New Residential Prices F-T-F Issue – UPDATED

We have updated the info below on this new issue with the data that was missing yesterday.

Or we should have said that they have priced the issue, but because the SEC pricing term sheet has not been released, we have only part of the data.

The initial coupon is priced at the rate of 7.50%–as some predicted. The floating rate spread has NOT been released–but we will post as soon as the FWP hits the SEC.

Other details are known and below we show the known data. We will repost in the morning assuming they get the FWP (free writing prospectus) filed.

You can see the pricing term sheet here.

23 thoughts on “New Residential Prices F-T-F Issue – UPDATED”

  1. As several other posters here I bought a position in this issue, NRZ-A, on 6/26/19 with the goal of making a relatively small short-term gain. Today, 7/10/19, I sold my position in NRZ-A for my target 3% gain.

    1. It pays 7.5%. Where are you going to find anything better?

      I have posted many times that I just don’t understand the flipping mentality. Please help me understand your thought process here. Thanks.

      1. Larry, I can only surmise your investment goals and risk tolerance are different than mine, so you can’t understand it from my perspective. To each his own my fellow investor.

      2. Larry. I’ll just offer another perspective to think about. I’m not suggesting that your position is wrong, or that I’m trying to talk you out of it. But you seem curious about why others think differently. So I’ll just offer you my perspective. The initial yield on NRZ-A was attractive, but I think it was high for a reason. I find NRZ financials difficult to understand and evaluate. For me, it is tough to assess the value of the MSRs. There is no public market for the assets, which means (1) it’s difficult to monitor and anticipate changes in the value of the company, and (2) NRZ holds illiquid assets, which can be a problem if we hit times of financial uncertainty. Also, new players are entering the market, which will likely lower profitably over time as competition increases. So for these and other reasons, I personally don’t think of NRZ as a company that I can just assume will always do well. When the price of NRZ-A goes from $25 to $26, it doesn’t matter that I have a gain. I have an asset worth $26 that is yielding 7.2%, and I have to compare it to other assets. Will I take a higher risk 7.5% over a safer 6.7%? Maybe. Will I take a higher risk 7.2% over a safer 6.7%? Tougher call. My basis in NRZ-A is irrelevant to the answer to that question. I’m not predicting gloom and doom for NRZ, and it could do much better in the coming months. I’m just saying that as the yield drops, it is less attractive to me in comparison to other assets.

        1. Thank you Roger, that’s food for thought. I know many readers of this site have come from SA where the denizens shout down opposing points of view, and talk in circles. That’s why I don’t post there any more.

          Actually I bought 100 NRZ-A’s with the thought of flipping. I don’t normally go anywhere near MREIT’s, and I bought them in my taxable account where their dividends would be taxed as ordinary income. I don’t know as much about NRZ as I probably should. Thank you again.

  2. Tim or others with the knowledge
    The float of 5.802% has been verified ?
    Not up on Quantum yet.
    Thanks
    Gary

    1. Gary,

      From the prospectus: “From and including the original issue date to, but excluding, August 15, 2024 at a fixed rate equal to 7.50% per annum of the $25.00 per share liquidation preference (equivalent to $1.875 per annum per share of Preferred Stock) and (ii) from and including August 15, 2024, at a floating rate equal to three-month LIBOR plus a spread of 5.802% per annum.”

      That’s a pretty good floater for a 7.5% Coupon. I’m sure Libor’s continuous drop played a part in that.

  3. This is a very large preferred offering: $135,000,000 initially or $155,250,000 with the over allotment. My understand was that some of the underwriters were trying to get NRZ to agree upon a 7.75% coupon, but eventually moved it down to 7.5% because of the recent move lower in interest rates and the rush of many companies to bring new preferreds to market.
    Please do your own deep due diligence before investing in anything, especially a non-rated preferred with no maturity and a high sensitivity to future interest rates.
    In Latin we say… Aeque pars ligni curvi ac recti valet igni.
    Nomad

    1. Hi Nomad,
      I am somewhat new to the III board but have been investing in fixed income for 15+ years. I understand your comment but I also see that NRZ has a market cap of $6.65B and is rated Ba3 by Moody’s, upgraded from B1 on 12/11/18. At 7.5% The common pays a 12.79% dividend which could be lowered or suspended if needed. I see this as a good risk / reward return in the current environment. All things considered I see very little chance of suspending the PREF payments and an even smaller chance of BK. I would be interested in your view of this. Thanks !!

