Mortgage REIT Two Harbors Investment (TWO) has announced the potential purchase of up to 5 million shares of the company’s preferred stock in open market transactions.
As has been discussed on this site mREIT preferreds have been rocked hard by rising interest rates.
TWO has 3 issues of preferred stock outstanding–those issues can be seen here. These issues have over 25 million shares outstanding in total.
The company announcement is here.
Denard and I spotted this one.
TIM…We did the same . bought when the market Down. 98% of my preferred stock ,are way below. Par $25,..50 and $100…5-10% profit on the rebound..
Thank you ,Tim your the best…….Georges
So- offers to buyback at lower than par from the look of it, nothing about redeeming/calling.
Not excited.
Why would they redeem or call if they can buy back way under par?
Just saying — & why even consider them, especially with a good possibility they drop even more? Collect divs & hope the price goes up before a buyback, I guess. Not sure why all the interest. Different set-up if the price is $22 and they announce a call at par (obviously).
Juicy dividend but what are your metrics? EBITA/Net Debt ($8.5B/$3.5M) = Astronomical inability for earnings to service its debt? Payout Ratio = 124% and Dividend coverage =80%. Not good. TWO did very well during the great bear market of 2008 but never came back from the pandemic.
Payday-
Did you mean net debt = 3.5B ? Or are they backwards?
Net Debt $3.5B divided by EBITA $3.5M. Opps! did not finish my coffee! Sorry about that.
Karma,….Think about if you had a 30yr mortgage at say 2.5% for $400k. And current mortgage rates jump to say ~6%. Wouldn’t be nice if you could buy back your mortgage from the bank for say $250k? And if you had the money to do this why would it increase your odds of declaring bankruptcy?
As I explained, they are buying back EQUITY securities, which do not have required redemption dates or restrictive covenants. That increases bankruptcy risk. If they were actually buying back debt at a discount, I wouldn’t have made that comment.
Wow
I would think that’s good news for the preferreds. Puts a floor on the price counters dilution and reduces bankruptcy risk. Common stockholders might not like losing div increase to buybacks but that’s short term foolish long term wise reducing the debt liability.
I trade TWO-s but have a small amount now because it’s higher risk than most. Time to buy more? TWO-A priced better than the others at the moment.
A buyback actually increases bankruptcy risk. A buyback is a SIGNAL that the company views that risk as low, but using up cash to buy your own equity securities is a definitive increase in credit risk.