As noted by a number of readers Chimera Investment (NYSE:CIM) has priced their new fixed-to-floating rate preferred issue with an initial fixed rate of 7.75%. While the initial fixed rate coupon is about as expected the spread on the float (which begins in 2025) is a disappointing 4.743% which is added to 3 month Libor.
The terms are the normal terms–except the issue doesn’t become floating for 7 years. When fixed to floating rate issues started being issued (in large quantity) a few years ago many didn’t become floating for 10 years—and most recently most have been 5 years. Whether one is better than the other depends on ones interest rate outlook.
The OTC Grey Market ticker is PRBPP