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Charles Schwab Corporation to Sell New Preferred

Financial firm Charles Schwab Corp (SCHW) has announced a new offering of non-cumulative preferred stock. The company intends to call for redemption the 6% SCHW-C issue which became redeemable last December with the proceeds of this issue.

The offering will be qualified for preferential tax treatment and will have an optional redemption period starting in 2026.

The new preferred will be investment grade.

SCHW has 1 other outstanding preferred issue which can be seen here.

The preliminary prospectus can be found here.

J was right on top of this one with EarlyBird chiming in ‘yield talk’ in the 4.75% area.

11 thoughts on “Charles Schwab Corporation to Sell New Preferred”

  1. Series I vs J ….

    Fair comparison as the two were issued within days of each other.

    Series I is priced at 100.76 to yield 3.97% and the Series J is priced (more or less) at 25 to yield 4.45%. The I resets to 5yT+3.168% and the J is fixed. One is paying a 48 bps premium for the reset, which is to say the protection from ending up in a 5% world with a 4% coupon. Worth it?

  2. Saw this thread, and decided to get a few shares of this new SCHW-J preferred. Called the Schwab Bond Desk, the issue was already oversubscribed and books were already closed.

    Was not expecting this, as a 4.45% yield is not really anything to get excited about. Guess it’s still way better than a 5 year CD.

    Wow.

    1. It is unfathomable to me that someone would buy this instead of just buying more OPP-A.

      1. I have along list of things I would buy ahead of a 4.45% perpetual. That said, I do have a bid in for SCHWL at 25. If it hits I’ll immediately enter a sell for 25.50 or so. This is not an issue that I want to hold for the long term.

      2. Karma, I’ve been watching OPP-A. It’s now down to $23.69. Any idea why? What makes you comfrotable owning it? (I freely admit I have no experience with either buying or evaluating CEF’s.)

        1. OPP-A has a lower coupon than other CEF preferreds, so the price has dropped as market yields have risen. All CEFs are required to stay under maximum leverage ratios on a quarterly basis, so if you have a combination of relatively low leverage and low volatility, liquid assets, the preferreds are pretty hard to impair. But keep in mind that not all CEFs meet the criteria, particularly those that own illiquid assets.

        2. Bur, looking at pricing alone in relation to par does not give one full information and as Karma mentioned, the low issuance yield is the major problem. There are several preferreds over 70 years old with investment grade credit rating that never traded back to par since they were issued. All because they were issued in record low preferred yield environments of 1940s (sound familiar?) and then subsequent rising rates.
          And then you have the opposite examples… Look at the TDS preferred and baby bond yields. TDU-U, TDJ, and TDA. On the surface they look crazily miss priced with the lowest cap stack preferred trading higher in price than the senior notes. But anchoring of par and call risk yields distort TDJ, while TDA reflects a more normal market price and thus the huge relative yield differences between the sisters despite both being past call. So you have to look a little deeper than just price to determine some aspects of pricing.

  3. I having issues seeing original call dates. Cs callable last year so a little overtime vs Ds staying with 6/1/21?

    Doesn’t really matter. These will be very well received . I’d be surprised if they are anywhere near 475

  4. Will be interesting to see where this comes out relative to the recent institutional issue that went off at 4% to 5yT+3.168%. Markets have been paying a premium for the reset relative to fixed rates such as this new issue.

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