Voya Financial Announces New Preferred Issue

Insurance and financial services company Voya Financial (NYSE:VOYA) has announced a new issue of perpetual non-cumulative preferred stock.

This issue will be marginally investment grade (a split rating) with a BBB- from S&P, a Ba2 from Moodys and BB+ from Fitch.

The company will sell 12 million shares and there will be no over allotment shares available.

The issue has priced at an initial coupon of 5.35%–the issue is a Fixed-Rate-Reset Non-Cumulative Preferred.

The coupon will reset starting 9/15/2029 at a rate of the 5 year treasury rate plus a spread of 3.21%.

9/15/2029 is also the date upon which the issue is first callable.

This issue will trade under the permanent ticker of VOYA-B when it begins to trade on the NYSE. Starting immediately the issue will trade on the OTC Grey market with the temporary ticker of VOYXL.

The preliminary prospectus is here.

The final pricing document is here.

17 thoughts on “Voya Financial Announces New Preferred Issue”

    1. Rated junk, deep due diligence would be required to see if it meets your risk tolerance. It doesn’t suit me.

    1. Quarterly contract adjustment payments equivalent to 5.50% per year will be made on the stated amount of $100 per Equity Unit, subject to Dominion Energy’s right to defer such payments.

  1. This yield is atrocious. If it was 100BPs higher, it would have been interesting to buy.

  2. Ok, this is a total ripoff…NI-B at least gave current 5 yr T Note yield plus kicker when par issued yield of 6.5% went to market. This one is flat out cheating one out of 25 basis points. I get it that anything yield is popping at issuance. But as one who studied the genesis of the Canadian resets and the cycle, and reading many a article…Americans do not get it yet…See Canadians a little over a half dozen years ago were offered the same thing..The initial low yield was not worrisome because yields would go higher and the T Note and kicker would result in higher yields down the road…Nadda, didnt happen, went the other way with even lower yields…This is why they are struggling now and way under par. Fool me once….American investors havent been hit with a crappy reset yield as these are new…This is why many Canadian issues now have “reset floors”. Always fighting last battle. But these are more desired price wise even though they offer little value considering how low the no floor resets have plunged. Just something to think about…Im betting Vola preferred wont be at $25 come reset time if 10 year is at 1.5%. And I dont mean higher either, lol.

    1. Grid –
      By cheating out of 25 basis rates, I assume you’re saying that if interest rates are identical 10 years down the road to where they are now, then when VOYA-B resets, it will reset from 5.35% to 5.10% right? That’s really crazy pricing given how historically low interest rates already are. And that’s not even counting how aggressive the pricing of 5.35% is today for a split rated perpetual preferred. It gives the holder absolutely no chance of resetting at a good price under any circumstances. As you and I have discussed, if interest rates go UP, then the value of the reset premium goes down because it becomes a smaller part of the overall equation. As an example, this issue is being priced at approximately 344 basis over current 5 year Treas. If 5 yr Treas were to go to 3.91% from today’s 1.91% then it’s most likely that the spread between Treas vs split rate preferreds such as Voya would most likely dramatically surpass the current 344 basis because spreads historically widen out as interest rates move up. The 321 basis premium would be relatively low in a world where base rates are 200 basis higher… That would mean it’s highly likely that in practically any interest rate environment, given today’s pricing that already forfeits 25 basis on reset, VOYA-B will not reset at a price that will bring it back close to par if it’s at a discount unless it’s being brought back from being at a premium. Your experience with ENB preferreds verifies that. Therefore, I agree – this looks like an easy pass unless one thinks VOYA is going to be an improving credit over the years

      1. 2WR, Great summary and a very much worthwhile read. Thinking further on the ENB preferreds, there does appears to be an emerging opportunity. As Bob-in-DE indicated, they are trading at a misery-inspiring discount for anyone who paid at or near par and since original issue been very much to the issuer’s advantage.

        EBGEF for example is currently trading at $19.02, a near 25% discount to par. For a new buyer though, this price comes packaged with an effective IG QID yield of a tad over 7%, which will be in place for another 4 1/2 years. A lot can happen in that time.

        If in 5 years FVX has collapsed, say to zero, the 2.82 kicker would indicate a price of maybe $15. If we can call this the worst case scenario and FVX didn’t go negative, the yield to reset which of course includes mark to market is still 3% (3.6% taxable equivalent). At that reset, at the kicker plus 0, the new yield would be 4.7%. One would expect significant price support at this level because if FVX is 0%, that 4.7% (5.875% taxable-equivalent) would be stellar.

