Preferred Stock Call | Innovative Income Investor

Priority Income Fund Calls Another Term Preferred Issue

Untraded closed end fund (CEF) Priority Income Fund has called their 6% PRIF-H for redemption on April 9, 2025–the mandatory redemption on this one was scheduled in 12/2026.

The announcement is here.

This is the 2nd term preferred that PRIF has redeemed early in the last 4 months. They redeemed the PRIF-G 6.25% issue in December, 2024. It had a mandatory redemption in 6/2026.

It is quite obvious that PRIF is making these calls based on the mandatory redemption dates–not by coupon. These are generally smaller issues–a million shares or so – not a big hardship on a CEF with total assets of over 900 million to call. I believe the next issue they will redeem is the 6.625% PRIF-F issue–this is the issue with the next mandatory redemption which is 6/30/2027. This issue is currently callable and trading at $24.38. I will immediately try to buy some of this issue since our H shares are being called.

Disclosure–we own shares of the PRIF-H 6% issue in 2 accounts.

Rithm Capital Makes a Partial Call on Floating Preferred

As posted by Z and Maine in comments earlier today mREIT Rithm Capital (RITM) is calling 2 million shares ($50 million) of their 7.50% fixed-to-floating preferred (RITM-A). Their press release is here.

This is a 6.2 million share issue so plenty will remain outstanding–but this is a ‘shot across the bow’ and will ensure the issues trades around $25 plus accrued dividends. The issue fell about 15 cents in trading today–not a big reaction, but only because pricing was reasonable.

I do own a modest position in the RITM-B 7.125% floating issue, which I bought instead of the ‘A’ issue figuring the A issue would be redeemed 1st.

This just a reminder to all of us that if something goes to a $25 plus 2 or 3 dividends and is callable there will be call risk-we can never forget this.

Aspen Insurance Calls a Fixed to Floating Issue

Apollo owned Aspen Insurance has announced a redemption of their 5.95% fixed to floating rate preferred (AHL-C) effective 1/1/2025 which is the next dividend payment date.

Honestly I have been waiting for this to happen for quite some time now. The issue was originally to float starting a year ago, but the company was able to fix the rate at 9.593% because of the prospectus language relating t0 the LBOR/SOFR issue. Just the same 9.593% is a very high coupon for shares just 1 notch under investment grade.

This issue had traded as high as the $26.80 area in the last 60 days–crazy–a reminder that holding shares much above $25 holds potential danger for those paying sky high prices for shares.

The announcement is here.

As has become the norm J posted this in reader alerts early today (very early). Thank you J!!

As Expected Merchants Bancorp Calls Their Fixed to Floating Preferred

Indiana banker Merchants Bancorp (MBIN) has announced a redemption of their 6% fixed to floating rate preferred (MBINO) on 1/2/2025. This was generally expected when the company sold their new 7.625% non cumulative preferred last week.

The redemption announcement is here.

I think we can assume that MOST relatively stable companies with outstanding fixed-to-floating issues will call them when available. This does not include mREIT preferreds, which have let issues with a 10% reset ride. Interestingly both Customers Bancorp (CUBI) and Valley National Bank (VLY) continue to have very high yielding issues out there.

I have a mostly complete list of fixed to floating and floating rate issues here.

Sometimes You Get a Surprise Bonus

Sometimes you get ugly surprises–once in a while you get a capital gain bonus. For holders of the Priority Income Fund 6.25% term preferred (PRIF-G) the surprise came in the form of a redemption notice. The redemption notice is for 12/23/2024 at $25/shares plus accrued dividends from 9/30/2024. This issue became redeemable 3/19/2023 and had a mandatory redemption date of 6/30/2026. Shares were trading around $24.30 yesterday and closed at $25.04 today.

It is somewhat unusual for a term preferred of this relatively modest coupon to be called early in this interest rates environment–but the issue is only 1.28 million shares so the $32 million cost to redeem is minor to a $1 billion CEF.

Priority Income has an active ‘at the money’ common share sale program which can readily generate cash for redemptions such as this one.

The good part for holders is they got a 3% pop on their shares and they have plenty of other PRIF term preferreds to chose from to invest their proceeds.