How About Some Ready Capital Baby Bonds?

Of course we have investors of all types on the website, but as I was “shopping” for myself last night I came across an interesting baby bonds that really fits in my wheelhouse.

Ready Capital (NYSE:RC), a mortgage REIT, has a baby bond outstanding which is now in the early redemption period, which started 4/30/2019.

This issue is the Ready Capital Corporation 6.50% Senior Notes. The price of this issue has trended down lately as investors are anticipating a ‘potential’ call. This puts the current price at $25.35. The issue has a maturity date of 4/30/2021.

This particular issue has a 1% bonus payment if called before 4/30/2020–8 months from now so it would be called at 101%–$25.25–so no call risk at this particular time and price.

You may recall that RC just sold a 6.20% baby bond on 7/18/2019 so we have a decent idea of what type of coupon is available to them–we think they need a better coupon to be motivated to call the 6.50% issue–but one never knows.

Whether you believe you want to be involved with Ready Capital securities is an individual matter, but for myself, given the current interest rate situation, I will likely pick up a small position today. Each investor should do their own due diligence and see if this one might work for them.

Summary–RC has decent financials, the issue has no call risk, the coupon is superior to what is generally available right now, the issue has a maturity in less than 2 years.

8 thoughts on “How About Some Ready Capital Baby Bonds?”

  1. Im not a fan of mReits but I checked morningstars finra data and their senior secured 7.5% 2022 bonds are priced strongly at 107.5 giving a 4% ytm.

    So I think you’ve found a good one here Tim.

  2. Interesting you bring this up as I’ve owned the other, more complicated Ready note, RCA, but did not participate in the new issue… RCA is convertible and carries a 7% coupon due ’23 and callable ’21 but it’s much more complex with apparent caveats for both calling and converting….
    Looking quickly at RCB and comparing to RCP, to me at last price of 25.35 it only falls in line on price with RCP. However, what I’ve been trying to do is similar adn it has to do with INBK and its other note, INBKL vs the newly issued INBKZ. Both are fixed to float vs LIBOR and INBKL will float with a higher premium to LIBOR (4.85 vs 4.114) than INBKZ and will float beginning ’21 vs INBKZ’s ’24… To me, that means there’s a high likelihood INBKL will be called in ’21. With that in mind, if you can buy INBKL at the bid side of 25.59, it yields 5.28 to call and 5.75 to maturity while INBKZ yields 5.28 to its longer call and 5.59 to its longer maturity at its last of 26. To me, that makes INBKL out of line cheap.. The problem is there’s been no volume all week…

      1. Tim- I already own RCP. Are you considering a purchase of both issues, the new and the old?

        1. Hi Skg–no–just RCP–just bought it now. The attractiveness to me is the 4/2021 maturity.

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