New offering summaries:
Two new ETDS began trading in March, and interestingly both of them achieved perfect CDx3 Compliance Scores. Long-time readers of our Seeking Alpha articles may already be familiar with our compliance scale and what it means to rank 10 out of 10, but for those readers who may be new to CDx3 compliance as a framework for selecting quality preferred stocks, the following elements must match or exceed our target: dividend rate, time until call date, cumulative unsuspended quarterly dividend, investment grade credit rating, US issuer, non-convertible, prospectus availability, and $25 par value.
Retirement services company Athene — formerly ATH, now part of Apollo Global Management, Inc. (APO) – priced an offering of $500 million of new 7.25% fixed-rate reset junior subordinated debentures due 2064. The new debentures offer a coupon of 7.25% for the first five years, after which the debentures can be redeemed at the issuer’s option; but if not redeemed, the coupon at that point resets to the then-current Five-Year US Treasury yield plus a spread of 2.986%. The new debentures were rated Baa2, BBB, and BBB- by Moody’s, S&P, and Fitch respectively. Trading has begun on the New York Stock Exchange under symbol ATHS, where the debentures have thus far been trading above par, with a recent price as of this writing of $25.45.
Alternative asset manager TPG Inc. (TPG) priced an offering of $400 million worth of new 6.95% fixed-rate junior subordinated notes due 2064. The new notes may be optionally redeemed by the company starting five years from issuance. Credit ratings by Moody’s, S&P, and Fitch were Baa1, BBB-, and BBB- respectively. The new notes trade on the Nasdaq under symbol TPGXL, and last changed hands nicely above the offering price, at $26.26 as of this writing.
And notable in the “on-deck circle” is internally managed Business Development Company (BDC) Trinity Capital Inc. (TRIN), which priced an offering this week of $100 million worth of new 7.875% notes due 2029; the company may redeem them at its option in March of 2026 (this short time until callable date means the new notes are not CDx3 Compliant). The new notes were rated BBB by both Egan-Jones and Morningstar, and the company intends to list the notes within 30 days from settlement, under symbol TRINZ on the Nasdaq.
SEC filings for further information: ATHS, TPGXL, TRINZ
Past preferred stock IPOs below par
In addition to covering new preferred stock and ETD offerings, we also track past offerings, with alerts when securities fall below their par values. Year-to-date, the basket of CDx3-compliant preferred stocks and ETDs (i.e. scoring 10 out of 10 on our compliance scale), is off to a strong start, narrowing the discount to par value to a current 2.2%.
Yield on the CDx3-compliant basket has come down somewhat as the basket price rose, with current yield starting the year around 6.24%, and sitting at approximately 6.19% as of this writing. The yield was also impacted slightly by changes to the basket itself, with the two new additions during March covered above (ATHS and TPGXL).
We track when different preferred stocks and exchange-traded debt securities become available below par in market trading, and to close this article, we would like to share with you some of the most recent dips/crosses below par we have observed among individual securities (note that yellow highlighted entries indicate highly rated securities eligible for the “CDx3 Bargain Table”):
For those preferred stock (and ETD) investors interested not just in new IPOs but previously issued securities, following par crosses can provide useful insight into which securities have recently become available in the marketplace below their initial offering prices.
Investor Takeaway
In our monthly Seeking Alpha articles, we typically summarize all the new preferred stock and exchange-traded debt offerings observed over the course of the month; we also highlight past offerings that have begun to trade below par value. Our goal is to keep fixed-income investors up-to-date on the various investments available in the current marketplace, and we hope this month’s article has served this purpose. See you next time, and thanks for reading!
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