Tsakos Energy Navigation Prices Fixed-to-Floating Preferred

As we expected Tsakos Energy Navigation (NYSE:TNP) has priced their new fixed-to-floating rate preferred at a sky high 9.50% initial coupon.  They are selling 5.4 million shares plus 810,000 overallotment shares.

The pricing on the new issue can be found here.

The initial coupon remains in place until 2028 at which point it floats at a rate of 3 month Libor plus a spread of 6.54%.

As noted yesterday TNP has 4 preferred issues outstanding.  Our reader Andrew C notes that the TNP-C issue has a failure to redeem clause.  The TNP-C issue which becomes redeemable on 10/30/2018 has a failure to redeem penalty rate kicks in after 10/30/2020 at a rate of 1.25 times the 8.875% coupon.  Prior to 10/30/2020 there is a penalty rate of 1.25 of the 8.875% coupon if certain covenants are broken.

The 8% TNP-B issue which becomes redeemable next month (July 30, 2018) has the same failure to redeem clause.  This means on 7/31/2019 the rate on the issue will go to 10%.

Given the large size of the new issue we believe the company will redeem 1 or both of these issues once they become redeemable.

 

15 thoughts on “Tsakos Energy Navigation Prices Fixed-to-Floating Preferred”

  1. I have written extensively about the FTR clause and the reasons why its value is way overrated at best and valueless at worst. I utilized TNP preferreds, among others as examples to prove my POV, citing price performance of the preferreds containing the FTR alongside the performance of its preferreds that did not contain the FTR. My conclusions were born out by real prices not hypotheticals.

    https://www.smashwords.com/books/view/669667

    1. Hi Norman–I let this message through as I think you have a lot to contribute, but please limit your ‘advertising’ for your books etc. Thanks much Tim

    2. Norm – I see that you have not published any recent articles on Seeking Alpha. Do you expect to return there anytime in the near future?

  2. I picked up some of the C-series shares today on the rationale that they should be priced at least one dividend payment above par. I’ll give back 25 basis points if they get called in October or the higher payment going forward if they don’t.

    1. What impact on one’s taxes does it have to hold something like this from a foreign company? Is this situation easily handled by tax prep software like Turbotax?

      Seeing some interest in small amounts of these preferreds, but not if it comes at the cost of tax season headaches.

  3. Hey G…holding TNP-D shares in two tax deferred accounts has had no impact at all that I can discern. No fees charged, no foreign taxes paid on dividends.

  4. Hello G
    I have held the C and D series in taxable accounts for 3 years with no tax -time troubles.

      1. G, I currently hold the C, D, and E series. I could buy more D because of a shorter time to call, or more E. I’m looking at the new F series.

  5. I spent some time the over the weekend reading the transcript from the last TNP earnings call. A couple of analysts asked questions about what was planned for the preferred series B & C, and from the answers its sounded (to me) like the B-series will not be redeemed until July 2019 with the C-series redemption pushed back until Oct 2020. It seems the failure to redeem deadline is being used as a de facto maturity date, which is fine with me.

    1. Hi CW,

      I subscribe to Richard Lejeune’s service and he follows TNP. I asked him if he thought that there was a fair chance of the B and C getting called well before the FTR dates and he said that he would not be surprised if they did call the B and C well in advance of the 2019/2020 FTR deadline.

      I hope not.

      1. Hi Amy, this is the exchange between the TNP CEO and an analyst during the June 15 earnings call that led me to conclude that the B-series will be redeemed in 2019 and the C-series in 2020.
        ————————————————————————————-
        Fotis Giannakoulis
        Yes. Hi, Nick. I also want to ask about your capital allocation, your – how comfortable do you feel with your liquidity? I know that you want to have plenty of cash in your balance sheet for opportunistic acquisitions. Given the fact that you have to, I mean, plan to repay back the two prefers, which is $100 million, and you have also some equity to contribute for the new buildings, what are the sources of liquidity that you can have and if you would consider of raising any external capital?

        Nikolas Tsakos

        Well, I mean, as I said, our intention is – we have two preferreds. The first one will be repaid, I think, within 2019; the second is during October 2020, and we’re planning to, has a priority to repay those preferreds, or at least to refinance them. In the market, as you know our preferreds have performed very, very, very well, and they’re performing very well, because we have a very constant dividend from that side.
        —————————————————————————————

        1. Hi CW,

          Yes, I had read that (as did Richard) but R still did make the comment that they could easily call them earlier. …i.e…..that they have plenty of cash to do so…..but my personal (uneducated) opinion is that they won’t and that they will pay until the FTR date. Let’s hope so.

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