Regional Banker People’s United Financial Sells a Preferred Issue

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.

Further details of this issue can be found here.

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