I will be adding a new link titled “Sandbox” in the right hand menu.
That link will get you to this page.
I had originally set up the “Reader Initiated Alert” page for ‘alerts’. I was thinking this, for instance, might be when a preferred stock is undergoing a temporary selloff and someone wants to let the population know about it quickly. Of course we all (including me) use the ‘alert’ page for general messaging.
I am requesting that we start using the Sandbox page for all general talk, and try to preserve the ‘alerts’ page for ‘alerts’.
I have had a screen up on one of my monitors all week where I see all comments – no matter where they are posted–it is a great page and I wish everyone had a page like that–believe me we all benefit from all the knowledge being shared. I don’t want to stifle any of the exchange of knowledge, but hope to get things a bit better organized by adding the Sandbox page.
Any news on CTDD (& CTBB)?
CTDD tanking today……I am starting to question the wisdom of my investment in this one.
I also have CTDD.
I know LUMN is a stinking pile, but CTBB and CTDD are Qwest obligations. I look at Qwest’s financials, and they look pretty solid, even if you assign zero value to the goodwill. Don’t how well Qwest is ring-fenced from Lumen, and I’m probably missing something else, but shouldn’t Qwest be at least somewhat remote from Lumen’s problems?
Good point nhcoast. Hopefully they can remain insulated from whatever woes happen with Lumens.
If that does indeed happen, CTDD could be priced as a possible buy of a lifetime right now.
i bought some today CTBB and CTDD are trading much lower than Quest bonds in the institutional market( although those are shorter). In case of bankruptcy i want to have the lower cost per claim.
Made a few nickles on CTDD trade. Bough some on yesterday’s big drop and sold this morning. Still holding some.
nhcoast, where do you go to find Qwest’s financials?
I looked at the Annual Report for LUMN dated 2/23/2023 at this site: https://ir.lumen.com/financials/sec-filings/default.aspx (can’t link to it directly) and almost everything is stated for the holding company, consolidating all its positions. However, the following tidbits may be of interest.
“As a holding company, we rely on payments from our operating companies to meet our obligations. … Our subsidiaries are separate and distinct legal entities and have no obligation to pay any amounts owed by us, except to the extent they have guaranteed such payments. Similarly, subject to limited exceptions for tax-sharing or cash management purposes, our subsidiaries have no obligation to make any funds available to us to repay our obligations, whether by dividends, loans or other payments. As discussed in greater detail elsewhere herein, restrictions imposed by credit instruments or other agreements applicable to Level 3 and certain of our other subsidiaries limit the amount of funds our subsidiaries are permitted to transfer to us, including the amount of dividends that may be paid to us. Moreover, our rights to receive assets of any subsidiary upon its liquidation or reorganization would be effectively subordinated to the claims of creditors of that subsidiary, including trade creditors. ” (page 31)
As of the end of 2021, LUMN had $27.428B of long-term debt, excluding current maturities. $2.001B of this is Qwest debt: $1.986B of Senior Notes at interest rates between 6.5% and 7.75% with maturities between 2025 and 2057, and a term loan of $215M due 2027 at LIBOR + 2.25%. (Table on page 99)
Retired Sailor,
https://ir.lumen.com/financials/sec-filings/default.aspx
Click on the “Lumen” above where it says Filing Description and you can select Qwest
Thanks!
Retired Sailor
NTT2015 beat me to the response, but I’d like to get your take on it too.
It might be the downgrade
Moody’s downgrades Lumen’s CFR to B2; outlook changed to negative
https://12ft.io/proxy?&q=https%3A%2F%2Fwww.moodys.com%2Fresearch%2FMoodys-downgrades-Lumens-CFR-to-B2-outlook-changed-to-negative–PR_474191
CTDD at $12 today so dividend is now 14%.
I’d say it’s related to their Lumen’s subsidiary attempted note exchange which really doesn’t make great sense to me, “4.500% Senior Notes due 2029 $ 967,338,000” exchanged for 10.5% matured in 2030.
My read is Lumen is trying to push its large block of notes starting with near term redemption dates 2025 through 2027 out to 2030.
My broker:
CTDD; Volume
31.7M
Avg. Volume
60.5K
The exchange isn’t one for one. You only get $550 consideration for your $1,000 bond, in exchange for the massive increase in interest rate. See https://ir.lumen.com/news/news-details/2023/Exchange-Offers-for-Lumen-Senior-Notes/default.aspx
I suspect it is a flight from risk.
Other issues like TDS/V also getting spanked.
Issues like PRH and RIV/A higher credit quality taking a smaller hit.
The past week has opened up opportunity for sock drawer issues, at least for me. Pending interest rates going to .25% again, this could be income for the rest of my life. (fingers crossed)
Be well and stay safe
Spent the weekend reading financial reports, updating my spreadsheet, and reading various articles, and I have narrowed down my watch and possibly buy list. It’s a mix of just about everything – banks (small, TBTF, and ag), insurance, ag co-ops, shippers (container box and LNG), natural gas, industrial, and capital markets. Some are FTF, FTR, perpetuals, and terms. Some are IG, and some are YGBK-WMWY (ya gotta be kiddin – whatsa matta with you). Most have decent yields of +6.5%, and some have capital appreciation potential (not assuming any of they get called). Some are short-term holds (RCA), some are buy for a future bounce, and some are buy and hold (AGM/PRF and WFC/PRL). I own small amounts of most of them, and I plan to add more. Not recommending any of them, but I would appreciate your thoughts. Format is ticker, current yield, and float/reset info. Thanks.
