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MFA Financial Inc.: Another mREIT's Fixed-To-Floating Preferred Stock IPO

Mar. 06, 2020 1:27 PM ETMFA Financial, Inc. (MFA)3 Comments

Summary

  • MFA Financial's new preferred stock, MFA-C, is the fourth fixed-to-floater for the past month.
  • The new IPO is currently trading at 1.4% discount.
  • MFA is one of the relatively large mortgage REITs.
  • Sector Comparison.
  • Where in the context of all Fixed-to-Floating preferred stocks does MFA-C stand?
  • I do much more than just articles at Trade With Beta: Members get access to model portfolios, regular updates, a chat room, and more. Get started today »

Introduction

While we are in a pretty volatile environment where the equity market and the fixed-income securities move a few percent up and down due to fear of the new coronavirus, companies continue to launch their new issues. For the last month, from a total of 10 fixed-income securities issues, 4 are fixed-to-floaters and except the newly issued MFA Financial, Inc. (NYSE:MFA) Fixed-to-Floating Preferred Stock IPO, 3 more mREITs presented their new IPOs - NRZ-C, AGNCP, and DX-C. In this article, we want to shed light on the newest fixed-to-floating preferred stock. Our main goal is to acquaint market participants with every new fixed-income security that shows up on the exchange, to see how it holds up against its peer group, and to determine whether it will find its place in our portfolio or if there is a better alternative.

The New Issue

Before we submerge into our brief analysis, here is a link to the 424B5 Filing by MFA Financial Inc - the prospectus.

Source: SEC.gov

For a total of 11M shares issued, the total gross proceeds to the company are $275M. You can find some relevant information about the new preferred stock in the table below:

Source: Author's spreadsheet

MFA Financial, Inc 6.50% Series C Fixed-to-Floating Rate Cumulative Redeemable Preferred Stock (NYSE: MFA-C) pays a fixed dividend at a rate of 6.50% before 03/31/2025 and then switches to a floating rate dividend at a rate of three-month LIBOR plus a spread of 5.345%. The new issue bears no S&P rating, pays quarterly dividends, and is callable as of 03/31/2025. MFA-C began trading on the NYSE after it was previously trading on the Grey market under the temporary ticker symbol MFABO. The last reported market price of the new IPO is $24.65, meaning it has a 6.59% Current Yield and a YTC of 6.85%. The dividends paid by

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This article was written by

Arbitrage Trader profile picture
13.43K Followers

Day trader whose strategy is based on arbitrages in preferred stocks and closed-end funds. I have been trading the markets since I started my education in Finance. My professional trading career started right before the big financial crisis of 2008-2009 and I clearly understand what are the risks the average investor faces. Being a very competitive trader I have always worked hard on improving my research and knowledge. All my bets are heavily leveraged(up to 25 times) so there is very little room for mistakes. Through the years my approach has been constantly changing. I started as a pure day trader. Later I added pair trades. At the moment most of my profits come from leveraging my fixed income picks. I find myself somewhere in between a trader and an investor. I am always invested in the markets but constantly replace my normally valued constituents with undervalued ones. This approach is similar to rebalancing your portfolio and I just do this any time there is some better value in the markets. I separate my trading results from my trading/investment results. I target 40% ROE on my investment account and since inception in 2015, I am very close to this target.


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Comments (3)

Dollarman1971 profile picture
Thanks for the article. The debt concerns me. Debt is fine ... until it isn't.
MicroValue profile picture
Arbitrage trader. NRZ's preferreds seems safer but what about NRZ's MSR portfolio? With rates under 1%, this could easily be decimated by refinancing. MSRs are a huge % of NRZ's book value.
sc21 profile picture
micro
that is why MN bought into the origination business. relax and enjoy.
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