SLMBP - SLM Corporation PFD SER B: The Odd Duck In The Preferred Space, 8.4% Yield
2025-02-11 09:14:13 ET
Summary
- This article analyzes the Sallie Mae Series B preferred stock (SLMBP), highlighting its unique characteristics and investment implications.
- SLMBP's features include its perpetual nature, floating rate structure (SOFR + 170 bps + Libor adjustment), non-cumulative dividends, and unusual $100 par value.
- The current yield is a key driver of SLMBP's price and explains the sensitivity to changes in SOFR. The discussion of "higher for longer" and its impact is crucial.
- Although Fed Funds and SOFR are the main drivers for SLMBP's pricing, credit spreads also matter, as seen during the March 2023 banking crisis.
- SLMBP are preferred securities outstanding for over 20 years, and we believe they are a permanent form of capital for the company.
Thesis
The Series B preferred equity ( SLMBP ) from Sallie Mae ( SLM ) is an exchange listed non-cumulative preferred equity. The series was issued back over 20 years, in 2005 and represents in our view a perpetual form of capital for the company. We called the series an ‘odd duck’ because it is floating rate and has been outstanding for a very long period of time. There are very few preferred securities outstanding that have been issued 20 years or more ago....
SLM Corporation PFD SER B: The Odd Duck In The Preferred Space, 8.4% Yield