AGM/PRF, 6.6%
AGRIP, 6.8%, floats at 4.22% + LIBOR ON 1/1/24
ATH/PRC 7.4%, resets at 5.97% + 5-year in 2.27 years
CHSCN 7.1%, Floats on 3/30/2024 at 4.298% + LIBOR
C/PRJ, 7.1%, floats at 4.04% + Libor in 0.5 years
CMRE/PRE 8.8%
DLNG/PRA AND DLNG/PRB, 9.4% (B FLOATS)
FRMEP 7.9%
GS/PRJ 5.6%, Floats May 10 at 3.64+ Libor
HTLFP 7.3%, Resets at 6.675% + 5 year treasury in 2.3 years
LNC/PRD 9%
MBINP 8.0%, Floats at 4.6% + libor in 1 year
NEWTZ (8.3% YTM TERM TO 2/1/2026)
NI/PRB 6.8%, Resets at 3.6% + 5-year in 1 year
ONBPO and ONBPP 7%
RCA 9.8% YTM (3.6% gain in 0.4 months)
SNV/PRD 7.6%, floats at 3.35% + Libor in June
SNV/PRE 8.1%, Resets at 4.12% + 5 year in 1.28 years
SPLP 10.6% YTM in 2.6 years
USB/PRA 1.02% + libor at $1000 = 7.5% at $800, 7.7% at $780
WBS/PRG 8.3%
WFC/PRL 6.6%
WSBCP 7.7%, Resets at 6.55% + 5 year in 2.65 years
ZIONL 8.1% (about 11.0% YTM 5.5 year note with FTF in 6 months)
goin2cali:
I like several on the list, I own WSBCP, ONBPP, HTLFP and GSJ. Heartland took a beating, but I think they will survive. I sold ZIONL when it slipped under $25 and bought MSP with the money, a bit less dividend, but much better quality. CHSCN is a very good choice, will buy a bit tomorrow, been waiting for those to get under $25. Good choices. Been buying more bonds lately.
Thank you. ZIONL might be rated YGBK-WMWY, but I need to cheer for the hometown team. I was also a small Utah Jazz fan, so I’m used to hope, dashed hope, and pain. Thanks for the heads up on MS-P, which also reminded me of MS-E and MS-F.
I hear ya, lifelong suffering California Angels fan here ( refuse to call them Los Angeles Angels, they are not near LA or even in LA County thank God. The owner is geographically challenged I guess).
Yes, MSE is an interesting one, I bought some shares for my wife’s account a while back, hoping they don’t call it in October., maybe squeeze another quarter or two before they do.
Careful with C-J. Read comments in attached SA article.
https://seekingalpha.com/article/4567638-citigroup-a-potential-8-5-percent-dividend-yield-on-preferred-shares.
Thanks gumfighter, It’s good to see Affinity4investing comments haven’t run across him in awhile.
Glad to see people comment on Goin2cali’s list. I wish he had added a 4th column. H-hold, STH- short term hold, RCA- flip on bounce?
I hold a few of these also. The shipping I agree with Grid’s comment this is a volatile area for investment. I held GSL-PB in 2020 thinking it was a long term hold. I also held KNOP for 5 or 6yrs making money by flipping ( knowing when to hold and when to fold)
Not sure about FTF good for the short term like 3 month’s further out I think the FTR may be better.
Too many on the list to comment on, although I did go down the list and researched that C-N might be better than C-J but the risk of holding a par 25.00 preferred that is at 27.00 is a risk. You would have to hold about 1-1/2 yrs to break even hoping it doesn’t get called although it is one of those rare bank preferred that is cumulative like NYCB-PU
CHSCN & CHSCM are both FTF and go x-div in a couple days and might be worth a buy on the drop but then you have to ride the roller coaster for the next 3 months. The CHSCL is down to 25.35 and is fixed.
Best I can tell, ex-date for the CHSCN, CHSCM (and siblings) was March 16th. Pay date is March 31st.
Thanks Green and Gold, I was going by Quantum saying it was 10 days prior. I was thinking the 21st
Thanks for the heads up.
On C-J, careful why? Because those people commenting on SA for the most part have no clue ? Thinking “C-J will start paying based on the fallback LIBOR rate of 0.2544%, or at a coupon rate of 4.2944 not close to 8,5% posited in the article because SOFR does not replace LIBOR for preferreds that have a fallback position documented if LIBOR isn’t available”
Well those comments were proven all wrong. Citigroup (like others have / will) will adopt the safe harbor in the Federal AIR Act
From Quantum:
On February 27, 2023 — Citi issued a press release to provide notice that, after the Cessation Date, the relevant USD LIBOR rate in each Legacy LIBOR Instrument is planned to be replaced with the CME Term SOFR Reference Rate published for the one-, three- or six-month tenor corresponding to the relevant USD LIBOR rate as administered by CME Group Benchmark Administration, Ltd. (or any successor administrator thereof) (“Term SOFR”) plus a tenor spread adjustment. The replacement of USD LIBOR with Term SOFR plus a tenor spread adjustment will be effective for determinations under the terms of the Legacy LIBOR Instruments that are made after the Cessation Date, but will not affect any determinations made on or prior to the Cessation Date. The 3 Month Tenor spread adjustment is listed as 0.26161%. for this secuirty.
Thanks Mav. Wasn’t aware of the press release.
Yeah, am I missing something on C – J? Skimmed the article. I bought below par a bit ago. Don’t remember any red flags.
has anyone looked at RCA
its convertible if i remember correctly
the common has dropped a lot though i think its still ok and not really effected by the bank crisis
A question about banks, how they work, and their relationship with the government: A bank takes in deposits which they pay interest on and make loans which they collect interest from. The difference, or net interest margin, is the profit (hopefully) that the bank makes. Complicating the picture, however, is the fact that even a conservative bank is levered 10x the capital available to the bank through deposits, preferreds, etc. They achieve this leverage buy taking some capital, buying treasuries, and depositing them with the fed, which supplies the additional capital necessary for the leverage the bank uses for additional loans. If the bank fails, the govt. is on the hook for all the leverage. If the bank fails because of poor lending or risk management practices, that is one thing, but if it fails due to uninsured deposits fleeing, that is another, which might be preventable through unlimited FDIC insurance of deposits. If, by having no limit on FDIC coverage, the govt. could reduce the occurrence of instances where it gets stuck with all the capital required for the banks leverage due to uninsured deposits leaving via a “bank run”, why would the govt. limit the FDIC insurance in the first place? I am showing my ignorance here, but would appreciate any input that would help educate me a little. Just returning from Bequia, so I missed out on the excitement last week, which does not look to be over yet.
> If, by having no limit on FDIC coverage, the govt. could reduce the occurrence of instances where it gets stuck with all the capital required for the banks leverage due to uninsured deposits leaving via a “bank run”, why would the govt. limit the FDIC insurance in the first place?
Well, if you go with unlimited deposit insurance there’s a danger of depositors flooding money into the riskiest banks, because if you don’t have to think about it AT ALL you will take the highest rate every time. So it’s entirely possible the more conservative banks would go bust because they wouldn’t be able to compete with the deposit rates of the California Wildman Bank or whatever.
