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 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.