2 New Baby Bond Offerings
By: Tim McPartland,
Mortgage REIT Great Ajax (NYSE:AJX) and specialty auto insurer Atlas Financial Holdings (NASDAQ:AFH) have both sold baby bond issues this week and we would expect the issues to begin trading in the next couple of days.
Great Ajax Corporation has sold 3,050,000 $25 convertible senior notes and has granted the underwriter an option to purchase another 450,000 notes for total gross proceeds of $87,500,000. The notes are convertible into common shares and carry a coupon rate of 7.25%. The notes mature on 4/30/2024 and have an early redemption period starting 4/30/2022.
Being a convertible issue notes can be converted into common shares of the company under certain circumstances. Details are in the prospectus.
Small specialty insurer Atlas Financial Holdings has sold 1 million $25 senior notes with a coupon of 6.625%.
The notes will have a maturity date of 4/26/2022 with an early redemption period beginning 4/26/2020.
AFH is a smaller specialty auto insurer with quarterly premium revenue in the $50 million dollar area generated from taxis, limousines and other specialty vehicle insurance. In my quick financial review I noted that while the company is strongly solvent they took a major reserve in the 4th quarter ending 12/31/2016 against prior claims that had been filed. It appears that the company underestimated their liabilities against earlier claims filed. This is of a minor concern to us, but the company claims to have this situation under control and it is likely just a bump in the road.
We urge readers to do their due diligence on these companies prior to purchases of any bonds. Both are smaller companies and while we like the shorter maturity dates on these issues we will be doing plenty of reading on the companies before making any purchase.
Being baby bonds these issues will not likely trade on the OTC Grey Market prior to trading on their permanent exchanges.
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