South Jersey Industries to Sell Long Dated Baby Bonds

Regulated natural gas utility South Jersey Industries (NYSE:SJI) has announced the offering of some Jr Subordinated Notes (baby bonds).

The issue will have a maturity date way out in 2079 with an early redemption period starting in 2024. The issue will have the ability to have interest payments deferred for up to 40 consecutive quarters without a default occurring. While we don’t like these kind of stipulations they are not unusual in utility issues.

Being baby bonds the interest payments are not qualified distributions. I am not seeing a rating at this moment on the new offering, but Moodys has some secured debt at A1–the new offering is NOT secured debt.

This issue will not trade on the OTC grey market prior to big board trading, but occasionally with a call to your broker you may be able to pick up shares prior to official trading.

The preliminary prospectus can be read here.

A shout out to Eugene and mcg who noted this one within 2 minutes of when I saw the announcement. mcg has posited an estimated coupon of 5.675-5.75%ish.

14 thoughts on “South Jersey Industries to Sell Long Dated Baby Bonds”

  1. Will these bonds be like the CMS and DTE baby bonds that allow up to 10 years (40 quarters) of suspended interest payments? If so, count me out.

    1. Yes, garbage bonds, 10 years of suspended payments before a default and no hope of seeing your money back.

      1. This is why these are considered “preferred stock” instead of bonds even though its technically debt. Unlike true capital stock preferreds the company can write off the interest expense here. But the suspension option (if ever needed) acts as a perferred stock. So it really is what it is if viewed in proper context. It isnt like they can just defer. The common stock and capital preferreds would have to be suspended also. I am in no way advocating this issue as I am not a player here myself.
        I appreciate the concern, but I dont personally get worked up over the clause, as I dont generally invest in high risk issues and also accept the fact it is deeply subordinated in the cap stack.

        1. Deferral isn’t always bad.
          OSBCP was trading around 5 bucks during their deferral when they announced the resumption of interest payments and a 3.62 payment to catch up.
          And the market was behind on it, as it didn’t trade up for about a week, so some lucky people bought it at 5-6 a share, made over 15 dollars in cap gains, and got the $3.62 interest payment to boot.

  2. While revenue has increased steadily for this company the past few years, earnings look like crap… Will have to dive into this one more before making a buy.

    1. Newman–that is an area I have avoided thus far. There are quite a few equity units out there, but we lack enough time to due the correct level of DD.

      1. Thank You Mr McPartland.
        I put in a bid at 52.60 and quickly cancelled it as i read further on QOL.
        I prefer the simpler preferred issues only.

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