CAI International Prices Fixed-to-Floating Rate Preferred-Update

Container and rail car leasing company CAI International (NYSE:CAI) has priced their new fixed-to-floating rate preferred with an initial fixed rate coupon of 8.50% with a floating rate beginning in April of 2023 of 3 month libor plus a spread of 5.82%.  This is a spread we like and we believe that for some investors this could be a decent buy.  As always we don’t make recommendations on securities to anyone–we can only give you our perspective.

Dividends are cumulative and  should be qualified for preferential tax treatment

A OTC grey market ticker has not been announced, but we believe it could begin trading either Friday or Monday on the grey market.

We believe we will take a position in this issue BUT until we do a deeper dive on their financials we can’t say for certain.  With luck we will have a go/no go for ourselves as well as the high yield portfolio prior to the market opening on Monday.  Our initial glance was simply that CAI has high margins, but they carry a ton of debt–characteristics that are ok in good economies, but dangerous in economic downturns.  The question on this new issue is not whether it is “good” or “bad”–our question is simply – Is the reward ample for the risk incurred?

The companies press release announcing pricing can be found here.

The pricing term sheet can be found here.

2 thoughts on “CAI International Prices Fixed-to-Floating Rate Preferred-Update”

  1. Common is below both 50 and 200 MDA ….in last four months drop from $40 to $21…… but some advisers rate strong buy…..common pays no divi…..i am intrigued as well

    1. Other than the drop in the stock price, the earnings don’t really look that bad. 2015 was a problem for them but they’ve been beating earnings and revenues are increasing. I think the thing to remember with these guys is that they are more of a cyclical than a steady eddy?

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