Banker Cullen Frost Slips in a Redemption

Texas bank Cullen Frost (CFR) slipped in a full call of their 5.375% perpetual preferred late Friday (2/14).

Once again folks were caught as the shares traded last at $26.16—with this price the 3/15/2020 redemption means a loss of around 83 cents/share for holders.

13 thoughts on “Banker Cullen Frost Slips in a Redemption”

  1. Precisely my my personal rule is to never pay more than 1% higher than par ($25.25 in most cases) – no matter how far the call date is away.

  2. CFR-A had been on my buy list, at the right price, for a long time. I will never have the chance.

  3. I’m just surprised a BBB- 5.375 coupon from a no name bank is getting called. There’s lots and lots of callable BBB- out there with coupons at or above that.

    1. Wow, LI – Having covered Frost Bank a long time ago as an account, I can tell you that calling CFR a no name bank is equivalent to calling San Antonio a no name city…. lol… lots of pride down there in their hometown bank and a long long history… On the other hand, I thought the same thing when I was assigned them to cover…

      1. Yeah I agree. They have a good reputation and have been around for a long time. I see 34 billion in assets too

  4. Tim; I think that right there kinda proves my point from a few weeks ago. I said people are not paying close attention to what price they should be paying for these things. I see these $25 issued preferreds all over the place trading at $27+, $28+, and even higher. Its just crazy right now. On a “Johnny Cochran” side bar does anybody own “BPMP”???? Iam looking at it seriously but would like to know if BP is ultimately responsible for it or if it just stands on its own. These MLP’s are all over the place with incredible yields. Not difficult to find 7,8, and 9+% yields in many of them. Would love to hear from others.

    1. Hi Chuck. I noticed you have had quite a few q’s around oil and gas companies and equities. I for one, do not have that expertise. Typically, you will find here folks versed in the preferreds, bonds, capital preservation. There are probably various blogs around oil and gas equity investments that could help you out there. There should be a ton of them as much money was made, and then lost over the last decade. I for one, stay out of that, except COR-A is my only holding in that space.

    2. Chuck P–unfortunately folks have been snoozing for years on some of these issues and I expect redemptions will continue to happen and folks will continue to get ‘bitten’.

      1. I see some 130 preferreds trading at negative YTC. It’s the nature of the beast. If you own some you might ask yourself why.

        1. If you Prefer–I may publish the list tonight of ‘danger issues’ if I can squeeze it in the schedule.

        2. If You Prefer, I ask that all the time, and buy anyways if the situation is correct, or at least when odds favor me. Take IPLDL. I bought several thousand at 25.42-48 with no dividend declared yet a couple weeks ago. But at 5.1% “par” it was a no brainer being a ute it would get declared. I peeled some off at 25.73 yesterday and bought those back at market close today at 25.59. Tough way to make a living as, Bob said, ha. But I never wanted to sell them anyways.
          Many times an issue going exD within 10 days actually drifts down prior to exD, so I assumed I would get a chance lower which I did.
          I wouldnt go nutty buying things a dollar or two over “par” unless it was a specific trade play, but issues like IPLDP at this price point is a very defensive (for a perpetual, which is a relative statement of course) issue being over par.
          This seems counter intuitive, but its quite logical. Its not very far over par, it kicks out a divi in a week or so, its past call so that will have a positive anchoring if rates drift north, it yields an above market rate though not enough to trigger a call and reissue.

    3. Chuck…I’ve been getting exposure to MLPs through First Trust Energy and Income Fund (FEI). It normally invests at least 85% of its assets in MLPs, currently pays a double digit dividend, and there is no need to mess with individual K-1s at tax time. Gotta keep an eye on its market movements, but so far I’ve been a satisfied holder

    4. Chuck, I am no expert, but I think people here, if they are looking at the MLP’s or their parents have been buying the preferred’s . They move less and would be safer. Although with changes in the O/G business I think these companies have found it cheaper lately to issue preferred that borrowing on their ATM.
      There are too many to follow all of them, and BPMP is one I had’t looked at before. My 2 cents is BP is selling assets like crazy ( like their Alaskan assets ) trying to raise cash. I think they created this MLP hoping to sell it to another pipeline company. Like others here who flip preferred’s to get a profit and not waiting for the next quarterly divy, You can do this with the MLP’s. I trade in a 401k and I don’t worry about the K-1
      I don’t want to take up too much space here , you can message me and I can post my past month’s trades

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