Preferred Stocks And Baby Bonds: Redeemed Issues

Summary

• Brief coverage of four recent preferred stock and baby bond redemptions.
• A glimpse at how they traded and how the companies refinanced, if they did.
• List of products by the same issuers which are still outstanding.
• This idea was first discussed with members of my private investing community, Trade With Beta. To get an exclusive 'first look' at my best ideas, start your free trial today >>

Introduction

There is no incredible value created by the series of articles covering fixed income products whose Call Option was finally, or perhaps timely, exercised by the issuing company. However, it turns out that not all of us have the resources and time to keep track of their portfolio, thus we are continuing our coverage of these events.

Santander Holdings USA - SOV-C

• Redemption: Santander Holdings USA, 7.30% Dep Shares Series C Non-cumul Perp Preferred Stock (SOV.PC)
• Original Call Date: 5/15/2011
• Call Date: 8/15/2018

Also, today SHUSA announced that its Board of Directors approved the redemption of all outstanding shares of the Series C Preferred Stock, and all outstanding shares of the related depositary shares, each representing a 1/1000th ownership interest in a share of Series C Preferred Stock ("Depositary Share").

...

The Series C Preferred Stock will be redeemed on August 15, 2018.

^{Source: PRNewsWire.com - SOV-C Redemption Press Release}

Below you can see a chart of SOV-C's last days on the exchange:

^{Source: Barchart.com - SOV-C Daily Chart (6 months)}

We previously brought your attention to this one as it could have been a good addition to a "pinned to par" income portfolio, but it never really gave anyone the chance to buy the dip and give it a shot.

After this one and several other issues were redeemed by Santader (SAN), the following products remain available:

- Santander Finance Preferred, Float Rate Non-cumul Guar Series 6 Preferred Stock (SAN.PB)

The preferred above was recently removed from the iShares US Preferred Stock ETF (PFF).

Wells Fargo - WFC-J

• Redemption: Wells Fargo & Co., 8.00% Dep Shares Non-cumul Perp Cl A Preferred Stock Series J (WFC.PJ)
• Original Call Date: 12/15/2017
• Call Date: 9/17/2018

Wells Fargo & Company (NYSE: WFC) today announced it will redeem on September 17, 2018 of all of its 8.00% Non-Cumulative Perpetual Class A Preferred Stock, Series J, and the corresponding depositary shares, each representing a 1/40th interest in a share of Series J Preferred Stock.

...

Because the redemption date is also the dividend payment date, the redemption price does not include declared and unpaid dividends. Regular quarterly dividends in the amount of $20.00 per share of Series J Preferred Stock, or $0.50 per depositary share, will be paid separately in the customary manner on September 17, 2018 to holders of record at the close of business on August 31, 2018

^{Source: BusinessWire.com - WFC-J Redemption Press Release}

The way WFC-J traded over the last week kind of suggested that this kind of event comes with a relatively heightened probability, especially since the iShares US Preferred Stock ETF (PFF) was not adding to its position in it. And the fund really was on a buying spree in terms of preferred stocks.

With a market price lurking around the $25.70 level, this one was definitely of interest as a dividend capture addition due to the lucrative yield and the Call Risk sitting at no more than $0.20 per share.

^{Source: Barchart.com - WFC-J Daily Chart (6 months)}

However, Lady Luck was not with the speculators this time and now we are left with the following list of products issued by Wells Fargo (WFC):

- Wells Fargo & Co., 5.125% Dep Shares Non-Cumul Perp Preferred Stock Series O (WFC.PO)

- Wells Fargo & Co., 5.20% Dep Shares Non-cumul Perp Cl A Preferred Stock Series N (WFC.PN)

- Wells Fargo & Co., 5.25% Dep Shares Non-Cumul Perp Preferred Stock Series P (WFC.PP)

- Wells Fargo & Co., 5.50% Dep Shares Non-Cumul Class A Preferred Stock Series X (WFC.PX)

- Wells Fargo & Co., 5.625% Dep Shares Non-Cumul Class A Preferred Stock Series Y (WFC.PY)

- Wells Fargo & Co., 5.70% Dep Shares Non-Cumul Class A Preferred Stock Series W (WFC.PW)

- Wells Fargo & Co., 5.85% Dep Shares Fixed/Float Non-Cumul Perp Pfd Stock Ser Q (WFC.PQ)

- Wells Fargo & Co., 6.00% Dep Shares Non-Cumul Class A Preferred Stock Series T (WFC.PT)

- Wells Fargo & Co., 6.00% Dep Shares Non-Cumul Class A Preferred Stock Series V (WFC.PV)

- Wells Fargo & Co., 6.625% Dep Shares Fixed/Float Non-Cumul Perp Pfd Stock Ser R (WFC.PR)

- Wells Fargo & Co., 7.50% Non-Cumul Perp Conv Cl A Preferred Stock, Series L (WFC.PL)

As you can note, the yield spread between WFC-J and the other issues is rather huge. Only WFC-L gets close, but it is a Convertible.