        If for example purposes FVX stays level, at today’s 1.83%, a buyer at the current price will experience a 7% yield (8.75% taxable equivalent) for the next 4.5 years and a reset in 5 years to a yield of 6.10% (7.6% taxable equivalent) at par for the following 5 years. In a rising rate environment it would also be reasonable to assuming sentiment would push the price north as a bonus. That’s a home run.

        If FVX increases in 4.5 years to your example of 3.91%, the new yield would become 6.73% at par of 25. Even if EBGEF only recovered to say $23, the yield to reset in 4.5 years is a tad north of 11%. That’s a grand slam.

        Now in the first example of FVX going to 0%, no one is going to be jumping up and down over a $1.34 divvy that costs $0.89 in capital loss each year. Still though, mark to market, it is still profitable, though maybe less than the 3% (3.6% taxable equivalent) depending on one’s taxable posture.

        Equally important, there appears to be an important risk management/hedging mechanism here. While there’s been a recent doorway-jamming rush to enter the jaws of some of these lower priced perpetuals, there’s every possibility rates could do an about face in which case the exit doorway away from those issues will be similarly jammed.

        If rates do turn northward, any ENB-pfd price loss from now until that time will have been a very small insurance policy premium against the risk of higher rates. Though they do have the potential to be low yielding holds, the less obvious risk management/hedging component built into the ENB reset pfds may have a stellar ending. They do appear especially useful for hedging rate risk if also holding well-priced/over-priced sock drawer perpetuals.

    2. Grid – you have to stop informing the people! You are right about Americans not getting Canadian style resets. The value of the option on a 5 year reset is much greater than the value of the option on a typical US Libor based F2F issue. And all of the value of the option belongs to the ISSUER.

      This is exactly why one sees many Cdn prefs trading at huge discounts to par.

      Learn bond math, folks, and know the risks you take.

      1. Bob, generally the US F/F after first call date, are callable within 30 days or quarterly on issues that I am familiar with. Canadian resets can only be redeemed at every 5th year anniversary so that is a unique difference. Generally most US F/F have been historically issued with high kickers in 4-7% ish range. Things are changing and they will need to understand the impact of a low kicker in conjunction with a low T Note (or low Libor, or replacement).
        I know you know this but the math is painful. For my invest purchases 25 basis points on any issue isnt going change my actual dividends received in any meaningful way. But it has meaningful impact on a value of a preferred. Losing 25 basis points on 6% par on $1000 worth of a preferred results $2.50 a year less in dividends. But a market repricing a $25 par 6% to needing 6.25% would result in the $25 issue sinking to $24. That is more noticeable. 🙂

    3. love to have a list of those reset bonds below par. I think you have had some american adjustable ones below par as well such as bank of america. Its a catagory that suits my investment style very well. I mainly pick through the newer ones because of lack of info. 10 year limit, adjustable, convertable and maybe some speculative.

  3. The speed with which issues are pricing (not to mention the low coupons) tells one the temperature of the market.

    I am only buying new issues to flip; I’ve no real interest in a 5.35% perp from a semi-IG issue.

    Continue to build cash while waiting for fairer investment weather.

    1. Bob-in-DE—couldn’t agree with you more. I am even having trouble leaving ‘sock drawer’ issues in the drawer–hard to resist selling.

        1. I agree with everyone that VOYA preferred, despite QDI is a ridiculously low coupon. Just one Fed raise sometime down the road or 2.5% inflation would see VOYA 5.35% melt into $24.xx region. Trying to get 200 shares of AMAHP @$25.35, probably would never get filled. Act too slow. But that is okay. I am actually close to fully invested. I I called Vanguard fixed income on the Dominion Energy Preferred. Apparently this is a convertible to 1.1267 shares of D common. Dominion Energy is a huge utility unlikely to fail, but it has unnaceptable IMHO volatility. So, AMAHP or nothing for me. I thank Tim and everyone. Doug Le Du alerts new issues without any details on the coupon and terms. He started this service only in response to Amy’s suggestions on improvement. I continue to subscribe to him because his “engine” tracking all preferreds/ETDS with some details. LOL.

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