LTSH - First Look At The Ladenburg Thalmann Financial Services PFD A

2023-12-15 08:30:00 ET

Summary

• Ladenburg Thalmann Financial Services Inc. is a diversified financial services company in the US. The company operates as a subsidiary of AG Intermediate Corporation and provides various financial services.
• A brief overview of the Issuer and preferred stock is provided. The four Notes are also mentioned and compared to the preferred.
• The preferred stock of Ladenburg Thalmann Financial Services Inc. is not recommended for investment due to its high risk and lack of financial information.

Introduction

For the last several years, the name Ladenburg Thalmann Financial Services has popped up in various financial stories and not always in a positive light. Since I do not analyze companies in depth, a better approach in researching this company was to see if the Ladenburg Thalmann Financial Services Inc. PFD SER A % (LTSA) itself might fit into my fixed income ladder. This is the first Seeking Alpha review of this preferred stock, and after completing my review, I can understand why, but knowing what most investors might want to avoid is valuable information.

If Seeking Alpha allowed a AVOID rating, I would have chosen that but the closest would be a Strong Sell rating except for high risk investors.

Ladenburg Thalmann Financial Services overview

Any preferred stock or bond/note research needs to include some understanding of the issuer to gauge whether the yield/ytc/ytm are enough to justify the risk of owning any of those assets. In the Seeking Alpha description (condensed), we see the following:

Ladenburg Thalmann Financial Services Inc. (LTFS) operates as a diversified financial services company in the United States. Its Independent Advisory and Brokerage Services segment offers advisory and securities brokerage services for clients, including advisor-managed accounts, general securities, mutual funds, and variable and fixed annuities; brokerage support services, such as access to stock, bond, exchange-traded fund, and options execution; insurance, non-traded real estate investment trusts, and unit trusts; and research, compliance, supervision, accounting, and related services. This segment also provides asset management services, trust administration of personal and retirement accounts, estate and financial planning, wealth management, and custody services.

The company was founded in 1876 and is headquartered in Miami, Florida with additional offices in Boca Raton, Florida; Princeton, New Jersey; Melville, New York; and New York, New York. Ladenburg Thalmann Financial Services Inc. operates as a subsidiary of AG Intermediate Corporation.

Source: seekingalpha.com LTSA

LTFS provides the following financial services to investors and corporations:

Details on each area is available at this link . Since LTFS merged with the Advisor Group in 2020, the last LTFS financials are from 2019. LTFS is one of eight investment firms owned by the Advisor Group, now combined under the label Osaic. I failed to find any up-to-date financials and I suspect that Advisor Group is a private company that is not required to file financials with the SEC.

Ladenburg Thalmann Financial Services Inc. PFD SER A review

My "go to" site for fixed income assets provides this review of the preferred.

• LTSA is eligible to be Called but at its current price, not at all likely
• While dividends are cumulative, if the issuer is private as I suspect, this provides little value to investors as I see it
• Dividends are eligible for the favorable 15% tax rate
• Dividends are paid monthly at rate of $.166666
• LTSA now trades on the Pink Sheets, which makes it harder to trade and usually with a wider bid/ask spread than when it was listed

Portfolio strategy

At the current price of $14.22, the yield is just over 14%. The YTC is meaningless as I see it and there is no YTM since there is no maturity date. Over the past year, the price has hovered around the $14 mark, though low volume (<1k on average) would make it tough to profit from price swings.

Before the merger, LTFS also had four Notes outstanding that mature between 2027 and 2029. Comparing the preferred to them will help evaluate whether the 14% yield covers the risk, which is harder to determine with no financials.

I have to say finding three of the Notes with the exact same quote is troubling but nowhere near these trading disclaimers I found:

Just for fun, I checked to see if Fidelity would block an online trade for the LTSL Note. Based on it doing that for other risky Notes/Pfds, I was surprised it did not. The Bid/Ask was $0/$0 but that might have been due to the market being closed as the LTSA Pfd showed the same.

Conclusion

As stated above, if Seeking Alpha allowed a AVOID rating, I would have chosen that but the closest would be and all five assets earn a Strong Sell rating except for high risk investors. The lack of financials helps explain why the yields are double similar issuers. If I am correct, the conversion to a private issuers the cumulative protect in my opinion and has negatively affected to trade the preferred reviewed and Notes mentioned.

I "trust" the Notes over the Pfd since they at least have maturity dates. The last one issued pre-merger was the LTSH in May of 2019 where a minor rating firm gave it a BBB+ rating.

As a comparison, I recently reviewed preferreds issued by another investment firm, publicly traded, Stifel Financial Corporation ( SF ) where the yields were under 7%. They were rated lower at BB, and had YTCs that varied widely. I own one of those preferreds in my fixed income ladder, but no stomach to add any of the Ladenburg Thalmann assets!

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