Annaly Capital Sells Fixed-to-Floating Rate Preferred

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July 30, 2017

By  Tim McPartland

The giant of the mortgage real estate investment trust (mREIT) universe, Annaly Capital Management (NYSE: NLY), has sold a huge fixed-to-floating rate preferred with an initial coupon of 6.95%.


Proceeds from this offering of 28 million shares will be used to redeem the company’s 7.875% preferred issue, which is one of four preferreds that Annaly has outstanding. The 28-million-share issue also includes a brokers’ overallotment option of an additional 4.2 million shares.

The proceeds of almost $780 million is massive for a mortgage REIT and just $185 million will be needed to redeem the NLY-A issue with the balance going to acquire additional residential and commercial mortgages. The new issue will have a fixed coupon until September 30, 2022, and then will float at a coupon rate of three-month LIBOR, plus a base fixed rate of 4.993%.

Since the three-month LIBOR is currently at 1.32%, if the issue were floating today, the coupon would be 6.3%. It should be noted that the majority of fixed-to-floating-rate preferreds issued recently have a 10-year period until going to a floating rate coupon versus the five years for this issue.

Dividends from this issue will be cumulative, but will not be qualified for preferential tax treatment. Additionally, they are redeemable at the issuer’s option on September 30, 2022.

Details for this issue can be found here.


The new issue now has started to trade on the OTC Grey Market under the temporary ticker symbol of ANNPP and last traded at $24.85/share. For those not familiar with trading on the OTC Grey Market, we have a short primer that can be reviewed here.

As noted above, NLY has three other preferred issues outstanding (four if counting the 7.875% issue mentioned above which has now been called for redemption). You can compare the issues on our swaps page here.

Tim McPartland

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Tim McPartland
Tim McPartland is a private investor with over 45 years of investing experience. His analysis, research and writing is devoted to the hunt for income producing securities of all types, but in particular specializing in preferred stocks, exchange traded debt and Master Limited Partnerships.
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