Prudential Financial Prices Baby Bonds

Prudential Financial (PRU) has priced the new baby bond previously announced with a rock bottom coupon of 4.125%.

Of course the issue is investment grade.

There is no OTC grey market trading in this debt issue–and in fact the company didn’t even announced a tentative ticker symbol. Anxious investors will need to contact their broker with the CUSIP if wanting to buy the issue before exchange listing.

The company will be calling the 5.75% (PJH) baby bond as well as the 5.70% (PRH) baby bond with the proceeds of this new issue. Both issues to be called tumbled around 3% yesterday.

The pricing document can be read here.

20 thoughts on “Prudential Financial Prices Baby Bonds”

  1. I know the focus here is on exchange traded issues but very worth noting that PRU did a concurrent offering of a 3.70% reset issue that will trade as a bond. 10 years fixed then 5yT+3.035%.

    So you can pick your poison. The relative pricing of the two issues puts a considerable value on the optionality that comes with the reset rate. You are giving up 425 bps for 10 years for the privilege of the reset.

  2. Frankly, I don’t see that purchases have to be made at these levels- either at the prices or low yields. Unless you think the market is not going down again, or you really, really have to have more income, even here.
    Comfy holding 46% in cash & equivalents- mostly just cash for now.

  3. I was able to purchase through Schwab’s bond desk (1-877-906-4670) and they waived commission for me. The price was $25.40.

    1. Dick–thanks for the info–no doubt investors are hungry for quality even at a low coupon.

      1. Given the fact that PSAGL is trading at almost $26 with the same coupon, it didn’t seem unreasonable to think that this new BB from PRU would go over $26 relatively soon. If it goes to at least $26, I’ll make 2.4% on what I paid. Annualized, that’s a pretty nice return. I won’t be holding this one long term.

    2. Does anyone know if I should generally expect better pricing for jumping on this one early through the bond desk? I haven’t done this before with baby bonds without OTC symbols. When it opens and trades under it’s normal ticker symbol, would you expect the price to be higher than the $25.40 that I paid earlier today.

      1. Dick, I am not aware of bonds trading OTC, and not aware of them changing ticker symbols to something else later on. There is an element where the symbols for bonds are not available for a broker, and that is why you call a bond desk for earlier purchases while that is sorted out.
        For your q regarding jumping higher than $25.40… anything goes. But having a 4% coupon jump to 26-27 range for a nice quick profit is probably a slim chance for PRU in a week. That is unless new investment rated issues are in the 2-3% land, and this will jump along with thousands of other investments.

  4. Considering the recent issue by Public Storage and now the new issue by Prudential at 4.125%, things look pretty grim for us fixed income investors now. To make it even worse, I see the new PSAGL issue is now trading at $25.80.

    This morning I had some excess funds and just decided to by a low-beta common stock that trades with a 6%. At least for now, there is probably more upside in some beaten down stocks, although they certainly come with more risk.

  5. SD Surfer, It’s the term. If you are setting up a buy and hold , private ‘forever annuity’ like the PRU sells then it may make MORE sense. If you watch capital deterioration with an intent to sell someday then?? The big question is NOT whether we have a free market, nor is the question for whom; that has been proven to be hated and divisive to many. The question is for how many plates can be spun by one performer! I pray that credit quality comes through in the end (that selfish date being the day my wife and I check out).
    UZD the chase is on, same detail as the above comment with a different credit rating of course. TD has been a mess, so I open an order and let it sit, that worked for AEPOU.
    PS: There is a good, extensive article (surprise!) on SA by Lyn Schwartzer that is, as usual for her, very well done article on where we are right now. She has drifted into pay to see over there, but here’s a freebie. I will not make any comments that she does not cover very well.
    Sail On! It a new high mahn! JA

  6. I wonder if this has a ripple effect on other insurance issues. I’ve had a bid in on AHLprD and am watching it slip away. Same for the other insurance issue I’ve been watching from AXA (EQHprA) or maybe its just a general floating of all boats. The reason I’m in the market is my PNCprQ is being called. I was able to sell it at $24.995 ex dividend. Who would invest $24.995 to make a half penny in two weeks when it’s called?

  7. Prudential is rock solid enough you can put your faith in the common at a 6.4% yield. I don’t say that for a lot of securities these days. Would have been nice to get between 4.5%-5% coupon.

  8. New guy question, as I come here to learn from you financial savages!

    I’ve realized that these rates are perceived at low per the comments, but given the current market isn’t 4.125% pretty good, especially since PRU is pretty credit worthy?
    Is the concern this actually is only a bit above inflation or something else?

    1. “rock bottom”… That’s what some said when sub 6% issues began showing up a year or two ago… sad times my friends…

    2. What would be interesting is if in the next year we say, “3.0125% is my rock bottom.” Many have said this at 5.5, 5.2, 5.0, 4.8, … and I dont see a bottom. As long as the government and Fed continues their path, there is no floor. I am not complaining right now, as my fixed investments continue to skyrocket, but the future will consist of reaching for yield and hence risk.

      With all the low interest rates and free money, average homes here in Minnesota are selling in a few days. I have several friends upsizing, buying cabins, buying extra rental property, I wonder if we repeat the mortgage crisis again.

      1. You’re not complaining now but if you’re in my position of having to replace one thousand shares of something that was called, you would understand our angst.

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