Ladenburg Thalmann Financial Services: This 6.50% Baby Bond Started Trading On The AMEX

| About: Ladenburg Thalmann (LTS)

Summary

Overview of Ladenburg Thalmann Financial Services' new baby bond - LTSL.

Brief view of the company.

Comparison with the sector.

Introduction

In this article, we want to present a new Baby Bond issued by Ladenburg Thalmann Financial Services (NYSE: LTS).

Our goal is purely to inform you about the product while refraining ourselves from an investment recommendation. Even though the product may not be of interest to us and our financial objectives, it definitely is worth taking a look at.

The New Issue

Before we submerge into our brief analysis, here is a link to the 424B5 Filing by Ladenburg Thalmann Financial Services - the prospectus.
Source: SEC.gov

For a total of 2.9M notes issued, the total gross proceeds to the company are $72.5M. You can find some relevant information about the new baby bond in the table below:

Source: Author's spreadsheet

Ladenburg Thalmann Financial Services 6.50% Senior Notes Due 2027 (NYSE: LTSL) pay an interest at a rate of 6.50%. The new issue has no Standart&Poors rating but it is expected to be assigned an "A-" by Egan-Jones Ratings Co. LTSL is callable as of 11/30/2020 and maturing on 11/30/2027. LTSL is currently trading at a price of $24.44 and has a 7.34% Yield-to-Call and a 6.81% Yield-to-Maturity. The interest paid by this baby bond is not eligible for the preferential 15% to 20% tax rate. This results in the "qualified equivalent" YTC and YTM sitting around 6.11% and 5.68%, respectively.

Here is the product's Yield-to-Call curve: Source: Author's spreadsheet

The Company

Ladenburg Thalmann Financial Services Inc. (NYSE American: LTS, LTS PrA) is a publicly traded diversified financial services company based in Miami, Florida. Ladenburg’s subsidiaries include industry-leading independent broker-dealer firms Securities America, Inc., Triad Advisors, Inc., Securities Service Network, Inc., Investacorp, Inc., and KMS Financial Services, Inc., as well as Premier Trust, Inc., Ladenburg Thalmann Asset Management Inc., Highland Capital Brokerage, Inc., a leading independent life insurance brokerage company, and Ladenburg Thalmann & Co. Inc., an investment bank which has been a member of the New York Stock Exchange for 135 years. The company is committed to investing in the growth of its subsidiaries while respecting and maintaining their individual business identities, cultures, and leadership.

Since its establishment, Ladenburg Thalmann has maintained traditions based on the importance of long-term relationships, integrity, and the highest level of service. These traditions, coupled with the ease and accessibility of employees at all levels, further emphasize Ladenburg Thalmann's commitment to achieving outstanding results for our clients.

As a firm which straddles three centuries with professional vision and vitality, it looks forward with great anticipation to the challenges and opportunities of the new millennium.

Source: The company's website - Company Overview

Below, you can see a price chart of the common stock, LTS:

Source: Tradingview.com

In September 2017, the Company began a quarterly cash dividend on its common stock. During the three months ended September 30, 2017, the Company initiated payment of a quarterly dividend of $0.01 per share on its outstanding common stock. The Company paid dividends of $1,962 on its common stock during the period.

In addition, with a market capitalization of $644M, LTS is one of the smallest national investment brokerages.

Capital Structure

Below you can see a snapshot of Ladenburg Thalmann Financial Services' capital structure as of its last Quarterly Report in September. You can also see how the capital structure evolved historically.

Source: Company's Balance Sheet - Morningstar.com

The LTS Family

Except for the newly listed senior notes, LTS has one outstanding preferred stock - Ladenburg Thalmann Financial Services 8.00% Series A Cumulative Preferred Stock (NYSE: LTS-A). In the table below, there is some information about LTS-A:

Source: Author's spreadsheet

Sector Comparison

Issuing a baby bond is not something that happens very often from an investment brokerage company. There are currently 5 outstanding baby bonds (JMPC, JMPB, BGCA, COWNL, and SFB) issued by an in investment brokerage company, most of which have a negative Yield-to-Worst (they are all callable). An exception is made by SFB, which was recent IPO (You can check the article about it by clicking the link - Stifel Financial Corp: This 5.20% 'Baby Bond' Started Trading On The NYSE). That is why in the chart below, I compare LTSL with all preferred stocks and baby bonds issued by an investment brokerage company which pay a fixed distribution:

Source: Author's database

Fixed-Rated Baby Bonds

The next chart contains all baby bonds that pay a fixed interest, have a maturity date in 5 to 15 years and have a positive Yield-to-Call.

Source: Author's database

If we have a closer look:

Source: Author's database

Special Considerations

Nothing out of the ordinary.

Use of Proceeds

e plan to use the net proceeds from this offering for general corporate purposes. Pending their use, we intend to maintain the net proceeds in interest-bearing, short-term, marketable investment grade securities or money market accounts or (interest or non-interest bearing) checking (or escrow) accounts.

Source: 424B5 Filing by Ladenburg Thalmann Financial Services

Conclusion

While our goal is to merely keep the investment crowd informed, in case anyone has missed this preferred stock, and LTSL is unlikely to find a spot in our own portfolio, we do not dismiss it by any means.

This is a purely informational article.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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