I’m not sure what the answer is here but maybe just raise the deposit insurance to $1MM to start and see how that goes.
Hi Lucky,
I thought that leverage was primarily created by fractional lending. In essence, banks can lend out more than they have in deposits. Although your statement shows the balance that you expect- your balance actually consists of some cash along with an iou from the bank. But this is only my understanding, I could be wrong. I don’t think that the Feds are technically on the hook for bank losses- though from a political standpoint…?
At Fri Close …. CME FF Watch Probilty’s : @ Fed Mtgs
Mar. 4.75% = 62%
May 4.75% = 54%
Jun 4.50% = 51%
Jly 4.25% = 45%
Sep 4.00% = 42%
Nov 3.75% to 4.00% = 32% toss up
The next crisis? Barrons has a story of the risks of a credit contraction, if you have access. “Small Banks’ Big Problem: Too Many Commercial Real Estate Loans” Two key points for me. One, a credit contraction is likely as a result of small bank deposit outflows and tightening credit standards. Two, Signature was a big player in the troubled NYC RE market. There could be implications for the NYC REITs.
“Signature has an estimated $25.5 billion in loans secured by NYC assets, equal to about 12% of all outstanding CRE debt in the city”
” …exodus of deposits. The banks are unlikely to be able to offer as much credit—the lifeblood of the economy—as they had previously. “This loss of confidence in regional banks means there has been a sudden and significant contraction in credit availability in the economy,” ….
https://www.barrons.com/articles/small-banks-commercial-real-estate-loans-545b1755?mod=hp_columnists
DYODD
SCHWAB MONEY FUNDS ~ 7 day yields with waivers
SWVXX ~ Value Advantage ~ 4.49%
SNVXX ~ Government Money ~ 4.23%
SNOXX ~ Treasury Obligations ~ 4.29%
SNSXX ~ US Treasury ~ 4.31%
as always, DYODD
as for some others as of Friday.
Fidelity Investments
SPAXX GOVERNMENT CASH RESERVES 4.24%
FDRXX GOVERNMENT CASH RESERVES 4.27%
FRGXX FIMM GOVERNMENT PORTFOLIO 4.51%
Merrill Lynch
Preferred Deposits 4.24%
Speaking of NEWT, does anyone have any thoughts on the Newtek Bank 5% savings account?
One thing that jumps out is the $25K daily online ACH limit, which combined with the six monthly transaction limit, is … limiting.
YELLEN DOUBLE TALK…
* Yellen’s “Double Talk” to Senator Lankford on “Double Standards” for Community Banks vs TBTFB
*https://twitter.com/FedGuy12/status/1636524778755592193?cxt=HHwWgsDQ_bKnjbYtAAAA
You mean Janet Yellen? Wife of Yoda?
I have a question for someone who knows how brokers work internally/report sales.
I often place GTC orders for small quantities of stocks (rounding out lots, or just buying a few shares to help me track, etc.).
I have noticed that I sometimes get fills at prices below (for buys) or above (for sells) the market-reported prices. Sometimes the differences are a few cents, but once in a while it is more like 50 cents. I also notice that my trades don’t show up in the broker’s “recent sales” data (like on streetsmartedge or in their pages showing the day hi/low for the stock) or even in the more broadly reported sales histories (for example, the feed at freerealtime).
I am not complaining – but it seems really odd. Only seems to happen on tiny quantities.
Anyone know what this might be?
Private—my experience at Schwab is that odd lots almost never get reported and are just handled internally. That’s why the fill prices can vary based on Schwab’s internal orders.
If memory serves, odd lots (i.e. orders less than 100 shares) don’t necessarily move the reported price.
That you did better buying than the reported ask might just be because someone had a hidden order out there to sell lower than the ask (I do this myself sometimes on less liquid shares).
Odd lot orders do not move the NBBO quote.
Orders can be routed to dark pools but I don’t know if that’s applicable to odd lots.
Hidden orders can be somewhere between the bid and the ask and can result in fills within the NBBO quote.
I placed a fat fingered trade on Friday, something I haven’t done in many years. I was attempting to short a preferred with an 80 cent spread. When you click SELL, it opens the order at the bid and you have to change the price. I screwed up and I didn’t. Thanks to whichever one of the aforementioned explanations, I got a mid spread fill, only 40 cents off the ask instead of 80 cents. Was lucky to a second time and got out at break even later in the day.
question to all. how would you rank the four short term investments below
“3 months or less” for safety
my thoughts thoughts are
T Bills
CD under 250K
SNOXX
SWVXX
Today? I’d go for Guinness! (four leaf clover emoji here)
🍀
Sorry. Just testing. I have no idea what this forum allows.
Anyone notice AFFT went down 6% today? Seems surprising to me. I guess they are not easily bought anymore, and the volume is nil, but seems surprising.
Individual investors (and many fund managers as well) who bought 10 year and 30 year U.S. Bonds when interest rates were low now have nearly worthless bonds due to higher interest rates. On the other hand, Silicon Valley Bank’s 10 year and 30 year U.S. Bonds bought over that lower interest rate period were made whole (including interest payments).
I think your statement is not accurate. The shareholders will be taking a loss directly related to the losses on SVB’s holding’s which can be 10/30 yr bonds. If there was no loss a common shareholder would be getting paid quite a bit during liquidation.
Hmm.
https://seekingalpha.com/news/3948625-fdic-willing-to-talk-loss-sharing-to-smooth-sale-of-svb-signature-bank-report
hmm. Yes, depositors will be made whole from FDIC and asset sales. Investors 🙁 of Signature Bank common and preferred shares will only receive a tax deduction for their losses – as I don’t see any funds left over from the asset sales going to share holders. We will have to wait to see if there are enough assets left for the bond holders.
More evidence market is figuring rate cuts:
Enstar group preferreds; Both are trading well under par, so call is unlikely. Both have the same coupon of 7%. But the fixed issue ESGRO closed at 23.28 while the FTF issue ESGRP (libor plus 4.015 in 2028) closed at 21.92.
I do not own either issue.
CME Fed Watch Friday @ 10am NY …
Fund Contracts implied rates ….
