Insurer Allstate Prices Their New Preferred Issue

In a sign of things to come Allstate (NYSE:ALL) has priced their new preferred issue with a rock bottom coupon of 5.10%.

The shares will be non-cumulative, qualified and perpetual. They likely will redeem some of their higher coupon issues which are now outstanding.

This new issue is rated BBB by S&P and Baa2 by Moodys–this is an upgrade by 1 notch. I just checked the rating agency websites and they have not upgraded the sister issues as of yet, but likely they will soon.

We are looking for the shares to trade tomorrow (Friday).

The pricing term sheet can be read here.

13 thoughts on “Insurer Allstate Prices Their New Preferred Issue”

  1. All I can say about this new issue is – YUCK! Great company and they will probably never default, but 5.10% for a non-cumulative perpetual preferred is just terrible.

    For any of the REIT investors out there, today I picked up 700 shares of CDR-B at $25.10. It’s 7.25% issue that has been partially called and goes ex-dividend in about a week. It’s probably one of the most boring grocery-store anchored retail REITs out there right now. Earnings were announced this evening and just what I expected – read through the report and it was a real snoozer, but I am fine with boring and reliable.

    1. Lou, you like these “Waste Management” issues a bit more than me, but I have been thinking about it off an on for a few weeks. You pushed me over to buy, albeit for only 200 shares and the C issue instead of the B. If I am going to buy this, I might as well chase the yield with the issue less likely to be redeemed in this rate chasing crazed environment.

      1. Grid – the security is clearly not rated, but when I take their total mortgage debt and divide this by their real estate (at cost), their debt is only about 43% of the cost of their real estate. While it could be lower, I’m absolutely fine owning the preferred considering this debt level. I already own a fair amount of the C shares, so I just picked up some of the B shares. Plus, they both go ex-dividend on 8/8. I’ll take the risk, as compared to getting 5.10% with the Allstate issue. Can you imagine the after-tax yield on the Allstate issue if held in a taxable account?

        Also, with most REIT issues now, 20% of the dividend is exempt from tax under the new section 199a guidelines. Nice little bonus if held in a non-retirement account.

        1. Yes, one has to pick their risks. I tend to dabble on both ends. Cedar debt to EBITA is a lofty 7 times from what I read. And interest expense ratio lighter than most debt heavy utes. So it is what is. As long as their 2 major grocery store company anchors can stay afloat I am not too worried. But at 200 shares I wouldnt be anyways, lol. I certainly understand your interest level though.

          1. Grid – yes, EBITA is probably higher than what I would like. The company is not very large with about 58 properties, yet they have a CEO and then 13 Vice Presidents so their G&A expenses are very high. The company could probably make some decent money if they were ever taken private and someone got rid of all of this overhead. Their major grocery store company (Giant) has their corporate headquarters about and hour from my house and is well known in the central PA area. They are owned by Ahold, which has a credit rating of Baa1. Plus, I feel positive about their top 20 tenant list. Certainly not for everyone, but a fine holding for me.

            1. I was bored this afternoon waiting at a mall to go to Top Golf…So what the heck, I bought 100 more of the C. Ok, 300 is it!

    2. All I can say is that this is an issue that time will tell you whether you are thinking properrally about these issues. The IG rating is being overweighted. I DO think the Finance Team at ALL will be getting their bonuses this year…good job, even fit the timing with an interest rate drop…wow!

      1. Thanks Tim. I’ve been busy in early retirement lately, so I’ve just been reading the board a little and not posting much. For us early retirees that rely on fixed income to provide my “retirement paycheck” the low yields like the new Allstate issue are pretty sad and probably a sign of things to come in the future.

        1. kaptain–well glad to see you whenever you are here. I think about you often as I deposit in 2 uhaul accounts.

          1. Glad to see the U-Haul investment club is working out for you Tim. When I first started investing with them, I was investing in their longer term real estate loans (7.25% on 25 year loans), due to the fact that I am 50 now and wanted the “annuity” payments from the investment. However, they appear to have stopped the real estate loans and the best they have available now is 5.75% for 15 years on some equipment loans – so I’ve not placed any additional funds with them lately.

            In January of this year I even invested in a note with their U-Haul of Gettysburg, PA property. It had a rate of 7.75% for 30 years. Sadly enough, I don’t think they will be offering any notes like that again soon.

  2. When I was 11 I had a passbook savings account which paid 5.25%. Occasionally I’d walk down Main Street (yes literally it was called Main Street) take the actual “book” into the savings bank to have them stamp the interest in so I could look at it. It was probably $1-something. Wish I still had that book.

    Well here we are again, 5.10%. The QDI helps, but ouch. Perpetual…good grief.

    1. Way too low for me, too. I am pretty much fully invested and would need to sell some SWAN taking profit or loss (risky stuff) in order to buy new one. Doug Le Du’s website suggests Highland Income Fund Moody Cumulative A1 not QDI last price was $24.90 for the 5.35% coupon. Still quite low and would be problematic just with one interest rate increase.

Leave a Reply

Your email address will not be published. Required fields are marked *