Customers Bancorp Inc. Sells a Preferred Issue
By: Tim McPartland,
Regional bank Customers Bancorp Inc. (NYSE:CUBI) sold a new preferred stock offering that now is trading on the OTC Grey Market under a temporary ticker, CUBUP.
As a banking company, Customers Bancorp’s new issue is required to be non-cumulative, meaning if dividends are not declared that they are gone forever. The non-investment grade issue is unrated and the shares are perpetual, so they have no maturity date.
This issue features a “fixed-to-floating rate” preferred offering. This means that the coupon is initially fixed at 6.5% until March 14, 2021, when the coupon converts to a floating rate that is calculated with a three-month LIBOR rate, plus a spread of 5.09% that is calculated each quarter.
The floating rate coupon on this issue may reduce share price volatility in the future in a period of rising interest rates, since there is some assurance that the coupon rate may move higher as interest rates rise.
The issue has the normal five-year optional redemption, so the company can redeemthe shares at its option as early as March 15, 2021. Typically, the issuer will redeem the shares in what is known as a “refinancing” transaction on the optional redemption date, if the company can issue new shares at a coupon at least ¼ to ½% below the coupon on these shares.
Customers Bancorp Inc. has a 7% fixed-to-floating issue currently trading.
For those interested in buying on the OTC Grey Market we have a “primer” on the process which you can access at this link.