June 14 ….. to 4.75% …. 42% Problty
July 26 ….. to 4.50% …. 43% ”
Sept 21 …. to 4.25% …. 40% “
SVB Financial Group SIVB,, has filed for bankruptcy. To be clear: This is not the HoldCo’s former bank, which is now federalized and unaffiliated. This is the holding company.
“The company said the filing does not include SVB Capital or SVB Securities funds and general partner entities, which are continuing to operate as SVB Financial explores its strategic options. SVB Financial is no longer affiliated with Silicon Valley Bank, which was placed in receivership last week.”
SVB Financial files for Chapter 11 bankruptcy with about $2.2 billion of liquidity
https://www.marketwatch.com/story/svb-financial-files-for-chapter-11-bankruptcy-with-about-2-2-billion-of-liquidity-718be944?mod=mw_latestnews
DYODD
With the weekend coming, I would like to offer this essay which I found very interesting. Having lived around commercial fishing for a while, I had never thought much about the history. Thanks to everyone.
https://monthlyreview.org/2023/03/01/the-fishing-revolution-and-the-origins-of-capitalism/
Be sure to read Michael Lewis’ Boomerang with its chapter on the unintended consequences of ‘rationalizing’ Iceland’s fishing industry. The whole book would normally be hilarious except in times like these when we pray that the financial community has evolved?
NEWTZ and NEWTL – It’s a minor victory I suppose but finally after many conference calls that seemed to dance around an answer, a clear statement about the continuing validity of the 1940 Act BDC language limiting asset coverage ratio to 150% is printed in the just released 10k. p 54 – “we are subject to 150% asset coverage requirements under the 1940 Act even though, effective January 6, 2023, we are not regulated as a BDC or under the 1940 Act.” Also, “if we were to redeem all of the outstanding 2024 Notes and 2026 Notes, we would no longer be subject to the above requirements.” The full textis here –
https://www.sec.gov/Archives/edgar/data/1587987/000158798723000073/newt-20221231.htm#i77373c2e854a4868bc0fa335d91defe9_337
“We are subject to 150% asset coverage requirements due to covenants contained in the indentures under which the 2024 and 2026 Notes were issued.
The 2024 and 2026 Notes were issued pursuant to a base indenture, dated as of September 23, 2015 (the “Base Indenture”), and a Fourth Supplemental Indenture, dated as of July 29, 2019, and a Seventh Supplemental Indenture dated as of January 22, 2021, respectively, each between us and U.S. Bank National Association, as trustee. The Fourth Supplemental Indenture and Seventh Supplemental Indenture include covenants requiring us to comply with (regardless of whether we are subject to) the asset coverage requirements set forth in Section 18(a)(1)(A) of the 1940 Act as modified by Section 61(a) of the 1940 Act (or any successor provisions), to comply with (regardless of whether we are subject to) the restrictions on dividends, distributions and purchase of capital stock set forth in Section 18(a)(1)(B) of the 1940 Act as modified by Section 61(a) of the 1940 Act and to provide financial information to the holders of the Notes and the Trustee if we should no longer be subject to the reporting requirements under the Exchange Act. As a result, we are subject to 150% asset coverage requirements under the 1940 Act even though, effective January 6, 2023, we are not regulated as a BDC or under the 1940 Act.
Under these requirements we are only permitted to issue multiple classes of indebtedness and one class of shares senior to our common stock if our asset coverage, as defined in the 1940 Act, is at least equal to 150% immediately after each such issuance.
The ratio of our total assets (less total liabilities other than indebtedness represented by senior securities) to our total indebtedness represented by senior securities plus preferred stock, if any, must be at least 150%. As a result, if we were to redeem all of the outstanding 2024 Notes and 2026 Notes, we would no longer be subject to the above requirements.”
They also state on p 68 “As of December 31 2022, our asset coverage was 169%”
And, once again for NEWT, it comes down to the dilemma of the Oak Ridge Boys, “…. Ones got my money, the others got my heart….”.
2whiteroses, As knowledgeable as you are on NEWT, I hope you can shed light on a few things. First, is there a means of assessing the assets valuations? Another words, might there be falsehoods such as hold to maturity, real estate valuations not based on true market conditions, etc.? Given the environment for smaller banks, do you think NEWT will likely call these preferred in the near future? I realize some of my questions can only be answered with subjective opinion but I would value yours.
Don’t know if that’s misplaced value to asking my opinion, TNT, but here goes – I suppose you’re always at risk that valuations for assets turn out to be overstated at any company, however, the conference call this Wednesday was straight forward. When they converted from BDC to BHC all assets were marked to market. Barry talked about how well matched their assets are relative to liabilities… He also pointed out where most banks range in the 10% range for capitalization, they are at 30%…. So they are theoretically well positioned in the face of this storm… I do not yet see a transcript posted of that CC but if you listen to the first 10-15 minutes you get the info on how they differ. https://edge.media-server.com/mmc/p/yfcdnq9n. Also interestingly, Barry took the opportunity to reconfirm the guidance put out for the upcoming 2 years worth of projections…. Gutsy to be doing that I suppose, but perhaps a commentary on how the bank aspect of NEWT is only a part of the picture.
Will they call these notes (note “notes” not preferreds) in the near future???? That’s anyone’s guess in this environment… IMHO, the notes language if nothing else therefore acts as an anchor to the amount they can leverage up and that provides added security to noteholders as well as a drag on NEWT’s plans for the future…. And of course, who knows the actual mechanics of confirming and calculating the break should they broach the 150% mark? So all I would say at this stage is I’m glad the language and the protection it provides has now been clearly confirmed…..Personally I can’t see them trying to refinance these in this environment, plus they still haven’t received their final S1 approval, so I think unusual times will leave this outstanding for now, but NEWT will jump on calling them as soon as the market allows – and I suspect they are prepared to be paying more in interest rate to do so if need be.
Will only “too big to fail banks” survive? Why would anybody or any company keep more than the $250k FDIC limit in a bank? Our working assumption is that there still are TBTF banks like JP Morgan, Citi, BofA, etc. We now understand that the TBTF label did not extend down to the 16th largest bank, Silicon Valley Bank. We also understand that for whatever reason(s) after the fact, the Feds decided their depositors were TBTF, while letting the bank go under. What about Capital One, Comerica, Wells Fargo, Zions or many others? Would the Fed’s let them fail and not extend the $250K FDIC limit? It is unknowable.
