FG - New Exchange-Traded Debt IPOs December 2023

2024-01-03 03:25:50 ET

Summary

• December saw no new preferred stock offerings but two new ETD offerings with dividend yields ranging from 7.95% to 8%.
• CDx3 preferreds, ranked 10 out of 10, are selling at an average discount to par of about 4% and offer an average current yield of 6.23%.
• Midcap Financial Investment Corporation and F&G Annuities & Life priced new exchange-traded notes with fixed coupons of 8% and 7.95%, respectively.

New offering summaries:

Midcap Financial Investment Corporation ( MFIC ), an externally managed Business Development Company ((BDC)) focused on making senior loans to middle market U.S. companies, priced an offering of $75 million worth of new exchange-traded notes due 2028, offering fixed coupon of 8%. The new notes received a credit rating of BBB- from Kroll and traded on the Nasdaq under symbol MFICL.

The company indicated that proceeds will be used to repay outstanding indebtedness under its senior secured revolving credit facility, as well as for new portfolio company investments. Although the notes are due 2028, they may be redeemed at the Company’s option beginning December 15, 2025.

And insurance company F&G Annuities & Life ( FG ) priced an offering of $345 million worth of new exchange-traded notes due 2053, offering a fixed coupon of 7.95%. The new notes were rated BBB- by both Standard & Poor's and by Fitch. The company may redeem the notes early at its option, beginning December 15, 2028.

The new notes trade on the New York Stock Exchange under the symbol FGM and score 10 out of 10 on our CDx3 Compliance scale, entering it into the basket of CDx3-compliant securities matching our strategy. 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: MFICL , FGN .

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. For all of 2023, the basket of CDx3-compliant preferred stocks and ETDs (i.e., scoring 10 out of 10 on our compliance scale), traded below par value of $25 as a group. We track when different securities become available below par, 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; for example, BC-B is a 10 out of 10 CDx3-compliant security (highlighted in yellow), which crossed below par value on 12/28 and trades at $24.67 as of the time of this writing.

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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