Bank of America - BAC-D & BML-I

BAC-D was the victim of a partial redemption back in June and now the guys from Bank of America (BAC) have decided to finish it off, while BML-I is fully redeemed in one go.

• Redemption: Bank of America, 6.204% Dep Shares Non-Cumulative Preferred Stock, Series D (BAC.PD)
• Original Call Date: 9/14/2011
• Partial Call Date: 6/14/2018
• Call Date: 9/14/2018

All 7,588,595 Series D Depositary Shares outstanding will be redeemed on the dividend payment date on September 14, 2018...

^{Source: BusinessWire.com - BAC-D Redemption Press Release}

Here is a chart of BAC-D which shows how it traded around the partial call and afterwards:

^{Source: Barchart.com - BAC-D Daily Chart (6 months)}

BML-I is the second preferred stock which bit the dust on the 26^th:

• Redemption: Bank of America, 6.375% Dep Shares Non-cumul Preferred Stock, Series 3 (BML.PI)
• Original Call Date: 11/28/2010
• Call Date: 8/28/2018

...and all 26,127,328 Series 3 Depositary Shares outstanding will be redeemed on the dividend payment date on August 28, 2018...

^{Source: BusinessWire.com - BML-I Redemption Press Release}

As the chart below illustrates, someone was betting big that it would not get redeemed right now:

^{Source: Barchart.com - BML-I Daily Chart (6 months)}

After these two products are out, we are left with the following issues by Bank of America:

- Bank of America Corp., 5.875% Dep Shares Non-Cumul Preferred Stock Series HH (BAC)

(BAC-K is a recent IPO and was briefly covered by us in this article)

- Bank of America Corp., 6.00% Dep Shares Non-Cumulative Preferred Stock Series GG (BAC.PB)

(BAC-B is a recent IPO and was briefly covered by us in this article)

- Bank of America, 6.00% Dep Shares Non-Cumulative Preferred Stock Series EE (BAC.PA)

- Bank of America, 6.20% Dep Shares Non-Cumulative Preferred Stock Series CC (BAC.PC)

- Bank of America, 6.50% Dep Shares Non-Cumulative Preferred Stock Series Y (BAC.PY)

- Bank of America, 6.625% Dep Shares Non-Cumulative Preferred Stock Series W (BAC.PW)

- Bank of America, 7.25% Non-Cumulative Convertible Preferred Stock, Series L (BAC.PL)

- Bank of America, Floating Rate Dep Shares Non-cumul Pfd Stock Series 1 (BML.PG)

- Bank of America, Floating Rate Dep Shares Non-cumul Pfd Stock Series 2 (BML.PH)

- Bank of America, Floating Rate Dep Shares Non-cumul Pfd Stock Series 4 (BML.PJ)

- Bank of America, Floating Rate Dep Shares Non-cumul Pfd Stock Series 5 (BML.PL)

- Bank of America, Floating Rate Dep Shares Non-cumul Preferred Stock, Series E (BAC.PE)

- Merrill Lynch Capital Trust I, 6.45% Trust Preferred Securities (MER)

- ML Depositor 6.0518% IndexPlus Trust Series 2003-1 due 5/15/2033 (IPB)

WhiteHorse Finance - WHFBL

• Redemption: WhiteHorse Finance, 6.50% Senior Notes due 7/31/2020 (WHFBL)
• Original Call Date: 7/31/2016
• Call Date: 8/9/2018

...The Company intends to use the net proceeds from this offering, together with cash on hand, to redeem all of its 6.50% Senior Notes due 2020.

^{Source: PRNewsWire.com - WHFBL Redemption Press Release}

This baby bond was a small and relatively illiquid issue therefore not exactly a subject of interest to most of us, especially with given that the yield was not exactly lucrative.

Below you can see a chart showing its final days of trading:

^{Source: Barchart.com - WHFBL Daily Chart (6 months)}

Currently there are no other issues by WhiteHorse Finance (WHF) outstanding.

Conclusion

There is no incredible value provided by these articles except keeping track of the big shuffle in the preferred stock universe which, albeit the small pause in early 2018, has been going on full steam ahead. What is more interesting is that banks have been increasingly active since April.

Having this in mind, it would be wise for every single one of us to do a portfolio revision and acquaint himself with which holdings might be the subject of a Call Option exercise. Once you know this, you can easily figure out whether there is a better product available or you are comfortable with waiting until it is stripped away.

Analyst’s 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.

Comments

[AlieGee]

Thanks for the update.
Glad to see WFC and BAC calling in higher rate pfds.

[Gridbird]

AT, I will be very pleased come next months call review article you arent writing about my AILLL, ASRVP, or HE-U being redeemed. I would not be happy about that!

[GARAK]

You've improved this list and made it more helpful to me by including the original call date plus a few other tidbits. Thanks, and please keep it up!

[Retired Income Seeker]

Very informative. Thanks a lot!