Giant Container Ship Owner Seaspan Sells Preferred Shares

Container ship owner Seaspan (NYSE:SSW) has priced and sold a new fixed-to-floating rate preferred issue with an initial coupon of 8%.

They will be selling 6 million shares.  The coupon will be fixed until 10/30/2023 at which time it will begin to float at 3 month Libor plus a spread of 5.008%–kind of a skimpy spread in our opinion–although we need to do more due diligence on SSW before deciding just how skimpy.

Terms are the normal terms–cumulative, redeemable and perpetual.

The OTC Grey Market symbol will be SSWPP and we expect trading to commence immediately.

The permanent NYSE ticker will be SSW-I when the issue moves to the big board in a week or so.

The pricing term sheet can be found here.

Thanks to Eugene who noticed this new issue at the same time I did–his note motivated me to work ‘after hours’.

The company has 2 baby bonds outstanding as well as 4 preferred issues–coupons range from 6.375% to 8.25%.  The company could possibly use some proceeds to redeem outstanding debt or preferred per their filing.

6 thoughts on “Giant Container Ship Owner Seaspan Sells Preferred Shares”

  1. Tim,
    I couldn’t find anywhere to contact the author, so I’m using this post to contact you. I downloaded your master list so I could see if anything was missing from my spreadsheet. In the process, I found some missing from your spreadsheet as well as a few problems that need your attention.
    The following are missing from your master list:
    ANH-B
    CAI-B
    CPTAG
    CLNY-J
    CPTAG
    ETP-D
    GLOP-A
    LMRKN, LMRKO
    PEI-D
    PRE-G, H, I
    QTS-B
    RLJ-A
    SCE-G
    UBP-H
    UMH-C
    WRB-E
    other:
    WBS-F is listed twice
    CTU, CTX, ISF have errors calculating the dividend.

    Thanks for all the work you do, and I really like the new site.

    Russ

    1. Thanks Russ–glad you did that. I have been adding them when I run across them. Will fix the easy one right now.

  2. I think this is a clever move by SSW. It looks to me like their perpetual preferreds, regardless of coupon, trade at a yield that hovers around 8%. So the initial coupon seems to be market. But if it floated under current market conditions, it would be paying closer to 7.3%. SSW could never offer a perpetual preferred at that rate. I love fixed-to-floating issues, because I expect that interest rates will eventually rise. And they are sold to investors that way. But with a spread that thin, absent a dramatic improvement in the SSW balance sheet, this issue will probably always trade at a discount once it starts floating. Right now, SSW’s other preferred issues can be thought of as trading at 3mL + 5.7. Doesn’t that tell us the spread is too thin?? In a static environment, SSW would want to call all the other preferreds before this one. And it would never be able to get initial financing at this pricing. Clever move for SSW, but not so great for investors.
    In my opinion, Annaly Capital used the same trick when it offered NLY-G. NLY-F has a spread of 3mL+4.99. NLY-G has a lower initial coupon, but also moves to a lower spread of 3mL + 4.17. NLY-G trades at a discount to par, and once the initial coupon goes away, Annaly will never want to call it because it could never raise new capital through a preferred at that pricing. Many NLY-G holders ignore the spread, because it seems far away. But if it is a “buy and hold” security, it would be important to purchase under par.

    1. Roger–as my dad used to say ‘there is more than one way to skin a cat’. All of the various terms that can be used are used by someone–bonus rates, penalty rates, term preferreds, participating preferreds (AMH and FPI), floating rate, fixed to float with a 5 year fixed–and then some are 10 year fixed and on and on.

      As you say I think the spread is kind of thin. Will be interesting to see where trading begins and goes.

  3. I own a few of the SSW preferreds and their 7.875 H shares are trading right around $24.88. The 8.2% G shares are trading at about $25.35 today, so I expect the new shares will trade right around $25 and perhaps a little more as they should have a five year call protection on them. However, the Libor spread does not look very appealing to me after 2023. I’ll probably just continue to hold my current shares.

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