New offering summaries:
M&T Bank Corporation (MTB) priced an offering of $750 million worth of new series J non-cumulative preferred stock, offering a fixed dividend rate of 7.5%. The new shares were rated by all four of Moody’s, S&P, Fitch, and DBRS, at Baa3, BB+, BBB- and BBB, respectively. The new shares traded temporarily on the OTC under symbol MTDJV before moving to permanent symbol MTB-J on the New York Stock Exchange.
Citizens Financial Group (CFG) priced an offering of $400 million worth of new series H non-cumulative preferred stock, offering a fixed dividend rate of 7.375%. The new shares were rated Baa3 (albeit with negative outlook), BB+, and BB by Moody’s, S&P, and Fitch, respectively. The new shares traded temporarily on the OTC under symbol CFGPV before eventually moving to permanent symbol CFG-H on the New York Stock Exchange.
AG Mortgage Investment Trust (MITT) priced an offering of $65 million worth of new 9.5% (fixed-rate) exchange traded senior notes due 2029. The notes are callable at the company’s option in May of 2026. A credit rating of BBB- was assigned by Egan-Jones Ratings Company. The new notes traded on the New York Stock Exchange under symbol MITP.
Chimera Investment Corporation (CIM) priced an offering of $65 million worth of new 9% (fixed-rate) exchange traded senior notes due 2029. The company indicated that a portion of the proceeds will go towards the acquisition of mortgage assets including residential mortgage loans, non-Agency RMBS, Agency RMBS, and Agency CMBS. The notes are callable at the company’s option in May of 2026. The new notes trade on the New York Stock Exchange under symbol CIMN.
Southern California Edison, part of Edison International (EIX), priced an offering of $350 million worth of new trust preference shares, offering a fixed dividend rate of 6.95%. The new shares were rated Baa3, BB+, and BBB- by Moody’s, S&P, and Fitch, respectively. The new shares are trading temporarily on the OTC under symbol SCEXP before eventually moving to permanent symbol SCE-N on the New York Stock Exchange.
Of the various offerings summarized above, one of them, SCE-N, achieved a perfect CDx3 Compliance Score. 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.
SEC filings for further information: MTB-J, SCE-N, CFG-H, MITP, CIMN
Buying new shares for wholesale
Preferred stock IPOs often involve a temporary period during which OTC trading symbols are assigned until these securities move to their retail exchange, at which time they will receive their permanent symbols. For example the new M&T Bank preferred discussed above, which initially traded under symbol MTDJV on the OTC:
Individual investors, armed with a web browser and an online trading account, can often purchase newly introduced preferred stock shares at wholesale prices just like the big guys (see “Preferred Stock Buyers Change Tactics For Double-Digit Returns” for an explanation of how the OTC can be used to purchase shares for discounted prices).
Those who have been following this strategy of using the wholesale OTC exchange to buy newly introduced shares as close to $25 (or less) as possible are more able to avoid a capital loss if prices drop (if they choose to sell). Note that in the case of the new M&T Bank preferred, on 5/8/2024 shares were changing hands around $25.03; as of this writing MTB-J is trading at $25.40.
Your broker will automatically update the trading symbols of any shares you purchase on the OTC, once they move to their permanent symbols. A special note regarding preferred stock trading symbols: Annoyingly, unlike common stock trading symbols, the format used by exchanges, brokers and other online quoting services for preferred stock symbols is not standardized.
For example, a given Series A preferred stock might have a symbol ending in “-A” at TDAmeritrade, Google Finance and several others but this same security may end in “PR.A” at E*Trade and “.PA” at Seeking Alpha. For a cross-reference table of how preferred stock symbols are denoted by sixteen popular brokers and other online quoting services, see “Preferred Stock Trading Symbol Cross-Reference Table.”
Past preferred stock IPOs below par
In addition to covering new preferred stock and ETD offerings, here at CDx3 we also track past offerings, with alerts when securities fall below their par values. Year-to-date, we have seen many such par crossings, with the CDx3-compliant “basket” trading at a discount to par of approximately 4.7% as of this writing. Current market yields offered by CDx3-compliant preferreds have generally trended upward on a year-to-date basis, from lows around 6.1% in January to a current level of 6.44% as of this writing:
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 here at CDx3 Notification Service 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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