      1. I also understand the skepticism but Mike N. has been here before. He has guided NRZ successfully through all sorts of interest rate environments. I like the Preferred and being its first one with a decent Coupon, I expect it to shoot over par rather quickly.

      2. Hey Gary, I hope this message finds you doing well. I truly appreciate your comments and question. My primary goal/wish is to encourage and empower each investor to do their own deep due diligence before they commit to investing in any specific security. After each of us has done their comprehensive and unmitigated research, then IF we decide to invest we can take full responsibility for our new purchase (or sale if one is going short). Who would have ever thought that Lehman Brothers with almost $700 BILLION in assets would have gone bankrupt in 2008? How about the once the largest company on the planet GM? Texaco? Enron? Worldcom? eToys? My point is that safety of investing is an important aspect of our lives and we each need to make sure these investments fit our risk profile and monitor them. I believe SA is full of manipulators that could care less about losing you money because of no real full disclosure of their track record (no accountability) and just deceive to get subscribers and/or clicks. BTW, I’m sorry for my long winded answer but there is much to say…
        Wishing you profitable investing, Nomad

        1. Thanks Nomad. I get what you’re saying. The exchange of ideas is always good but YES at the end of the day we must make our own decisions. I have too many BDC debt positions currently. In selling some of those off I find comfort in larger / rated debt even if not pristine. It’s all relative. I feel the storm is coming…

          1. Gary, I like you to let me tell you a short story from my Wall Street career I have thought about many times:
            I managed a large institutional portfolio for some extremely large corporations and many mega wealthy people, at times (when our asset base was booming) we raised the threshold for new clients to start with $10 MM or more or we just wouldn’t manage their accounts. I got a call in 2012 from an executive at one of the S&P 500 companies that I managed a good part of their 401K, pension fund and 529 Plan. He told me his daughter just graduated from an MBA program at Yale and that he gave her a gift of $100K to start an investment account for her. She would be calling me to set up a new account shortly. Within a week the funds come in, she signs all the forms and we are good to go. I figured that I definitely wanted to impress her Dad and this would get me more of their companies massive 401K plan to manage and be a “trusted” advisor. We had access to Facebook shares at the IPO price of $38 (I believe Facebook took the company public on their own) and when I spoke with her she was very excited to get the shares on the May 18, 2012 IPO date. I quickly flipped her discretionary accounts 2600 shares and sold her out at +/= $44.40 for a gain of about $16,500. I thought her Dad would be extreme impressed at such a nice quick gain and even though about approaching him to begin a personal account with me.
            When I called his daughter she was beyond happy and thank me so many times. Especially since Facebook tanked after I sold her out. I then called her Dad (I had my chest out and was proud of myself) and told him of his daughters good fortune. He was beyond mad and started screaming at me! He told me he gave his daughter the $100K gift to teach her about INVESTING and didn’t want to teach her that Wall Street and the stock market was nothing more than a casino…
            Sadly, her account was transferred out shortly after the Facebook flip.
            The real moral of the story is that I was wrong because I didn’t know their goals and objectives (my ultimate job) because I was more concerned with short term profit gain (and making myself look good to get more assets) and not what the real objective was.
            Smile, Nomad

        1. Up at Schwab too. Tried to buy earlier about 10 cents lower but it wasn’t trading there yet. Settled for smallish 200 share position @ $24.98.

      1. I read the article. I don’t think it is inferring that there is trouble on the horizon. I think it says perform some due diligence if you are investing in an mREIT, and here is some good background on what is going on in “MSR Land”.

        I would be curious to see what others think

      1. Joel, you just summed up what it took me many paragraphs and too many words to to say!
        I thank you, Nomad

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