There are many stories that depositors are NOT waiting to find out. They are moving their money in size to the agreed upon TBTF banks. Jamie Dimon led the charge to convince SIVB customers to transfer their accounts to JPM. Think of the risk/reward from the customers’ perspective.
For III’ers, the investment question is whether non-TBTF bank preferreds/babys/terms are still investable? It appears that the SiIVB and SBNY preferreds are worthless. It is not clear to me if the Silvergate preferred is or is not worthless. After seeing the warp speed bank run on SIVB, as investors, why would we consider any non-TBTF issues investable? Food for thought.
Two other points: Someone pointed out that Zions was in trouble in the 2008 GFC and had to be helped out. That is correct. What was not mentioned was that the TBTF ALL would have gone under without help. You might not recall the special $300 BILLION “ring fence” they did for Citi, otherwise it literally would have gone BK.
The First Republic “bailout” by other banks has precedents. When Long Term Capital Management failed in 1998, Alan Greenspan coerced 16 banks to bail them out. If they had let LTCM fail, it would have cascade and caused several other banks/brokerages and at least one country to go belly up. I am confident the FRC bailout banks were similarly coerced into depositing the funds. They were NOT given a choice. Also just like TARP funds when Hank Paulson explained to banks they WOULD take the funds, whether they needed them or not. I do not think we can count on a similar bailout for more banks.
For the record, our current preferred/baby/term holdings of bank issues is maybe .001% of assets. We have not added any additional holdings this week, but did flip a few. OTOH, we did make significant allocations to short term bank bonds, in the 1 day to 6 month maturity range. We are betting those banks survive that long and hope we guess correctly.
Janet Yellen explicitly says that the SIVB/SBNY bailouts of depositors will NOT be the practice for other small banks.
Video link:
https://twitter.com/FedGuy12/status/1636524778755592193?cxt=HHwWgsDQ_bKnjbYtAAAA
Tex2:
Not sure it matters what Yellen says. Will the FDIC/Fed/Treasury backstop all deposits of a bunch of tech start-ups (SIVB) and crypto investors (SBNY) and then not backstop uninsured depositors of say a Key Bank or Comerica?
Would a consortium of major banks plow $30B in very low-return deposits into FRC (without getting any equity) if they weren’t guaranteed that all uninsured FRC deposits would be FDIC guaranteed if FRC still goes under?
So the FDIC is going to guarantee all uninsured deposits for SIVB, SNBY, and FRC and then say, “No Mas” if any other FDIC-insured bank fails?
Don’t think so. The implicit guarantee is now there. Probably until the end of 2024. By then the Fed will likely be aggressively cutting rates again.
Similar to what Greenspan started doing in 1995 after his 7 rate increases caused the “Bond Market Massacre” and the Orange County BK back in 1994.
Don’t look now but The Fed is essentially already doing Quantitative Easing again! Wash, rinse, repeat.
I think it depends on the distribution of deposit size. Someone with deposits only a few multiples of $250K can just split them up among a few banks and be fully insured, and then it doesn’t matter if they are TBTF or not. If they had their money in a smaller bank to start with, they may prefer to split among multiple smaller banks.
I wonder if Wealthfront Cash is seeing inflows, since they do auto-splitting up to $2M.
Yeah, my everyday bank is PNC and I keep nowhere near the FDIC limit there – it’s my “emergency fund” for about a year’s worth of $$$ if needed. My big accounts are at eTrade which is now owned by Morgan Stanley – hopefully it fits the TBTF moniker as I am above FDIC limits there spread across multiple accounts. Also SIPC plays in there as well.
Suspended Common Dividend -FRC
* FRC announced suspension of dividend on common stock late Thursday, stock drops in after hours trading.
Noticed TECTP dropped sharply toward the end of the session, don’t see any news, does anyone know what’s up?
About 4 times the normal volume. Looks I chose poorly to buy above par a few weeks ago.
The business might sound a bit too much like SVB. Looking at their site you won’t find as much as here:
https://finance.yahoo.com/quote/TECTP/profile?p=TECTP
Thinking of adding. Could be the SVB buzz or an unrelated dump but I don’t want to make a blind move. See if there’s any news tomorrow.
Anyone recently taking either of the Apollo Asset (AAM-A/B) preferreds yielding well over 7% here?
Theta, yes. It has formed a triple bottom. I buy in 21 range and sell over 24. Done it twice in the last year. I want to keep as a long term hold but investors either love it or hate it too often.
ATH/E
ATH/D
Owned by the same company but for now it is rated, IG (BBB) some call protection.
Have not done the YTC, I just like the yields and that it is rated. Less likely to be delisted, IMO.
Stay safe.
CME Fed Funds Thursday 7:20am NY FF Rate indictns ….
Jun Mtg = 4.50% FF
Jly Mtg = 4.25% FF
Sep Mtg = 4.00% FF
above are FF contract indicated levels ….
Doubled down on FTF WFC-Q at $24.50 yesterday.
I meant $23.50 LOL
Anyone have an opinion on MGR? IG issue down to $21.81. Thanks.
36 years to maturity, 6.83% YTM.
Yield-to-Call in 1 year of 20%.
Credit quality is not a problem, bet is will it or won’t it be called? I’ve owned it for awhile. Not a bad risk/reward here IMO.
WFC-L is a $1,000 par busted convertible preferred (from an acquisition), noncallable and safe from conversion, down to $1,110 today, yielding 6.76%. Unless you think Wells Fargo is going under, this looks very appealing. Am I missing something?
All banks are falling with the tide. The big banks should be ok because if they fail too then everything is toast. This issue looks reasonably deal if rates are finished rising and especially if you think rates will go back down in our lifetime.
Wilson,
I add to my position 1 share at a time. And yes I bought another share quite recently. I dont worry about it much.
(GHI) Greystone Housing Impact Investors LP Announces Quarterly Tax Free Distribution of 0.37 cents 💰
https://www.ghiinvestors.com/news-events/press-releases/detail/176/greystone-housing-impact-investors-lp-announces-quarterly
NYCB . . . Wed. bank stk rout … interesting that NYCB common has been up 0n the day ( currently .46c on above daily avg vol. ).
