It looks like untraded CEF Priority Income Fund will finally be selling the previously announced new perpetual preferred —NOTE this is a perpetual preferred issue–NOT a term preferred (there is a huge difference).
‘Yield talk’ on this perpetual is 7.00 to 7.25%–if it were a term preferred it likely would have been around 6.00%
The company is redeeming the 6.375% term preferred (PRIF-E) this week.
Priority Income Fund has many term preferred issues outstanding–they can be seen here.
The preliminary prospectus can be read here.
Thanks to EarlyBird for being on top of this.
7 thoughts on “Priority Income Fund to Sell Preferred”
I’m confused. (nothing new). Why would they call something that doesn’t mature for 3 years and replace it at a higher rate?
Extend maturity to perpetual while times are as good as they get.
If the current times are as great as it can get… why then pay a big premium for 3 years for something you have cheaper to only extend for 2 years and then pay fees on top of that? The long term trend is low rates. All other investments are kicking the can down the road and getting lower rates. This is the only investment I am aware of kicking the can down the road and negotiating higher rates.
“only extend for 2 years”
They’re extending it into perpetuity. Let’s say they issue 5 year paper. You really have to roll that in four years to be prudent and not wait until the last minute. Then you pay 315+ bps in underwriting fees which comes out to almost 80 bps a year. So that 6% paper is really costing you 6.8% after you include fees.
” The long term trend is low rates.”
How much lower can rates really go? Sure, maybe treasuries could go a bit lower but that could be negated by a rise in spreads which are rock bottom. If rates truly go to zero, then they can always refi. Convexity works in their favor.
They’re not just kicking the can down the road, by going perpetual, they’re punting it to infinity and beyond.
It’s unrated, high yield paper from a non-traded CEF that invests in illiquid, high risk, Level III securities, with dodgy external management. Beggars can’t be choosers. You strike when the iron is hot.
I posted this last week
09/29/2021 at 4:14 pm
PRIF-K coming. PRIF-E going.
A4I-we have all been watching for it for a few weeks–they are slow to finally get them out after they first announce.
And they never seem to ultimately clarify their original notices of intention to call on the issue being called… On 9/9 they announced call on PRIF-E for NO EARLIER THAN 10/8 AND NO LATER THAN NOV 5, subject to successful new issue, but nothing more said… With settle on new issue being 10/8, I think their past precedence has been the call coincides with the settlement.