MFA Financial Prices New FTF Preferred–Corrected

CORRECTED–this issue is perpetual–no maturity date–earlier I had a maturity date in the chart below.

mREIT MFA Financial (MFA) has priced their new previously announced fixed-to-floating rate preferred stock.

The initial coupon will be 6.50% and will be paid until 3/30/2025 after which time it will pay 3 month Libor plus a spread of 5.345%.

Shares will trade immediately on the OTC Grey market temporarily under ticker MFABO.

This is a large issue with near adequate issuance to call both the 8% baby bond (MFO) and the 7.50% preferred (MFA-B) in full if the over allotment shares are sold. We will have to see what the company decides to do.

The pricing term sheet can be read here.

12 thoughts on “MFA Financial Prices New FTF Preferred–Corrected”

  1. Will be interesting to see if this trades above par. Not a good time for an IPO. Libor spread is generous though.

    1. There was a poster over on Seeking Alpha that said the 3 month Libor is going away. Not sure if thats true or not but thats what he said.

        1. Tim; In looking thru that chart and not really understanding it is it somewhat safe to say that the SOFR will most likely be lower than the 3 month Libor??? If so then a person needs to be careful in buying these preferreds that are tied to the SOFR or he could be in for a rude awakening when the call date finally comes in.

          1. Bloomburg tv posts SOFR rate on its ribbon at bottom of TV screen along with 3 mo LIBOR. When I first noticed this earlier in the year, the spread was at least 15 basis… Right now it’s only 2 so if that’s a trend, SOFR v LIBOR may not end up being much of a measurement differential issue.

          2. Chuck, SOFR should theoretically be lower because it is a secured loan (secured by treasuries) while LIBOR is unsecured. Practically, during normal times, the rates should be very close. However, in a financial crisis they could be very different. During the crisis, Libor went to a 300 bps spread over Fed Funds. I don’t know what SOFR did but no reason for it to deviate much from the risk free rate since its secured by treasuries.

          3. SOFR is a bit more volatile than Libor. Sometimes it’s lower, sometimes it’s nearly the same. Hasn’t been higher but that could change with changing market conditions. Overall it’s probably not as favorable to the investor but not a huge difference. Deduct a small amount from the floating rates.

            1. SOFR is more volatile because it is a market determined rate and markets go up and down. Libor is less volatile only because it is a number that is made up by the big banks. They “fix” Libor at a certain level and then only move it slowly in one direction or the other as market conditions change.

  2. Tim,

    Is this really a term preferred, maturing on 6/30/27? I briefly checked the term sheet and didn’t see it there.

    Thanks, Tim.


  3. They’re a week too late. Higher yielding REIT preferreds are losing their call risk with the recent price drops.

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