Regional Banker People’s United Financial Sells a Preferred Issue
By: Tim McPartland,
People’s United Financial Inc. (NASDAQ:PBCT) has sold a junk rated fixed-to-floating preferred stock issue with an initial coupon of 5.625%. Shares will trade on the NASDAQ under the ticker symbol of PBCTP after temporary trading on the OTC market.
This new issue will carry the initial 5.625% coupon until 12/14/2026 when the dividend will move to “floating” with quarterly rate adjustments calculated at the 3 month libor rate plus 4.02%. As is usual for banking issues the shares are non-cumulative in respect to dividends and will have an optional redemption date beginning 12/15/2026. Readers have no doubt noticed in the past that fixed-to-floating rate preferred stock issues many times have a optional redemption date that is about 10 years after issuance, instead of the more typical 5 years.
This new issue is now trading on the OTC Grey Market under the temporary ticker of PPLUP. Shares traded up sharply immediately and today are trading in the $26.25 area with a current yield of 5.4%. We consider this price $1/share too high given the junk rating on the shares. We would be surprised if the share price remains at this level for long.
PBCT is a bank holding company that operates in Connecticut, New York, Massachusetts, Vermont, New Hampshire and Maine and has total assets of just over $40 billion. The company has had solid financials over the course of the last few years and while this new preferred issue is junk rated there is no current safety issue.
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