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Capital One Financial to Sell New Preferred

Not to be left out of the gravy train of low coupon preferreds Capital One Financial (COF) has announced a new issue of preferred stock.

The company has numerous preferred issues already outstanding which can be seen here. Only 1 of the issues is near a potential redemption–the 6.20% COF-F issue which can be redeemed on 12/1/2020 (only redeemable on a dividend payment date).

The preliminary prospectus can be read here.

mcg and EarlyBird were on this one. ‘Yield Talk’ is in the 5% area (likely a little less).

16 thoughts on “Capital One Financial to Sell New Preferred”

    1. I own COF-J bought in $23s. Now this new preferred seems to have moved COF-J to mid $24s today!

      Wonder why the COF Preferreds rated IG trade so much below par when others such FRCLL rated similar, IPOing today is trading above $25s!

      1. msquare – this would be my answer….

        S&P and other ratings don’t capture the full picture where risk is concerned. What they especially don’t capture is the inherent risk of the business model.

        They may all be “banks” but all banks don’t carry the same risk, even with comparable credit ratings. FRC, and more so, STT and NTRS, are much lower risk businesses than COF and most other traditional banks that are essentially balance sheet lenders. The less dependent a bank is on balance sheet lending the more I like, all else being equal.

        1. Do you mind sharing how you are buying? Also, at what price?

          Also, what’s the appeal of this one when COF-J trades under $25? Were you able to buy well under $25?

          1. Got this thru one of the book runners. So officially @ IPO I guess.
            T+5 settlement.
            I bought this one to extend call risk.
            Sold some older COF issues I had above par.
            I think Cap One and Wells Fargo failed their sress tests during the summer.One or both adjusted their common dividends as a consequence I think.
            I’m certainly hoping that tases 2 banks are going to be ok – only time will tell.But COF right now is weaker than say First Republic. I try to invest for dependable cash flow while managing call risk. Hope that’s what I am doing with this purchase. I don’t use a PBW strategy with preferreds.
            By stressing cash flow I’m hoping it provides maximum dependable cash flow to pay bills and reinvest a portion for increasing income. Right now it’s tough to do this but I’m trying.

            1. Corrections to above post:
              I bought this one to extend call protection.

              I’m certainly hoping that these 2 banks will be ok – only time will tell.

              I try to invest for dependable cash flow while managing call protection.

              Additional comments:
              My hat is off to those able to buy a new issue below par during OTC trading b4 NYSE listing . I’ve never been able to do this consistently. Also, I’d love to
              buy below par but as a non PBW investor, I’m ok paying par for a new issue. I might add that after new issues come to market if they are still quality and their price goes below par as market conditions change, I love adding shares.

              1. CW,

                I’m not a flipper. It doesn’t work for me. It probably works well for others.

            2. Thanks. To clarify, my question is how you got set up to purchase directly through the book runners? Do you need to have an account set up with them already and have it be of a certain size or something like that?

              1. Yes you do Dick. I use both discount brokers (mostly) but still have accounts @ 2 full service brokers. One is for municipal bonds which helps me get access to new issues of in state tax exempts. The other I use for preferred stock new issues and at one time for new issues of Build America Bonds. I am a buy and hold investor. It works for me. It may not work for others. Everyone’s outlook, experiences, goals, thinking processes, etc. are different.
                Make no mistake. Some of the new issue low coupon securities will suffer market value if rates increase. There are no guarantees in investing. But the way I do this is to focus on maximum dependable cash flow from income with a strategy of reinvesting always a portion of cash flow and spending less than total income. It may not work for others. And there is always more than one way to do things. But this works for me. As an aside, I’m turning 73 Saturday. I remember in the 1970s and early 1980s wondering how high interest rates would go or if there would be a collapse. I still worry about a collapse but am now focused on how low rates will go. If I knew I’d have more money than Gates and Buffet combined.

                1. Razor, read your post with interest I also turned 72 this summer. Have a full service account, basically buy and hold. that served me well on for munis. They can get some preferreds, but never seem to have any access to the ipo’s at any price. I suspect they save all that stuff for their “advisory solution” clients, never availible to those that control there own accounts or won’t even supply a list of “approved for purchase”, even thought I pay through the nose. I road Muni’s I had from the 1980’s for over 20 years but those days are long gone. now you have to scratch around for any and everything.

                  1. Mike, you are correct. Muni yields are pitiful. To be honest I never know how things are going to turn out. When Build America Bonds first came out, I heard about them and tried to study them. Paul McCulley who worked for Bill Gross @ PIMCO (through articles – I read he and Gross faithfully) convinced me to give BABs a shot and I did. I’ve always liked municipals and felt they are more secure than preferreds and commons. I still feel this way, Anyway for a few years after BABs came out the coupons were excellent for the market conditions then and I loved the idea of 10 year call protection. Since BAB in come was taxable even though they were a muni instrument, they were a perfect fit for my IRA. So I cashed out my 30 year Treasury Zeros I had acquired in the very early 1980s and went with BABs to a great extent. ML was a major underwriter of BABs so I had very good luck at buying BABs with them. Today they underwrite a lot of Preferreds that are IG which I prefer (lol) but it’s tough to always get a fill @ IPO sometimes and this is one of those times. So I use ML full service but I also use ML Edge and several other discount brokerages as well. If I fail at an IPO and want the issue I try to buy thru the discount option and move some funds around. My muni broker is headquartered in Little Rock and when I get the call about a new issue it virtually always means I’ll get it if I place an order. Having said all of that there is no one style that works for everyone in investing. We all have different situations. I have no pension plan from an employer as I have always been self employed so I depend on myself for all income – nothing else to
                    rely on. My best realized returns in approx 50 years of investing were from common stocks, but in come investing suits my personality better so most of my investments for many years have been in income instruments.

                    1. Razor, boy does all that sound familiar, I was still building houses part time, semi-Retired, waiting on social security at 62, after the financial crisis in 2009-2010. my young broker would have a BAB’s reserved when I came home in the afternoon 2 or 3 times a month. Loaded up an Ira with utes, schools, toll roads, jails, government buildings even “Las Vegas city hall”. I actually still have a couple left, none were lower than A- some AA or higher, up to 7%. I been hoping “this latest crisis” would open the program backup?

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