Entergy Subsidiaries Move Into the Markets in a Massive Way
By: Tim McPartland,
Various divisions of energy giant Entergy (NYSE:ETR) moved into the markets in a major way in the last week floating 100’s of millions of dollars worth of new low coupon “baby bonds” in a giant refinancing move.
At this moment (Wednesday evening) here is the run down as filed with the SEC.
Entergy Arkansas has sold $410 million in 4.875% First Mortgage Bonds ($25/share). With the proceeds of this issue they will call/redeem their outstanding 6.45% preferred stock (OTC:EGXKP) and 5.75% 1st Mortgage Bonds (NYSE:EAA) (there are others being called, but we do not follow them as they are $100/share issues).
The link to this new issue is here. We will publish the data in an organized fashion tomorrow sometime.
Entergy Louisiana has sold $270 million in 4.875% Collateral Trust Mortgage Bonds ($25/share). With the proceeds from this they will redeem their outstanding 5.75% First Mortgage Bonds (NYSE:ELA) and 6% First Mortgage Bonds (NYSE:ELB).
Entergy Mississippi has not filed a new issue with the SEC as of this moment but we EXPECT that they will do so shortly as they have 2 First Mortgage Bonds and 1 preferred stock issue outstanding with coupons of 6% to 6.25% (tickers, EYMXP, EFM and EMZ)
Obviously this continues the trend of hammering coupons down and this is just one more nail in the coffin for us income investors. In this case we own none of these issues–but just the same it certainly narrows the selection of decent coupons available in the marketplace.
Now the decision to be made by income investors is whether to buy low coupon issues which have maturity dates out 40-50 years or not. These issues will take major beat downs when/if rates rise—but on the other hand if rates stay flat to down for the next 2, 3, 5 or 10 years these may be the safest coupons we see. Everyone has to make their own call on this issue. We are staying the course of where we are today–leaving ourselves with more cash than we want, but earnings yields above these meager rates.