NiSource Preferred to Finally Trade on NYSE

The newer 6.50% fixed – reset rate preferred from utility NiSource will finally start trading on the NYSE after trading on the OTC market for the last month.

The permanent ticker for the issue is NI-B.  The issue is cumulative in respect to dividends and dividends should be qualified for preferential tax rates.

The issue popped a bit in price today and closed today at $25.35.

This issue was originally announced here on 11/28/2018.

This issue is a large issue of 20 million shares and is lower investment grade rated by S&P at BBB-.  The issue is 1 notch under investment grade according to Moodys at Ba1.

The issue is a bit unique in that the reset rate, which will ‘kick in’ on 3/15/2024 will key off the 5 Year Treasury rate instead of off 3 month Libor.  The issue will reset at the 5 year treasury plus a spread of 3.632% until 3/15/2044 at which point an additional 1% is added to the initial spread.

The original offering prospectus can be found here.

We will now add this issue to the various listings of the website.

Disclosure–we do own a starter position in this issue.

8 thoughts on “NiSource Preferred to Finally Trade on NYSE”

  1. Watched Powell, Yellen, and Bernanke. Powell seemed to change Fed Policy. He will consider that the balance sheet reduction is impacting markets and they will adjust if needed. He moved away from “auto-pilot” and balance sheets reduction not impacting things.

    Stressed patience. Said weak link between wage inflation and overall inflation.

    I have been very critical of Powell but frankly today he did an excellent job

    1. Hi Wilson–in my opinion yes. It has barely traded at all under $25 since issuance and being only 2 months of dividend above that level is still a great buy for a low investment grade 6.50% issue.

      Of course I don’t ever recommend folks buy stuff because we all have differents needs etc.

      I have a starter position and likely will add some more soon.

      1. The amount above par could be considered partially offset by the accrued dividend since IPO. Better yet, if the “initial dividend period” commenced on Nov 28th, the first dividend should be about seven sixths (7/6) of the regular quarterly dividend ($0.40625), so about $0.47396.

  2. Based on today’s price of 25.35/share and the current 5-year government rate of 2.40%, NI-B is currently trading at a risk premium over treasuries of 4.01% vs. a reset rate of 3.632% over the then 5 year T-Note rate so T-Note rates would have to increase 0.378% to avoid a dividend cut when the rates are reset. If not, a haircut would be in order. Nevertheless I like indexing to the 5 year rate vs. a perpetual preferred. Less interest rate risk if the indexing spread is adequate.

    1. Agreed David…Things change quickly though. When NISOP went to market at $25 par, the 5 year TBill was over 2.80%. They had it set almost exactly for the adjustment and spread to align exactly with the fixed yield at issuance.

  3. Bounced up today after hugging par most of the month. Been a strong start for an issue that was issued in worst month since Taper Tantrum. I have a full position here. Runs fairly leveraged, but decent regulatory climate allowing quick recovery of cap ex programs, so I suspect that is why they run a bit leveraged. Management promising 10% annual divi increases next couple years for common holders.
    NISOP was issued and rated based on 50% equity 50% debt ratio. NI has this preferred and a private placed 5.6% 5 year Tbill reset with lower kicker than NI-B (NISOP). These were issued to deleverage their debt. As you mentioned Tim, as a slight twist it is nice to see an issue possibly float off a longer duration T Bill than Libor. Canada Utes issue these types. If NI was just a T&D electrical ute I would have loaded for bear on this one when issued. But since it is mostly regulated gas lines (but it has some nasty coal plants they have to decommission for their smaller electrical division) and they have a knack for blowing up small towns with their gas lines, I will just stay at a full position, not a supersized one.

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