Here Comes Another $1000 Preferred Reset Rate Issue

We mention that we don’t normally follow $1000 issues, but the proliferation of these issues catches our attention.

M&T Bank (NYSE:MTB) has announced another new one today–$1000, non-cumulative, semi-annual dividend payment and a reset rate starting in 2024 which drives off the 5 year treasury.

M&T apparently has a 6.375% cumulative $1000 issue outstanding that they mention they may call with the proceeds.

The preliminary prospectus can be read here.

Of course BB&T priced one yesterday at 4.80%–can’t wait to see the crap coupon on the M&T issue.

18 thoughts on “Here Comes Another $1000 Preferred Reset Rate Issue”

  1. MTB throwing investors a bone…No sub 5% offering. Its a flat 5 handle….The reset kicker is 3.17%
    Pricing Term Sheet

    Issuer: M&T Bank Corporation (the “Issuer”)
    Expected Ratings (Moody’s/S&P/Fitch)*: Baa2/BBB-/BB+
    Securities: Depositary shares (the “Depositary Shares”), each representing a 1/10th interest in a share of the Issuer’s Perpetual 5.0% Fixed-Rate Reset Non-Cumulative Preferred Stock, Series G (the “Preferred Shares”)
    Liquidation Preference: $10,000 liquidation preference per Preferred Share (equivalent to $1,000 per Depositary Share)
    Number of Depositary Shares 400,000 (corresponding to 40,000 Preferred Shares)
    Aggregate Offering Size: $400,000,000
    https://www.sec.gov/Archives/edgar/data/36270/000119312519200174/d762568dfwp.htm

    1. T, yes, BAC cusip is 060505FP4. Probably not available. Re the Suntrust, that was a Wimpy burger they sold 13 years ago and some people are still waiting for Tuesday, lol.

      1. The new BAC issue is trading in institutional size chunks to yield 20+ bps under its issue price, so things are going south. 5% is now in the rear view mirror I think.

        The prospectus (not the FWP) is interesting to read for the very lengthy discussion of LIBOR alternatives. Gives insight into how other LIBOR floaters are going to be handled.

        1. Bob, I agree the days of 5% are over at least for now. Now it’s a game of musical chairs on IG stuff and nobody wants to be left standing. Worse yet, this is a non cumulative bank. Anybody who thinks banks are safe doesn’t have a very long memory or wasn’t in the game. But there are haystack sized piles of cash everywhere right now and getting desperate for a home so it is what it is. This will eventually have ill effect on insurance companies I would think. How safe is that annuity looking now?

  2. This is another reset off the 5-year treasury, with no option to convert to a 3-month floater, and no minimum. You may be able to buy it off the bond desk in a couple days.

    The same structure is coming to exchange traded issues. Two already issued and more to come for sure.

    I would not touch these with the proverbial 10-foot pole. I will wait until a recession, rates on the 5-year drop to under 100 bps, and buy these at a substantial discounts to issue price. Perhaps, then, I shall make some money.

    1. Bob-in-DE is correct – the $25 NiSource 6.50% issue (NI-B) is similar to these $1000 issues–as is the newer Synovus 5.875% $25 issue. Both are relatively new issues.

  3. I’m not going to buy the BB&T issue. I don’t have detailed knowledge of BB&T, but I’m not sure that the coupon is so outrageous. They have an upcoming merger with SunTrust, which is expected to close. I see SunTrust has a preferred that yields about 4.4%. Shouldn’t we expect BB&T to be able to raise capital at rates that anticipate their post-merger financial status? If investors are happy with 4.4% on a SunTrust preferred, isn’t that a sign that it has a pretty strong balance sheet, and that BB&T will be a better credit after the merger? If so, I don’t blame them for refinancing their preferred stocks now.

    1. Roger–you are probably correct, but I am just “whining” from the retail investor perspective. No you can’t blame them from a corporate perspective.

    2. Then think about buying STI-A. Min rate of 4%, yielding 4.4% as you note. If interest rates head south, the price will go up, as the min rate supports the price. If LIBOR goes to 1% that 4% min will look very nice. In which case you will have call risk, but a nice cap gain.

      The new BBT issue will drop in price if rates go south, especially if rates stay down as the reset date approaches.

      In any event, you may have trouble getting your hands on the new BBT issue.

  4. MTB looking sub 5%.
    Important to note that both MTB and BBT prefs are not going to be listed for trading.

    1. mcg–yes they are targeted at institutional buyers–but the coupons portend the future I am afraid.

  5. Bank of America sold a $1000 just 5 weeks ago at 5.125% and Libor +3.29%. Terms are deteriorating so expect this one to be similar to BBT rather than the BAC.

    1. BAC symbol BKRRL with an IPO date 6/27/19 , $1000 issue, has already been delisted ( not trading ), but is continuing to pay the dividends to those hold the issue.

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