ‘ban’ or anything like that–likely the spam filter didn’t like something. When you end up in the spam filer it temporary stops you from posting until I get it manually approved and then you can post.

I will try to figure out what setting I have control over that will stop this seeming random kickouts.

Shares Really Popping!!

All of the income issues–no matter how good or how junky are really popping today. I just reviewed some utility issues and they all seem to be up 25 to 50 cents. The 1 issue I bought late last week is up 78 cents since purchase. Wow!!

Again I don’t think that prices are moving on anything more than BS and computer trading–I do know that the algo momo folks love this movement–get on and ride the wave-at least for a few hours.

From last Fridays close here is what the $25/share preferreds and baby bonds look like.

The grand total average share is up 61 cents. Banks are up 68 cents, mREITs 50 cents, investment grade 60 cents, CEFs just 33 cents (but they fell the least last week) and lastly the shippers are up $1.26.

North Carolina Banker to Sell New Preferred Issue

Regional banker First Citizens Bancshares (FCNCA) has announced a new issuance of preferred stock.

This banker has $39 billion in assets and recently they did a roadshow with an investor presentation in support of their recently sold Subordinated Notes and for this issuance of preferred stock. You can see the presentation here.

It looks like this issue will come as low investment grade with a Baa3 from Moodys.

Dividends will be non cumulative and qualified.

The preliminary prospectus can be read here.

Thanks to EarlyBird for staying in tune with a slow new issue market.

Does Your Fixed To Floating Rate Security Have a Libor Floor?

A few of our astute readers (sorry lost track of who these folks were) commented recently that baby bonds of the First Internet Bancorp (INBK) have a clause in the floating rate reset determination section of the prospectus that states the following–

The key part is the last sentence which reads ‘if the benchmark rate is less than zero, then the benchmark rate will be deemed to be zero’.

While I don’t expect that we will see a zero 3 month Libor rate anytime soon, I also didn’t think we would see a 10 year treasury under 1%.

What this means is that if 3 month Libor went negative you would have a ‘floor’ coupon of the spread used to set the coupon rate. For instance the First Internet Bancorp 6.0% baby bond (INBKL) has a spread of 4.85% which will be added to 3 month Libor. Thus 4.85% will be the lowest coupon this floating rate issue would be reset at.

I did some random looks at other mREIT issues and did not find the language that set the 3 month Lior floor at zero.

This is likely not a big deal–BUT you may want to know if you have a floor on your floating rate issue–the details are in the prospectus of each issue.