New Prospect Capital 6.875% Baby Bond to Trade

We have been notified by ‘Wedgehead’ that the new baby bond from Prospect Capital (NASDAQ:PSEC) should start trading today.

The ticker will be PBC.  This issue has a coupon of 6.875% and a maturity date in 2029.

This is an investment grade baby bond with a coupon that is enticing.  While the maturity date is a little longer than we would like it may work well for someone.

Further links and data can be found here.

Investors should be patient for a day or so to allow for some brokers to get the symbol set up in the system.

35 thoughts on “New Prospect Capital 6.875% Baby Bond to Trade”

  1. Tim and et al, I have been concerned for some time about our exploding US debt (individually and governmentally) We are approaching $22 trillion US Government debt and $72 trillion total US debt. This story will sadly not end well! Time flies over us but leaves it’s shadow behind, Nomad

    1. Nomad–now only if we knew when this disaster would unveil itself to us we could make some real money. Is it 1 year-5 years or 20 years, but certainly sometime.

    2. Nomad, buy Enbridge Canadian reset preferreds. You get a foreign company tethered to US Tbill. So when it explodes they will redeem these current $18 preferreds at par to get out from the US interest rates, lol…. Remember though, we still got the ace in hole. The Fed can be buyer of last resort and just monetize it. Most of QE debt purchased will never see light of day either. That can keep the party going a while longer.

      1. You’re right Grid the Fed can monitize the debt–then we make money selling wheelbarrows as they will be in demand to move money by folks.

      2. Grid, it’s just impossible to buy; I’ve had an order in for a week and there never seems to be an offer. I bought some more RLJ.A (can never be calledas it is a busted convertible) today at 25.30 and it will go ex at the end of this month, so effectively it’s inder par.

        1. Nomad, I think it must be what broker has access to the inventory. I bought 300 more at 18.32 today. It didnt even show as an ask. It showed 18.32 as ask, I put in 18.36 and it never showed up. But 5 minutes later it gave me the 300 at 18.32

      3. A comment and a question:
        Comment – I’m very thankful that Tim manages this website. I’ve learned so much and appreciate all the comments that are posted. It’s wonderful (and unusual) to get honest viewpoints with no strings attached.
        Question – Enbridge seems to have over 20 preferred stocks. Which one are you referencing for that you were able to purchase for $18.32?

        1. Glad to have you here Steve C. I’ll leave Enbridge to Grid as that seems to be his bailiwick.

        2. 18.32 is EBBNF. I believe it’s the only pref to be registered in the US, rest being Canadian. On the bond side you have 1 baby bond plus a slew of $1,000 issues.

        1. What’s the rationale for buying the lower yielder (series J vs series L)? Not much of a difference, I know, but still curious.

          Do you own the J or the L series?

          1. Steve and G, I will respond together here. There is one reason only why I bought the Series L…And its a big reason…Its the only one that you can access in the US stock market. That is a pretty good reason isnt it, lol.. EBBNF is really ENB.PFU.CA. Its a Canadian exchange traded preferred. Somebody for some reason registered some of the above to be tradeable in US market. EBBNF was ticker assigned to it. Its a grey market OTC issue. This means the stock does not have a market maker to conduct transactions. So trading can be a bit blind. Usually no ask price is ever shown. Some bids do show though. If one was interested I would go in with idea of it being a bit like a marriage..For better or for worse, as divorce (selling) could be expensive if one is not fortunate. I love the mechanics of this issue. A F/F reset off a poor fixed from last year. It would be hard to find any security trading under that scenerio besides this one that I am aware of. Plus Enbridge is getting finances in order and upbeat and deleveraging…But there are always warts…Its Canadian so there is the 15% withholding and one must file to reclaim and offset unless put in an IRA. And of course the lack of trading clarity and liquidity must be noted also.
            BTW…Some people have access to Canadian shares…I do not through mine though. But then you deal with Canadian dollar exchange..EBBNF is paid in USD and trades off it. Canadians who buy through their brokerage oddly enough take the currency risk since it is paid USD.

            1. Added thought…Moodys just announced a review for credit upgrade. In their summary release they stated they could be in line for a “multi notch credit upgrade”. Of course that is music to ones ears when owning preferred shares. The preferreds are presently Ba2.

            2. Steve and G, if one is interested and keeps purchase in small amounts, the mechanism to reclaim the 15% withholding appears easy provided one stays under the $300 threshhold. I only own 800 shares of EBBNF so I am well under $300 limit. I could almost double my share count and stay under threshhold.

              Fortunately, if you pay $300 or less in foreign taxes for the year ($600 for married couples filing jointly), you can claim the credit without having to fill out Form 1116, although additional eligibility rules apply. For example, to claim the foreign tax credit without filing Form 1116, all of your foreign income must be passive and reported to you on a form like the 1099 or schedule K-1.