Any comments welcome ……
Jim, I took a shot and bought an oversized position in. the common and the preferred U as well. Some of my Money Manager friends were loading up and I like their financials/market position at this time. Of course, there my be additional information to come out that will force me to change my direction so I will be keeping a close eye on this regional. Certainly, this is not a blanket recommendation and I urge everyone to do their OWN deep due diligence as this equity is not for widow and orphans. Never listen to someone that hides behind their computer with a strange name like Azure Blue 🌊
Just an FYI, the series U can have some surprises come tax time if held in a taxable account because they are debt not equity, and produce phantom income.
Yes, it’s OID (Original issue discount from the stock warrants) phantom tax .
Can anyone (I’m looking at you Grid) explain to me how the warrants associated with NYCB-U work? QOL says, “On or after 11/04/2007 the preferred securities are subject to remarketing in conjunction with the redemption of the warrants. The warrant is to purchase an initial 1.4036 shares (an initial conversion price of $35.62) of New York Community Bancorp common stock for $50, is redeemable on or after 11/04/2007 if the price of the common shares exceeds 125% of the conversion price, and expires 5/07/2051. At any time, the preferred securities and the warrants may be separated and transferred separately and the recombined at a later date.”
If they were converted, would holders of NYCB-U receive shares of NYCB common? Have they been converted?
Bur, due to a couple 4 for 3 stock splits a long time ago the conversion factor has changed…
New York Community Capital Trust V, a trust formed by the Company, and a warrant to purchase 2.4953 shares of the common stock of the Company (for a total of approximately 13.7 million common shares) at an effective exercise price of $20.04 per share. Each capital security has a maturity of 49 years, with a coupon, or distribution rate, of 6.00 percent on the $50.00 per share liquidation amount. The warrants and capital securities were non-callable for five years from the date of issuance and were not called by the Company when the five-year period passed on November 4, 2007.
…..Basically its a convertible now, and pretty much a busted one. You do have the option now to convert one NYCB-U share for 2.4953 common shares, but that doesnt seem very profitable, ha.
So basically for now its simply you get $3.00 annually until maturity or company could redeem at $50 cash if it so desired since its long past first call.
….This describes the “phantom income tax” as its amortized over the life of the loan. This $92 million was the declared difference in capital value (paid in capital on the asset side of the ledger) from the stock warrants. Or at least that is the way I understand it. Simply put I think there is some “tax drag” and holding in tax free account side swipes the issue. This is also only my neophyte opinion but it likely has served as the reason the issue always has traded a bit doggier historically compared to issues of similar qualities over the years.
….The $92.4 million difference between the assigned value and the stated liquidation amount of the capital securities was treated as an original issue discount, and is being amortized to interest expense over the 49-year life of the capital securities on a level-yield basis. At December 31, 2022, this discount totaled $64 million.
….Why was this created that way? Simply put it was done for tax savings reasons. Tax laws and bank regulation laws also have change since then, so you dont see this stuff nowadays.
it doesn’t appear they ever got even close to that price. They split 9X in their history, but have not done so in over a decade and the last one was before 2007, so that conversion ratio is still active.
The ratio I posted above is accurate and current. The one Bur found was old from 2002 issuance. NYCB had two 4-3 stock splits after 2002 issuance and thus is at least in part why its down to $20.04. This conversion strike price came from their most recent annual filing.
Forgot to mention. Obviously that changed the amount of converted shares received also to that 2.4953 amount from the original number from ‘02.
FWIW, NYCB took advantage of the 08-09 crisis and offered a tender of this security on terms below and $48 million were accepted.
On July 29, 2009, the Company announced the commencement of an offer to exchange shares of its common stock for any and all of the 5,498,544 outstanding BONUSES units (the “Offer to Exchange”). All holders of BONUSES units were eligible to participate in the exchange offer. A total of 1,393,063 BONUSES units were validly tendered, not withdrawn, and accepted in the exchange offer, representing 25.3% of the 5,498,544 BONUSES units outstanding at the exchange offer’s expiration date. As a result, trust preferred securities totaling $48.6 million were extinguished in August 2009. In accordance with the terms of the Offer to Exchange, the Company issued 3.4144 shares (the “Exchange Ratio”) of its common stock for each BONUSES unit that was tendered, not withdrawn, and accepted. The Exchange Ratio was determined by adding (i) 2.4953 common shares to (ii) 0.9191 common shares. The latter number was determined by dividing $10.00 by $10.88, the average of the daily volume-weighted average price of the Company’s common stock during the five consecutive trading days ending on August 21, 2009. The Company issued 4.8 million shares of its common stock as a result of the Offer to Exchange. In addition, a $5.7 million gain on debt exchange was recorded in non-interest income in the third quarter of 2009.
Grid- I really appreciate your detailed analysis, it is much appreciated.
I am wondering if you would share a few of your top ideas here as this sell off in preferred’s intensifies. So many options out there from banks to non banks. It’s hard to decide.
Sjc, I haven’t got to look too much past 2 days. I did before teeing off buy a modest 600 shares of WAFDP at $15.09. Doing a little bank dumpster diving. That appears to be a decent regional bank. Time will tell.
I feel a bit emboldened knowing I have so much in safe money. I want to start peeling off some adjustables and rotate into some fixed. But it’s too cloudy for me to jump whole hog on them.
Grid, a couple days ago I did the bank “no one has ever heard of except in their region” dumpster dive like you and bought TFSL. Regional banks USUALLY do not have the derivative portfolio that the large multi national banks do (can you dig it https://www.youtube.com/watch?v=V-OYKd8SVrI )and hopefully are more conservative then the too big to fail 🏦
Thanks Grid – I will have a look. Lucked out with some buys yesterday afternoon and this morning in UZD and FFC.
Watching the commercial reit wreck closely for opportunity next week.
VNO, SLG, KRC BXP – The VNO preferreds specifically have been crushed
Sjc, A lot as you have noticed tend to bounce the same way even issues outside the bullsye target the regional banks have been under. And as you mentioned the more some drop the more some can have a quick bounce even if one doesnt hold long term.
I have only done a few of these recently but have typically caught a bounce and sold on what I have bought the past month or two. As that was the intent to just catch a quick wave. My core holds are not many now. Typically just the usual suspects of NSS, ALL-B, TANNZ, GBIl, and CNTHP. DCP-B may become a longer hold as I got most near $24.
