mREIT PennyMac Mortgage Investment Sells a Fixed-to-Floating Rate Preferred

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Mortgage REIT PennyMac Mortgage Investment Corp (NYSE:PMT) has sold a large fixed-to-floating rate preferred share issue with a coupon of 8%.  7 million shares are being offered with another 1 million share allocated for over allotment .

PMT will be using the proceeds from this offering for general corporate purposes, debt repayment and common share repurchases.  The trust expects to see proceeds of approximately $195 million if the over allotment shares are sold.

PennyMac has 1 other preferred issue outstanding and it is a 8.125% fixed-to-floating rate issue which was sold in March of this year.  The shares have traded generally between $25 and $25.50/share.  This would seems to indicate that shares on the new issue have minimal chances of trading more than 1-2% above par in the months ahead.  


Details of the new issue can be reviewed here.

While mREIT common shares are not our cup of tea their preferred issues have proven to be good performers over the last 2 years as interest rates (as measured by the 10 year treasury) have remained tame.  This new issue, as well as the older PennyMac issue and  the 8% fixed-to-floating rate preferred from Chimera Investment  (NYSE:CIM-B) are fairly solid investments as long as an investor realizes the interest rate risk inherent in all perpetual preferreds.  

As is normal for all REITs these new shares from PennyMac are cumulative in respect to dividends, but the distributions are not qualified for preferential tax treatment.

The new PennyMac issue is now trading on the OTC Grey Market under the temporary ticker symbol PNNMP and last traded at $24.70/share.

To get more information on preferred stocks and exchange traded debt (baby bonds), screen them, set up your own portfolio and receive email alerts, go to now.

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