              1. Grid,
                I bought a slug of ENBBF a couple days ago, so apparently it is available to us down here. Didn’t have any trouble getting it either as the shares were assigned a few minutes after the order was placed. Placed the order just like any other stock or pfd or ETD order. Grabbed it just a hair over $18.

              2. I make it a practice to hold all of my Canadian and other foreign holdings in IRA’s only as it eliminates the headaches for me. Already have enough with the K-1’s and other issues come tax time. I understand others have to dip over to taxable accounts from time to time and have to then deal with the recapture of the tax in that case. I don’t let the taxman worry me unless he can glue back together the things that “find” their way into my confetti shredder. You know what I mean! 🙂

                1. G, everyones situation is different, and I know avoiding hassles is nice. But largely the benefit of the QDI is the tax benefit as this has already been company taxed. Buying this thus is lower cap stack. For me just as an example, if I was putting it in IRA last week I would have bought the Enbridge baby bond instead of EBBNF.

                2. I also hold my canadian issue in IRA. I believe they withhold their taxes at dividend time, so to me it’s like you lose a portion of the dividend

                  1. Steve, I dont know if you saw my above post but you dont lose it, if you file to claim it as an offset . You get it back. Now this wouldnt apply if you are retired and are in 0% QDI tax bracket though.

  2. Yes, I was confused!

    That buy order I have in for HTGX at 24.75 doesn’t look like it will be filled!

  3. Did not know you started this site way back in January!!! Thank you for your updates and portfolios. (Used to follow YH)

    1. Hi RL–yes it was but I have not ever officially launched it as I continue to add and upgrade. It all started with 1 link given to Gridbird way back then. I have never promoted the site anywhere as it is always getting better and I was going to wait until every item as done–haha–it will never be ‘done’.

  4. Nomad – thanks for that; I had not seen it.

    But let’s look at this. The stripped price of PBB at the moment is 24.61. If PSEC wants to give me a capital gain of 39 cents per share, I’ll take it.

    That said, I don’t why PSEC would follow through with the call. If I thought they were I’d be backing up the proverbial truck. I mean FREE MONEY.

    Am I missing something?

    1. Hi Bob, note (PBB) has not been called (though it can be called 12/15/18). Baby Bond (HTGX) has been called in 2 tranches January 14 and February 4, 2019. It remains to be seen if PSEC will use the proceeds from new baby bond PBC tocall PBB. Wishing you profitable investing, Nomad

      1. The 424 for PBC made no mention of redemption in use of funds but the 424 for an upcoming institutional issue does hint at a possible PBB redemption. I am happy if they do; happy if they don’t.

        Now, how about a PCG redemption?

  5. Hercules Announces Its Intention to Fully Redeem its 6.25% Notes due 2024

    The redemption is expected to be completed in two equal transactions in Q1 2019, and to include a one-time (non-cash) expense to earnings of approximately $1.7 Million, or $0.02 per share
    PALO ALTO, Calif., December 11, 2018 – Hercules Capital, Inc. (NYSE: HTGC) (“Hercules” or the “Company”), the leading specialty finance company to innovative, venture growth, pre-IPO and M&A stage companies backed by leading venture capital firms, today announced its intent to fully redeem approximately $83.5 million (face value) in issued and outstanding aggregate principal amount of the Company’s 6.25% Notes due 2024 (CUSIP No. 427096 862) (the “Notes”), which were issued pursuant to the indenture dated as of March 6, 2012, between the Company and U.S. National Bank Association, as trustee, as supplemented by the third supplemental indenture dated as of July 14, 2014 (the “Indenture”). The Notes trade on the New York Stock Exchange under the ticker symbol “HTGX”.
    The redemption price will be par $25.00 per Note plus accrued and unpaid interest through, but excluding, the redemption dates of:
    •January 14, 2019 and February 4th

    1. Hi David–no. Since it is a baby bond it pays interest and interest is never qualified.

      1. Tim, as I try to get up to speed on Baby Bonds, I see that their yield is much higher than traditional investment grade bonds. Is this primarily due to the fact that they aren’t rated and so are treated like junk bonds?

        1. Alan–yes they mostly are not rated—and most are unsecured (no specific assets backing them). Typically risk equal reward. In this case you trade off some safety for a higher coupon.

          Some like business development company baby bonds use a shorter maturity date (normally less than 10 years) to make them more enticing to retail investors.

          There are a number of ways the issuers can make the coupon lower–shorter maturities—penalty coupons–etc.

          You will note that the utility company baby bonds are the lowest of the bunch and they are typically rated.

  6. Like the company but the option period is too long. Company is committed for 3 years but the investor is committed for 10.5. If you adjust the coupon to reflect the optionality it’s more like a 6.5% issue. PBB, with only 5.5 years to maturity, is an option to consider.

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