We have been waiting for Priority Income Fund to price a new term preferred stock for about 2-3 months. The company initially announced the plan to sell a new issue, but market turmoil prevented the closed end fund from drumming up enough demand in December, at least at the coupon they wanted, and the new issue was ‘pulled’. Finally they have gotten the job done.
The issue priced at a coupon of 6.625% with 1.4 million shares being offered. There will be 210,000 more shares available for over allotment. The ticker for this new issue will be PRIF-C. The issue will trade on the OTC Grey market, but the temporary ticker has not yet been announced.
The new issue will have a mandatory redemption in 2024. The shares are unrated, but the company is organized as a CEF and as such is required to maintain a 200% asset coverage ratio. NOTE that they company had a 900% asset coverage ratio earlier in 2018, but with new term preferreds we estimate the coverage ratio will be at 406%.
The company has 2 current issues outstanding. The PRIF-A issue has a coupon of 6.375% with a mandatory redemption in 2025. This issue is trading at $24.74. The PRIF-B issue has a coupon of 6.25% and has a mandatory redemption in 2023.
We would expect the older issues to fall in price on the news of the new issue as they are now competing against a new issue with a superior coupon. Investors may have a chance at buying the older issues at equivalent current yields.
The Priority Income Fund is a non traded CEF and as such due diligence is a bit more of a challenge as compared to a normally publicly traded issue.