Tectonic Financial Announces High Yield Preferred

Texas banker Tectonic Financial has announced a new fixed-to-floating rate preferred.

The company will issue 1.5 million shares of a $10/share preferred with an initial coupon of 9%. Dividends are non-cumulative and should be qualified. The issue is unrated.

The coupon will be fixed until 5/14/2024 after which it will float at a rate of 3 month Libor plus a spread of 6.72%.

Shares will trade on the NASDAQ under ticker TECTP. Thus far no OTC Grey Market ticker has been announced.

Details of the new issue can be found here.

While we have not had a chance to look over Tectonic potential investors would be well advised to scrutinize the company’s financials. With a 9% coupon it should go without saying that the risk is elevated.

4 thoughts on “Tectonic Financial Announces High Yield Preferred”

  1. If they had an Egan Jones rating it would be the complete package.

    The prospectus is a horror show. Actually, it’s hard not to laugh when you read it. Most of the issue goes to repay debt owed to a director, and to fees. Why pay off the Series A at all? And no mention of price . Hmmmm. From a shareholders’ perspective it’s a dumb deal. Total self-dealing.

  2. Accordingly, we intend to use approximately $1.9 million of the net proceeds from this offering to repay in full the outstanding balance of our bank stock loan with a correspondent bank. The line of credit is secured by the outstanding shares of Bank common stock and bears interest at prime plus 0.75% (6.25% as of December 31, 2018), with principal and interest payable monthly, and matures in May 2028. We also intend to use approximately $8.0 million of the net proceeds from this offering to repurchase in full, as promptly as practicable following the completion of this offering and subject to the receipt any requisite regulatory approvals, our outstanding shares of Series A preferred stock. DCFH, as the sole holder of the Series A preferred stock, will be under no obligation to accept our repurchase offer, may require a higher repurchase price or may determine that it is not in DCFH’s best interest to accept our repurchase offer given the current interest rate on the Series A preferred stock. We intend to contribute the remaining proceeds (estimated at $3.3 million, or $5.5 million if the underwriters’ option to purchase additional shares is exercised) to the Bank to support its capital position…..
    That preferred they intend to retire is a 10%….With this 9% one…Nice bank stock loan they have…Prime plus .75%….Ouch.

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