Phillips stated in acquisition that the preferreds will be unaffected by the merger. But that doesnt mean they wont be redeemed as they may have been compelled to say this hoping they got the deal done before B becomes call eligible anyways. And of course its possible they get delisted, but Im hoping since Enbridge will still own about 15% of so of the company still, the filings will stay in public domain. I will try to watch that one.
Outside of dumpster diving as you and Azure alluded to, there really isnt what I would call any great deals in the high quality stuff. Of course I mean that on a relative basis comparing their yield to 5% CDs still available out to 3-4 years. I do have sprinkings of these types anyways buying on recent dips that I would add if they dropped more.
USB came out with 19 to watch- NYCB was in their top 3 buys.
Gary, what were the other 2 banks?
Western alliance and bank OZK were top 2. Comerica and Webster financial rounded out the top 5.
First Citizens BancShares (FCNCA), Texas Capital Bancshares (TCBI), Cullen/Frost Bankers (CFR), Cadence Bank were the banks classified as top sells.
Longtime hold for me, added a piece to the commons under 6 and re- opened a position in NYCB-U just above 36. My take is patience will be rewarded when present turmoil resolves however long that takes but don’t take it from me, do your own DD.
Talking down the Fed rate – 1% less by end of yr : https://www.bloomberg.com/news/articles/2023-03-15/fed-traders-price-100bp-of-rate-cuts-from-a-4-8-may-policy-peak
WFC-D? No dividend today (3-15). It looks like this might be part of the new mixed shelf offering but I don’t know how this issue is impacted.
Any expert opinions?
I received my WFC-D dividend yesterday. Maybe your broker’s reporting is delayed?
Yes I saw it this morning it must have posted later. Whew!
USB-A preferred dividend announced at $14.6243 which implies a yield of 7.58% at the current $771 price. All the fixed rate preferreds of USB yield less than 6%. Market seems to think short term rates will be cut, and soon.
RB was my thought yesterday when I said am starting to look at fixed compared to the FF. Except for the few that have high reset rates like HTLFP
On USB-A this payment is of a coupon of 5.849%….. With floater being 3 month LIBOR + only 1.02% and a month to go before the next re-calc, there’s not much room for plus adjustment from the 5.849% present coupon….. If Libor goes down, it should be an interesting test case for floaters and how they will react if rates are coming down…… As you mention, there’s a 75 basis point cushion on this vs fixed rate yield on other USB… If rates in general go down, so will the comparable for which to compare USB-A. So what do you think – should its price hold up even if rates begin to go down?
Moody’s Late To The Party:
* Negative outlook banking sector
* Watching 6 banks for downgrade…
First Republic Bank, Western Alliance, Zion Bank, Comerica Bank, Intrust Financial & UMB Financial
After the recent banking news, Moody’s has internally submitted a memo. Essentially no more Fridays taking off at noon and hitting the golf courses early. It is back to work to begin reviews.
Credit Suisse ~ continues it’s steep decline today…Saudi investors say no more $$$ as a backstop
Waiting for Moody’s to do something is like doing CPR on the corpse at the funeral.
Hi, I have been reading posts for some years now, but was always reluctant to post anything due to my limited knowledge compared to other members.
This time I thought I might have something to contribute.
I own FRC-H preferred and it is now trading at under 10 dollars. In case of liquidation, preferreds rank senior to common and get paid first at parity (25). Reading through FRC’s balance I have total assets of 212.6B and total liabilites of 195B, leaving 17B of equity. Preferred stocks outstanding are 3.63M (x 25 is roughly 90M USD). I have also read that FRC has about 5B unrealized losses on bonds. This still leaves enough assets on the table to payout preferreds in full.
Looks like a great deal, but I am probably missing something. I am no expert and any insights are welcome!
No guarantee you’ll get anything in a liquidation. Often it’s all gone before getting to the “higher ranking” preferreds.
SI-A is bouncing around trying to guess the odds there will be any money left for them.
ALL-G For those still playing the alternatives to money market or 1 month US Treas hideout game, there’s been a seller in the market on ALL-G… At last trade of 25.21, if bot tomorrow and using settlement as tomorrow just for conservative sake in calculating, YTC for 5.625% due 4/15/23 = 6.72%. I bot today at that price. Given 4/15 is a Saturday, you don’t get paid until Monday 4/17 but dividend is as you would get for a full quarter ending 4/15 or .3515625
Have not been posting much since my stroke, but things are improving somewhat; can now walk with a quad cane, slowly & unsteadily, but at least am now able to leave the wheelchair for short walks.
Anyway, I own some ALL-B, was wondering what the new dividend is, QOL says the new LIBOR+ rate is effective as of 1/15, so this April should reflect it, but I cannot find the new div amount anywhere.
Can someone help?
Glad to hear you are getting better ❤️🩹 I don’t believe Allstate has declared a rate yet; Commencing on 1/15/2023, the Debentures will bear interest at an annual rate equal to three-month LIBOR plus 3.165%, payable quarterly in arrears on 1/15, 4/15, 7/15 & 10/15 of each year. All.PRB should go EX date 3/31/23 , so it’s coming and 3 month LIBOR closed today at 4.866% (got hammered down today) + fixed 3.165% so it should be around 8.03%. $tay Tuned and keep getting better 💪🏻
Thanks, Azure.
I will check the Allstate website on 3/31/2023 to see what the declared divy is.
Based on the approximate 8% yield you stated, we could expect the dividend to be about 50 cents, correct?
Perhaps you or someone can also post the amount here at that time, as I have a lot on my plate now, and might forget.
Guys, it has to be around 8%. Interestingly my Vanguard account sometime after it went floating changed it to AllState Corp. Sub Debenture FXD/VAR 7.99471%.
So my assumption is this quarter will be based off of 7.99471%.
Grid, you are correct 7.99471%
Fidelity automatically updates the description of these floating issues with the current rate. Perhaps Vanguard is starting to as well
Inspy, I’m very glad to hear that you have some improvement. Me, as well as many others here (some of whom posted their well wishes for you also) are rooting for you.
thank you, mbg. here”s hoping i can participate more in the interesting and stimulating discussions on this website.
We’ll be looking forward to your return to glory, Inspy..
Inspy, GREAT to see you posting again. Thrilled you are making progress in your recovery. Keep up the good work!
T2
Good news on health …..
On Monday clsd @ $25.18
Any fade off the $25.10 level …. will be an adder.
