Priority Income Fund Prices New Term Preferred-UPDATE

UPDATE–OTC TICKER IS PRYFP. I don’t see it up yet at eTrade or Fico yet.

Untraded CEF Priority Income Fund has priced their most recent issue of term preferred stock. This issue will have a mandatory redemption in 2027.

The PRIF-F issue has been priced at 6.625%–better than I thought it would come at–but some readers had it on the nose.

The issue will trade on the OTC Grey market, but the ticker has not been announced. Actually their filing shows the ‘trade’ date for the new issue as 2/21/2020 (tomorrow) so maybe the OTC data will be delayed–we will update this page as soon as the info is announced.

The pricing term sheet can be read here.

Being a CEF Priority Income must have a asset coverage ratio of over 200%. The company estimated that after this offering was floated that they would be at 292%. This offering is larger than they anticipated–they estimated 1 million shares and this is 1.2 million plus over allotment possibilities of another 180,000 so coverage would be under 292%

The company has 5 other issues outstanding which can be seen here.

16 thoughts on “Priority Income Fund Prices New Term Preferred-UPDATE”

  1. I think readers are overstating the risk of PRIF term preferred issues. The underlying assets are actually mainly debt tranches of CLOs which hold a diversified portfolio of senior loans. Debt tranches are far safer than the equity tranches (I’m taking an educated guess that since 2005 the number of debt tranches that have defaulted is 50% decline in the portfolio is extremely remote — in my mind you’d need an event worse than 2008 for this to happen. Even then, since the coverage is tested each Q and the fund must get into compliance each Q, the risk of getting caught below coverage level for too long is even lower. I am buyer of the the B & C issues for their shorter duration.

  2. Tim,
    My thoughts on Priority Income. If I get this wrong please correct me or save me from my ignorance and delete this. The preferred being offered is by a CEF, which is managed by Prospect Capitol? Which is a BDC, the proceeds will be invested in loans. My investing experience with BDC’s in their stock didn’t leave me with a good feeling. I followed BDC Buzz over on SA for a while and consider him a expert in that market like Brad Thomas is in mall REITs. Currently there is a article on SA by Scott Kennedy on PSEC that I suggest reading before SA puts it behind a pay wall. BDC’s are known for doing higher risk loans than Banks will not or can’t do. What I find troubling with BDC’s is when a loan goes South they write it down or refinance the loan in other words good money after bad. I am not interested in this new preferred at this 6%+ offer.

    1. Charles, I agree 100% with your thought process. I dont trust this stink outfit. But Monday morning I will buy if it is at the right price and get out like I did with a couple of the other flea bag sister preferred issues I have bought and sold.

      1. Gridbird, while I do have substantial respect for Tim’s opinion, I have always asked myself the question “who is monitoring the ancient 2x coverage on the CEF?” Of course, I do believe that Mario Gabelli should always stick to the rule. Gladstone? Maybe most of the time. I saw Tim’s early alert on the new issue, I quickly sold all my 600 shares of PRIF-E with limit order of $24.99 (ask was $25), filled somewhere in between, keeping some cash and bought a good chunk of WPC ( blue chip eREIT) with the announced good quarter with increased FFO. Going forward, I probably will sell some of TRIN-D (I am not into the stripped yield, usually sold the higher coupon ones recycled to the newer lower coupon assuming that the Feds are strapped from raising the rate and the global economy is lackluster) and replace it with PRYFP.

        I took a severe beating of unrealized losses of two shippers, GLOP, A, B and C and GMLPP and worst of all GMLP common (that was my most expensive tuition in dealing with common stocks). Like Tim has opined, TRIN is doing fine just like CAI (I own only 100 shares of CAI-B. I cannot pull the trigger to buy any of the renewable energy, BEP, TERP or AY, incredibly expensive these days. Sold 200 shares of BPR after reading one SA article claiming that the dividends were not fully covered. That was DUMB. At present, whatever Brookfield touches, it is gold. BPR has Mall and quite high leverage. It is safe at least for now. BTW, on BDC’s, the only names worthwhile holding or buying IMHO is ARCC and perhaps MAIN. I own lots of ARCC, one of Rida’s “correct” on and off again list (I hardly trade). Scott Kennedy is perhaps the best “accurate” BDC guru. BDC BUZZ IMHO is second. Guess what? No one is 100%, like a fool I bought small position of SLRC which has been on Scott Kennedy LONG list for at least a year, sucker went down last Friday with 6% drawn down. Bad quarter for severe revenue decline plus some other decline. In hindsight, the price volume action on SLRC was always not so great. BDC is risky, something Bruce Miller would never touch. LOL. In general, BDC is up when the equity market is up. When equity market is down or see headwinds, eREIT generally would do better, it seems.
        Thank you for your learned opinion, Gridbird.

        1. John, Buying something leveraged that is protected by leverage ratios just sounds odd. And certainly beyond my computational skills. There are no alarm bells for me on them, but I wont hold longer than a trade though. Its funny how a fund that owns “real companies” like KYN would have a preferred issued at 3.5%. Yet this outfit is also protected by leverage and term like KYN-F was is almost double the yield in lower rate period. Reputations matter though as that effects demand and market yield and this company doesnt have a top notch rep. So it is what it is I guess.

        2. John, Thanks for sharing even if it was a painful learning experience. Scott Kennedy is good and has always been , but no one is 100% I agree. He used to share a lot more and his comments on other people’s articles added value. But even he admits in his bio he’s decided he should be paid to share his knowledge.
          Rida I quit reading probably 2 yrs ago. My last experience with him, I had been flipping SRLP close to dividend and he wrote a article claiming it was “safe” and going to 27.00 ? I got in around 24. 00 and had to buy more lower to break even. Was lucky even doing that.
          I decided to read another of his articles today claiming that a CEF with almost 6% fee was great. I saw several commentators trying to warn others it’s a high risk but him and Pendragon drowned out all the naysayers. That guy should be held accountable for bad investment advice.
          Also like you I really wonder about that 200% coverage. I am considering GAB preferred’s this coming week if there is a selling panic.

  3. Swap or no swap?
    By my calculation, PRIF-E has a YTM of 6.55% based on a stripped price of about 24.82. So if F is at par, you’d gain only 8 bps of yield by swapping but move 2.5 years back in maturity date. So I’m thinking no swap unless you can get F below 24.75.

    1. Landlord Investor,
      Given that the parent CEF is untraded and the preferred is unrated, how risky is PRIF?

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