5/2/2025
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California banking company SVB Financial Group (SVB) has announced a new issuance of fixed rate preferred stock.
The issue will be non-cumulative, but qualified and will have an early redemption period starting in February, 2025.
We find no rating for this new issue at this time from S&P, but it will be rated Baa2 by Moodys.
The issue will be traded on the NASDAQ once it trades on its permanent exchange under ticker SIVBP.
No OTC Grey Market ticker is yet known on the issue.
It looks like the Axis Capital 5.50% perpetual preferred (AXS-D) will be called soon (no official notice has yet been made).
Axis Specialty Finance LLC has announced a new $1000 Fixed-Rate Reset Junior Subordinated Note issue with the stated “use of proceeds” for “redemption of all of our outstanding 5.50% Series D preferred shares”.
This issue was one of the issues we owned as it traded right in the $25 area and had little to no call risk (i.e. money would not be lost on a call). It is now trading at $25.07 after going ex-dividend on 11/14 with a pay date of tomorrow. Assuming the call notice will give 30 days notice the accrued dividend should be in the 11-14 cent range meaning a value of $25.11 or 25.14.
Additionally Kimco Realty (KIM) has announced the redemption of the 5.50% KIM-J issue on 12/31/2019. We did not own this issue, but had studied it for a potential purchase. The issue will be redeemed at $25.29028 as it will have about 2.5 months of accrued dividends included as the last payment date was 10/15/2019. The notice is here.
I HAVE REMOVED THE CHART ON PREFERREDS AND BABY BONDS AS I FOUND AN ERROR IN CALCULATIONS.
Last week, being a holiday week, was fairly quiet, although–of course, the S&P500 moved higher. The average moved in a range of 3117 to 3154 before closing the week at 3140–a gain of just under 1% for the week. All news is good news (so says stock prices).
The 10 year treasury traded in a range of 1.73% to 1.80% with a close at 1.78%–essentially unchanged from the week before.
The FED balance sheet data was NOT released at noon Friday as is normal, because of the holiday business week. We should see it by noon on Monday.
As might be expected the number of new preferreds or baby bonds announced last week was muted.
Fortress Transportation and Infrastructure (FTAI) priced a previously announced fixed to floating rate preferred stock issue that carries a coupon of 8.00%. The issue is trading under the temporary OTC ticker of FTABP and last traded at $25.21. Details are here.
Banker First Republic (FRC) priced a new fixed rate at the rock bottom coupon of 4.70%. The issue is trading on the OTC Grey market under the temporary ticker of FRCJL. It last traded at $24.90.
We all know today will be pretty darned quiet as no one is doing much investment wise–except some of us that are addicted to some sort of market adrenalin fix.
Today we have to search a little harder for that ‘fix’. Maybe one of the most interesting items today is the B. Riley (RILY) baby bond ‘call’. The company is calling the RILYL 7.50% issue which is the only issue outstanding that is currently in the early redemption period.
B Riley has become a complicated company that operates in traditional financial markets as well as having ownership (or partial ownership) of various operating companies–sometimes to take advantage of operating losses. bebe Inc. , magicjack, themaven?? Do I smell an implosion if a recession ever comes??
We haven’t had the time to do a deep dive into B Rileys financials lately, but anytime I see a company that has debt of almost $800 million with total equity of $299 million I get highly suspicious – I am going to try to dissect this one sometime soon.
This weekend we will post the latest version of the Sortable Master Listing. Since we had originally posted an earlier version we have been tweaking some components and now will put out a version for readers to use if they so choose. This will require you make a copy for yourself–so you should have a google account if you want to use it.
I will then start working on the next version for everyone–I plan to post an updated version every month.
Ag cooperative giant CHS (Cenex Harvest States) has now turned into a oil refining company masquerading as a ag company.
CHS was a darling of mine many years ago so I thought I should check in with them because of the 5 preferred issues they have outstanding.
CHS preferreds have always been good to investors–with coupons much higher than comparable corporations would offer.
Some may remember–and some may not know this–that the 1st issue from CHS was issued primarily to cooperative members way back in 2003–it was a whopping 8% coupon (CHSCP), which became redeemable in 2008. In 2013 the company changed the terms of the issue so that it would not be redeemable until 2023. During the years of 2003-2008 the company issued another 9 million (more or less) of these shares–even though they could have garnered a lower coupon–the ownership remained strongly in the hands of many of their members, thus it always remained a strongly traded issue and I have always surmised that the optional redemption period on this issue was extended simply as a bit of a concession to the members/owners.
After this initial issue (in 2013, 2015 and 2015) the company began to sell new issues of preferred stock–primarily to build a massive fertilizer plan in North Dakota. The new facility was never built and instead the company invested proceeds in giant fertilizer company CF Industries (CF)–quite honestly this investment has not provided much in the way of profits until recently.
So what is the company doing lately in this absolutely horrible ag economy? Actually they are making quite a bunch of money–but little of the profit comes from the ag end of the business.
The cooperative had net income of $819 million for the year ending 8/31/2019–$618 million was generated from the 2 refineries they own as well as 1,450 retail outlets. Ag contributed a measly $43 million of net income (off revenue of $24 billion), while the nitrogen investment in CF Industries kicked in $73 million. Investments in Ardent Mills (the nations largest flour miller–a venture with Cargill and and ConAgra) and Ventura Foods contributed $81 million.
So while the lions share of revenue comes from the ag segment it produces almost no profits right now.
The total revenues the company has produced during the last 3 years have all been in the $31-$32 billion area which actually is pretty respectable for operating in the ag segment of the economy. Of course, if you go further back you will see they had revenue of $44 billion at the peak for the year ending 8/31/2013. Energy has always been a pretty large chunk of earnings for the company–so right now the prime difference is the lack of contribution from the ag business.–now if this was a publicly owned company shareholders would be pounding the table to get rid of the ag business. Obviously this won’t happen.
So as a whole the company is performing well. Unfortunately energy at some point will perform poorly and one can only hope that the ag economy has straightened out by then. Looking further at the company’s debt situation–I always look closely at the debt–things look good. Most companies can perform relatively well–even in a recession, if their debt is under control. In this respect CHS runs a pretty tight ship. They have $1.8 billion in long term debt and $2.2 billion of notes outstanding–a total of $4 billion in debt against $16 billion in assets. Equity is around $8.6 billion. Interest rates on the debt run from 2.25% to 5.40%–the debt is all unsecured. So debt is really a small consideration for the coop.
The company’s 10-K filing for the year can be seen here.
Now going back to the preferred stock–
CHSCP, 8% perpetual is currently trading at $28.15 and is optionally redeemable starting 7/2023.
CHSCO, 7.875% perpetual is currently trading at $27.60 and is optionally redeemable starting 9/2023.
CHSCN 7.10% reset rate perpetual is currently trading at $27.83 and is optionally redeemable starting in 3/2024.
CHSCM 6.75% reset rate perpetual is currently trading at $26.40 and is optionally redeemable starting 9/2024.
CHSCL 7.50% perpetual is currently trading at $27.38 and is optionally redeemable staring 2/2025.
So as a new buyer (I haven’t had shares for a long time) these issues don’t look too attractive on a yield to worst basis. On the other hand knowing that the air won’t come out of the price until maybe 12 months before possible redemption and having 3.5 to 5 years before potential redemption maybe a tiny buy is in order?
Do I really like CHS enough to buy the CHSCL 7.50% issue at a current yield of 6.85%–and a yield to worst of 5-5.25%? I doubt it.