LIBOR 3/14 at 4.91100%
LIBOR 3/09 was 5.15371%
A case study of the recently failed Silicon Valley Bank (SVB) is illustrative. 10 percent of banks have larger unrecognized losses than those at SVB. Nor was SVB the worst capitalized bank, with 10 percent of banks having lower capitalization than SVB. On the other hand, SVB had a disproportional share of uninsured funding: only 1 percent of banks had higher uninsured leverage. Combined, losses and uninsured leverage provide incentives for an SVB uninsured depositor run.
We compute similar incentives for the sample of all U.S. banks. Even if only half of uninsured depositors decide to withdraw, almost 190 banks are at a potential risk of impairment to insured depositors, with potentially $300 billion of insured deposits at risk. If uninsured deposit withdrawals cause even small fire sales, substantially more banks are at risk. Overall, these calculations suggests that recent declines in bank asset values very significantly increased the fragility of the US banking system to uninsured depositor runs.
https://www.ft.com/content/84c4446a-d7aa-4f70-a286-adeb4fc4988c
Great article. The underlying paper is incredibly timely.
SVB issue wasn’t about capitalization. It wasn’t about unrecognized losses per say. It was that SVB had a significant mismatch of it’s assets and liabilities. It had matched demand deposits against long term treasuries. This was primarily due to them not have loans (short term – prime rate) to match with.
So the issue was liquidity, had to sell off a load of below water treasuries to pay the run on it’s deposits. So they were forced to recognize the loss. Banks should have a solid asset/liability policy so that terms are managed so prevent this. I understand that they expected rates to drop (not sure who would ever have thought that), so perhaps they felt comfortable with long term treasuries as match expected those to be worth more. But that is NOT how anyone should manage a bank’s asset/liabilities. If they had properly matched then they would have not had the big losses to recognize. They should also not have grown their deposit base without growing their loan portfolio. Strange that a bank of 40 years would be so careless and sloppy in their AL management.
Hello peeps,
I was wondering if anyone has a copy of the prospectuses of the FRC preferred issues since i couldn’t find any of them in SEC
Someone–they are FDIC regulated so don’t file with the SEC. All their filings are here–
https://ir.firstrepublic.com/filings?gnav=globalheader;aboutus-filings
I thought I had them all linked on the individual issue pages – but I see they have moved them so I will get the on the issue pages again.
Go to this website – https://www.quantumonline.com/search.cfm
enter the ticker symbol FRC and then “find all related securities for FRC”. Click on the link of the preferred, you should see a link to the prospectus for each (if it’s available).
google came back with this one for the series J.
the site is efr.fdic.gov
https://efr.fdic.gov/fcxweb/efr/fcxservlet/PublicEfrFileDownload?instFlngId=5203&instFlngAtchId=1&fileType=instFlng
I see some Canadian banks have short term A rated bonds paying 5.0%-5.3% at Schwab. Has anyone bought any of these ? My account is a traditional IRA, from what I have researched, it seems there would be no with holding of tax by the Canadian government for the dividends or any additional tax paperwork, just ordinary income when you withdraw your RMD.
You might ask- I had tax withheld in my IRA on EBBNF recently- did some reading- they shouldn’t, but someone else said they called S. and was told it was because their Canadian connection that did the processing between Enbridge & them did it- no getting around it for them. Sounds screwy, but….
Oh- and the Canadian form to get it back is a horror show nightmare.
I’ll be selling my 3 issues- life is too short to deal with that stuff.
You have to start with a declaration form with your broker. It has to be renewed every few years.
I fought the “its not us, its the agent in Canada” battle for a couple of canadian preferreds for a couple of years for an IRA, then I just sold my holdings.
My point exactly- they are not going to do a ‘form’ that can correct their problem at the source.
Is this at Schwab? This is why I’m not looking forward to 100% consolidation with TDA….. I have not had a problem like this with ENB issues at TDA. There’s been an option to apply what’s withheld for tax credit when doing your taxes. Bottom line effect is the same as 100% refund. There are guys on here who can explain this a whole lot better than I can but that’s how it’s handled at TDA as an option.
My battle was with Schwab. They won’t lift a finger to help.
Would Enba have the same problem?
I bought some last month to test whether I would have the problem, but it looks like it won’t matter. ENBA is called for next month.
Bill,
I asked the very same question in the ‘Bond Discussion’ thread and someone replied (sorry on my phone so can’t find who did) and said IRA accounts for these bonds do not have Canadian taxes withheld. I asked because I’m buying the current crop of new Canadian banking bonds offered on TD site. FY, TD has a 3 YR maturity, 6% offering.
Tax is withheld on dividends, not interest, and as others noted, if you buy it in an IRA, it should not be withheld but YMMV among broker’s whether they process them correctly.
ENBA was weird in that it was a perpetual bond, which means that it fell in the gap between debt and equity, and was treated as debt for Canadian tax purposes, (so no withholding tax) but treated as equity for US tax purposes. (pays qualified dividends, though your broker may get this part wrong)
See page S-46
https://www.sec.gov/Archives/edgar/data/895728/000110465918023049/a18-8730_2424b5.htm
Canadian issues for the most part operate under a different set of rules, so the normal rules don’t really apply, and practically every Canadian issue other than your garden variety common stock has a quirk that is can be beneficial in some cases and not always harmful.
not perpetual, J…. 2078 maturity on ENBA
https://www.sec.gov/Archives/edgar/data/895728/000110465918023049/a18-8730_2424b5.htm
the maturity is a conversion date of the preference shares into common shares, so they had this caveat.
There is no authority that addresses the U.S. federal income tax treatment of an instrument such as the Notes that is denominated as a debt instrument but that provides for Automatic Conversion.
Enbridge believes, however, that the Notes should be treated as equity of Enbridge for U.S. federal income tax purposes
As if the Enbridge options on their preferred issues are not confusing enough… Interesting, J…. are you saying these have been treated as anything other than interest to date for withholding purposes? Obviously I’ve not owned these long……
they are weird in that they are treated as interest north of the border, but dividends south of the border, so best of both worlds.
qualified dividends, and no tax withholding.
When a brokered cd says restricted states, does that mean those states can buy or can’t? I can’t find this answer anywhere!
can’t buy if you live in those states.
I tried to buy some with ‘sky’ provisions which is not allowed in my state. Fido let me know I could not.