JMP Group to Sell Baby Bonds – Correction

Correction–as Citadel points out they have not actually called for redemption of the old 8% issue as of this time. The registration statement states they intend to redeem all of the JMPB issue.

Securities dealer JMP Group LLC (NASDAQ:JMP) will be selling a new baby bond offering.

The company has NOT yet announced that they will be calling their 8% baby bond issue (Nasdaq:JMPB), which had previously been partially called on 7/31/2018, but within the offering documents they do state they intend to call these baby bonds.

Preliminary details of the new offering can be read here.

Thanks to Fabrib for catching this one last night under “Reader Initiated Alerts”.

15 thoughts on “JMP Group to Sell Baby Bonds – Correction”

  1. JMPB just did another partial call on 7/18/19.

    I had a very small holding which is now even smaller. Trying to decide whether to dump the remaining or let them pay another divvy or 2 before the rest disappear.

    I only have 35 shares left and at $.49 above par it’ll net me $17.15,(plus accrued interest of about $8.50) but it’ll cost me $6.95 to sell. If I let them pay another dividend, I’ll get $17.50 and if they redeem, I do not have to pay $6.95.

    Seems to me, I might as well hold till they call the rest. Nearly 8% return on a small amount of capital is still better than 0% return on a small amount of capital. Unless there is default risk, or some other concern, that I am not aware of.

    Any insights? I’m pretty new to investing, and even newer at playing in the preferred and baby bond sandbox. I’m net positive in my investments overall, but I’d be doing better if I just bought some index funds.

    1. Hi Mark, As a new investor, you’re doing a great job with transaction math. It can be challenging at times deciding which way to go when the options do not provide clear direction. There are no guarantees, though it seems a safe assumption that if JMP Group just competed a partial call, your remaining 35 shares are safe for now.

      So your options are:
      Sell now: (35*$25.49)-$6.95=$885.20
      Hold to 09.30 (ex-date) and called: (35*$25)+$17.50=$892.50
      Hold to 12.30 (ex-date) and called: (35*$25)+$17.50+$17.50=$910
      Hold to 12.30.20 (ex-date) and called: (35*$25)+$35(2019) +$70(2020)=$980

      Of course – you always retain the option of selling between and of these ex-dates. As you have evidenced a talent for calculating the accrued interest, so you might want to watch for opportunities for an over anxious buyer to take them off your hands at a too-high price.

      Another consideration is the question of where the funds will go after sale. If there is no destination, and you are confident in JMP Group, an accrual at the 8% coupon with the price close to par – is fairly outstanding.

      You mentioned you’re a new to the fixed income arena and are wondering about index investing. It’s difficult for any of us to offer investing advice, but we can certainly talk about some of the technical considerations. First, if you are younger, say under 35, then indexing might be an excellent idea. Here’s why:

      https://www.marketwatch.com/story/why-picking-stocks-is-only-slightly-better-than-playing-the-lottery-2017-06-28

      As for fixed-income – it’s supposed to boring, but in the last year it’s been anything but boring. Anyone here can offer you thoughts and ideas, which may or may not be appropriate of you. But I suspect all of us would suggest the following: 1) Preserve capital – do not lose money 2) Do not chase yields 3) Learn to use and understand the content of the S&P and Moody’s websites 4) Learn your way around a prospectus 5) Understand how your security will perform in different scenarios today and tomorrow 5) Learn about different forms of risk 6) Learn to evaluate a company on it’s stand-alone merits and how a company might react to a variety of economic or social or other variables.

      You might start by asking yourself these same questions regarding JMP Group. Lastly I suggest reading voraciously and immersing yourself in the dialogue and discussions on a site like Tim’s right here, which is loaded with talent and personality – and never stop learning.

    2. Mark in CO–welcome. I see alpha8 has written a long reply. Glad to have you here and hope you can learn from all the wise posters.

  2. Tim,
    Is this correct? for SOLN, at conversion shareholder will receive, in addition
    to the converted shares at the specified rate, $50 in Junior Subordinated Notes? Thanks.

  3. Hey Tim…JMP Group has NOT announced they are calling their 8% baby bond issue (JMPB). In fact, within the SEC filing for their new baby bond under Use of Proceeds they state ” This prospectus should not be construed as a notice of redemption for the 8.00% Senior Notes.”

    Very confusing to say the least…a month ago they were talking about partial redemptions of JMPB over the next two years. This is from their Q2 earnings conference call.

    “Our desire is to reduce our long-term debt to less than $50 million over the next two years if we are successful and opportunistically harvesting our existing investment portfolio currently at about $120 million, or 51% of our total assets. And these monies are invested for a return that shows up in our principal activities and is primarily in our fund strategies.

    As we have previously discussed at length, we elected to be taxed as a C-corp at the start of this year giving us the opportunity to retain earnings, while also using some of our capital to invest in growth and to repay long-term debt. We plan to use at least $5 million of cash earnings each year to redeem these outstanding Senior Notes.”

    1. Citadel – I would not want to bet against that language being anything more than boilerplate. I have seen it before with other issuers being followed up with the call announcement as anticipated once the proceeds of the refunding are in the bag.. Also don’t forget what a drastic move there’s been in interest rates over that last month… That sure could have changed their thought processes..

    2. They can’t announce it definitively, as that would bind them to do it, so they hedge.
      But they also have to note what the cash raised by the debt offering will be used for.
      If they just used “for general corporate purposes”, it could impact the rating assigned to the new bond.

  4. JMP operating profit margin: less than 2%. Net profit margin: less than 4%. This one’s for the brave of heart, not me!

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