mREIT AGNC to Sell New Preferred

Giant mREIT AGNC Investment Corporation (AGNC) will be selling a new preferred.

The issue will be a fixed to floating rate issue and will have an early redemption option starting in April, 2025. This is also the date at which it will begin to float at 3 month Libor plus a spread (not yet announced).

The issue is cumulative and will be non qualified. The issue will be unrated.

AGNC has 3 other preferreds outstanding–all of which are fixed-to-floating and none of them are currently redeemable. These issues can be seen here.

The preliminary prospectus can be read here.

This issue will trade on the OTC Grey market–probably tomorrow, but the temporary ticker has not yet been released.

mcg was right on top of this issue 30 minutes ago.

35 thoughts on “mREIT AGNC to Sell New Preferred”

    1. I applaud AGNC for doing this right; it’s rare. They actually posted the FWP and the OTC ticker at the same time, and before trading began.

      Now, if only Vanguard will pick up the symbol before market opens tomorrow. Without the customary 15 minute phone call.

      BTW, its 3mL plus 4.697%.

            1. Mcg – I called TDA. yesterday afternoon before the close to see if the trading desk could buy this for me as there was over 170k volume. They said there was no ticker or cusip yet in their system. You must be on a trading desk at a broker that had that information before the public. I’de appreciate a response and thank you for providing this info to this site. ATB.

    2. Thanks for the info. Guys. I will buy it as I own other agnc & nly preferreds and consider them very safe even in a recession. There are many BBB- preferreds and bonds that I would not touch in a recession, you know the usual suspects. ATB.

  1. Assuming 6.125% is right (I’m sure it is), and this comes out of the gate (for retail) at 25, it’s going to come in at a lower yield than the outstanding issues. Slightly better YTC but as others have noted YTC doesn’t matter so much for AGNC.

    For a retail buyer I don’t see how this works unless the price of the new issue goes well under 25. Or the price of the outstanding issues drop.

    Guess we’ll see tomorrow.

    1. Bob-in-DE—you, like myself look at this logically. Unfortunately lately logic seems to be set aside. These new issues are coming out pretty hot–except the new Capital One issue which is trading 6 cents under it’s opening price on the OTC Grey market.

      1. Why arent new us based issues using SOFR? Libor needs to be dead by end of 2021. I would think new issues are using this… otherwise you have to fall into compliance later.

        1. Mr. Lucky, its possible it could wind up SOFR anyways. SOFR generally is lower also, currently 18 bps lower. Per prospectus..
          Notwithstanding the foregoing, if we determine on the relevant Dividend Determination Date that LIBOR has been discontinued, then we will appoint a Calculation Agent and the Calculation Agent will consult with an investment bank of national standing to determine whether there is an industry accepted substitute or successor base rate to Three-Month LIBOR Rate. If, after such consultation, the Calculation Agent determines that there is an industry accepted substitute or successor base rate, the Calculation Agent shall use such substitute or successor base rate. In such case, the Calculation Agent in its sole discretion may (without implying a corresponding obligation to do so) also implement changes to the business day convention, the definition of business day, the Dividend Determination Date and any method for obtaining the substitute or successor base rate if such rate is unavailable on the relevant Business Day, in a manner that is consistent with industry accepted practices for such substitute or successor base rate. Unless the Calculation Agent determines that there is an industry accepted substitute or successor base rate as so provided above, the Calculation Agent will, in consultation with us, follow the steps specified in the second bullet point in the immediately preceding paragraph in order to determine Three-Month LIBOR Rate for the applicable Dividend Period.

    1. Oh, wow. Below expectations. I’ll stick with my AGNCO with a current yield of 6.25%. YTC is irrelevant unless AGNC can demonstrate the ability to issue preferreds somewhere close to the level where a refi would make sense. Only other thing to look at is how attractive the Libor spread is but probably the spread will be proportional to the coupon.

