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Mid-America Apartment Communities Inc. Message Board

  • zebraspit zebraspit Jul 5, 2003 5:00 AM Flag

    Preferred A & C are getting redeemed

    http://www.sec.gov/Archives/edgar/data/912595/000119312503016833/d424b5.htm

    The company is apparently issuing a new Preferred H stock, proceeds of which are going to be used to redeem the A & C preferred shares.
    One assumes the company will be selling the new shares to reflect an interest rates meaningfully lower than the 9%+ rates of the A & C shares (though the exact interest rate is not yet determined or stated).

    I'd guess you could expect that the A & C shares will come down to $25.00 on Monday, the B shares probably will stay where they are, or go up a hair(as the A and C holders may decide to roll into them), and, likewise, the common may go up a bit over the coming days as people exiting the A & Cs may decide to roll their monies into the common(a good move, I think, seeing that the common yields just under 9%, you get participation in the equity, and, for income oriented shareholders, there is no chance of it being called away).

    This will no doubt also help the common shares in that it will go a ways towards alleviating the dividend payout shortfall, which could soon result in a common stock price north of $30 if, as a result of the above, the market "re-prices" the stock to prevailing yields of its industry peers(7-8%).

    Management's focus on enhancing shareholders' interests is increasingly evident.

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    • New preferred is going to be at 8.3%, per the SEC filing.

    • If I recall correctly, the Fs were to a private buyer(Jack Byrne?), who essentially was voluntarily exchanging other preferreds at the request of the company so that they could harmonize the terms of all of the classes of preferreds.
      He had to be enticed with a good coupon.

      My guess is that the public markets will pay up a little, seeing that there is a current appetite for yield stocks.

      I'd guess that they will go out in the very low 8s, and I sure wouldn't count on the As and Cs not getting called - it seems clear that's why they're doing this at all.

    • The prospectus (dated Oct. of 1996) my MAA "Series A Cumulative Preferred Stock 9.5% Liquidation Preference $25 Per Share" states:

      "The Series A Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption and will not be convertible into any other securities of the Company."

      How does this relate to your suggestion that "the company is apparently issuing a new Preferred H stock, proceeds of which are goint to be used to redeem the A and C preferred shares."?

      Appreciate your interpretation of this.

      • 1 Reply to capt317
      • Here is an excerpt from the prospectus for the Series H preferred:
        "Maturity



        The Series H Preferred Stock has no stated maturity and will not be subject to any sinking fund or mandatory redemption. In addition, we are not required to set aside funds to redeem the Series H Preferred Stock. Accordingly, the shares of Series H Preferred Stock will remain outstanding indefinitely unless we decide in our sole discretion to redeem them."

        Here is another:
        "We estimate that our net proceeds from the offering will be approximately $96.5 million (approximately $111.0 million if the underwriters´┐Ż over-allotment option is exercised in full). We intend to use the net proceeds from the offering of Series H Preferred Stock, together with $3.5 million of additional borrowings, to redeem our issued and outstanding shares of Series A and Series C Preferred Stock"

        Clearly they intend to redeem the Series A and C.

        depending on the redemption date July or August, the A and C preferreds are now worth maybe $25.20 to $25.30.

 
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