Enstar Group Limited (NASDAQ:ESGR) has priced a new fixed-to-floating rate preferred tonight with an initial coupon of 7% which will remain in place until 2028 at which time the rate will float at 3 month Libor plus 4.015%. While the spread in 10 years is a bit lite the 7% current coupon is darned tempting.
The issue is non-cumulative which is typical for an insurance company issue–and dividends will be qualified for preferential tax treatment. They are selling 16 million shares with no overallotment shares. NOTE that almost 12 million shares are reserved for specific institutions thus leaving only 4 million to sell on the OTC Grey market. Shares should start trading tomorrow with the temporary ticker of ENSTF.
The permanent ticker when it moves to the NASDAQ should be ESGRP.
We were not familiar with Enstar and as such did a little bit of homework on the company. They were founded in 1993 in Bermuda (which is typical for many insurance company) and initially they purchased other legacy insurance portfolios–and in some cases entire companies–generally property/casualty companies which allowed the seller to refocus their capital on other business. In 2013 the company entered the “live insurance” business by purchasing a few other companies that are either specialty insurers or reinsurers. This company seems to be a bit more complex than most insurers so potential investors should do some due diligence on the company website here.
The company now has assets of over $16 billion with equity of over $3 billion.
The company’s long term debt is investment grade (Standard and Poors BBB), while this particular new preferred issue is rated BB+–a notch lower than investment grade. When we compare this issue to more recent insurance company issues from MetLife and WR Berkley which are both rated just 1 notch better and Unum which is rated the same the 7% on this issue is extremely tasty.