$61 billion in assets, Valley National Bank (VLY), has priced their new fixed rate reset preferred.
The issue prices at an initial coupon of 8.25% with a reset date in just over 5 years at the 5 year treasury plus a fixed spread of 4.182%. There after the issue is reset every 5 years.
The early redemption option starts on 9/30/2029. Redemption can occur only on a dividend payment date.
The pricing term sheet can be read here.
The Valley National 5.25 of ’30 sub debt is offered at 89.848. This will reset to term sofr plus 514 bps June 2025. This would seem to be a much better buy in the hope it’s paid off. I didn’t calc yield to call but spitballing it looks over 15%.
Comments?
Thank you!
I wonder how active the company has been in buying VLYPO on the market?
If only there were a way to find the answer:
lmgtfy.com
We felt that if this wasn’t gobbled up by North Jersey/Tri State offices what’s that tell you?
I think they’ll float it all and it will trade reasonably ok.
They must be issuing this to redeem VLYPO which is paying north of 9% and will continue to do so for however many months until rates go down. So this issue will simply lock in a known cost for 5 years for them. On the surface that seems reasonable.
Others mentioned the CRE/NY multi family thing. I am not sure but I get the feeling they are not as bad off as NYCB at their peak crisis point. They are slowly working their plan to right the ship.
So the question is.. will this bank survive? Will the bank continue to pay a common dividend giving a cushion? What will the fed reserve due over the next 3-12 months to help out the situation?
Part of me says this might be worth a small purchase.
And yet there’s not even a hint of them using proceeds to redeem anything no less VLYPO specifically….. It could happen, of course, but I wouldn’t count on it…. this is completely personal opinion based on nothing more than their Use of Proceeds statement
We estimate that the net cash proceeds to us from the sale of the Series C Preferred Shares will be approximately $ million (or approximately $ million if the underwriters’ option to purchase additional Series C Preferred Shares is exercised in full), after deducting underwriting discounts and commissions and estimated offering expenses. We intend to use the net proceeds from this offering for general corporate purposes and investments in the Bank as regulatory capital.
Our management will have broad discretion in the application of the net proceeds from this offering, and investors will be relying on the judgment of our management with regard to the use of these net proceeds. Pending the use of the net proceeds from this offering as described above, we may invest the net proceeds in short-term, investment-grade, interest-bearing instruments.
2wr,
My guess is they won’t call VLYPO with the proceeds from this.
I estimate a ~9% coupon for VLYPO. This new issue is 8.25%. After the cost of issuing the new one, maybe no savings from calling VLYPO. I recall from posts here on III that it’s only viable to call an issue with a new one when the new one’s coupon is at least 75 bps lower than the callable one. This case barely meets that criteria, and if/when VLYPO’s coupon drops (when SOFR falls), then even a tiny cost savings is vanished.
OK. My opinion has been total crap lately. I think i need to just log out of my brokerage account for a few weeks until something worth buying comes along. I will end up just doing something stupid.
If VLY is not redeeming O that is just more debt to pay which means they must be desperate somehow and need more cash on the books in case things get worse.
I hear that the $150M is not yet sold. Look for a discount?
$24.47 — pure excrement
https://www.otcmarkets.com/stock/VLYNV/overview
Af I like that the Link refers to the grey market and it says not able to quote a price and it gives several reasons, one of them being lack of investor interest!
WOW Tim; Thats one helluva coupon and quite the reset rate taboot. It makes me wonder how many warts lie beneath the surface???
The warts are actually pretty visible on this one. Enormous CRE exposure.
sounds like a junk rated issue.
Like it shows on the sheet– definitely not IG.