    2. Where do you find that info? I don’t see the FWP on Edgar yet, or a company announcement.

  2. AGNCO and AGNCM seem to be down on this news. I wonder if there’s a swap opportunity into the new issue.

    1. My guess is the Martin G will be looking at a potential swap opportunity as that is where he ‘plays’.

      1. Won’t know until we see the coupon and the price. With new REIT issues there’s usually enough movement to trade one way or the other.
        I bought both O and N on the mild price drop. I don’t expect much more drop unless an unexpectedly high coupon is announced.

  3. I bought AGNCO last October when it was trading on the grey market. I got in at $25.10. It is now trading at close to $26. Yield for me is around 6.5%. If I can get this new issue on the grey market at close to PAR with a yield over 6.25%, I’ll be buying since there aren’t many opportunities with that yield that meet my risk tolerance. If history is any guide, once it goes off the grey market to market it will appreciate. Thanks for the heads up.

      1. Bkill, AGNC is among the safest mREITs. Just the same, compare the 3 year chart of AGNC to say AGNCN. The preferred offers considerable more overall total return stability because of its place in the stack and the stability in the price. While not completely technically correct, I view mREIT preferreds through a similar lens to that of some CEFs, for which I would not own the underlying though appreciate the value of the more insulated preferred. I wouldn’t make these a corner stone issue but there’s a small square in holdings for this risk/reward profile.

      2. Different types of investment. High yield preferreds are forced to cut their dividends over the years. The challenge is to earn more in payments than you lose in price cuts. Preferreds pay the announced rate as long as the REIT stays solvent. More conservative short term, more reliable long term.
        I only trade preferreds because they trade in a more predictable range. Common stocks are too wild for my style.

    1. Guy–looks like it is pricing at 6.125% so we will see what happens tomorrow on the grey market (no ticker announced yet).

  4. Investors may want to look at some of the alternatives to low 6% non-investment grade (currently NR/NR) proposed AGNC’s new perpetual (no maturity) preferred. I bought at par more low investment grade real bonds of Prospect Capital Corporation today.
    CUSIP 74348YM40
    Product type Corporate
    Coupon 6.250%
    Maturity 04/15/2029
    Pay frequency Semiannually
    Moody’s / S&P Baa3 / BBB-
    Please note, this is NOT a recommendation as I don’t know anyone that is reading this posts risk tolerance, goals (both near and far term), income needs, time frame, portfolio construction or how much volatility they can stomach. PLEASE PLEASE PLEASE do your OWN deep due diligence before investing one cent of your money as you will have only you to congratulate or blame. NEVER blindly put your money at risk or listen to someone that posts investment recommendations on the internet; they might not have your best “interest” in mind…
    Wishing you profitable investing, Nomad

    1. That seems like a good buy at par vs PSEC’s 2029 baby bond PBC trading upper 26s last I checked.

    2. I looked that up and showed call date of 2/10/20.
      It doesn’t show up on Fidelity’s current list; as I write they’re showing 34 different Prospect bonds, varying duration, ALL have call dates of 2020, so mind your YTCs. Having dabbled in Prospect bonds (at times, Fidelity has shown >60 available to trade), they appear quick to call them.

  5. I’m holding a bunch of AGNCN which will go into floating mode in 10/2022 if it isn’t called. Does anyone here care to guess what the standard might be if the 3 month LIBOR isn’t used? The people at Fidelity wouldn’t venture a guess but they tend to be ultra conservative when it comes to offering advice though I was just asking for an opinion as to the replacement. I’m guessing SOFR.

    1. Great question. I think SOFR is the best candidate at the moment, but that kicking the can down the road for a while and keeping LIBOR on life support will be another option. LIBOR isn’t ideal, but the alternatives aren’t either. The problem is no one seems to be taking this issue seriously at the moment.

  6. AGNC preferreds are trading in the stratosphere with YTCs not much more than 5%. I was flipping and swapping them for awhile but lately I can’t find an entry point.

    1. MartinG, Been swapping M & O back and forth for quick .15 arbs, always holding one of them and picking up a few “free” shares each swap. I don’t watch them though so at this yield-compressed level trades are less frequent.

      1. I was swapping M and O with nice success for awhile. Then M stayed too high and I just flipped O a few times. Got some today @25.90 just a few minutes after I said there’s never an entry point. Let’s see if the new issue can join in the rotation.

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