KKR & Co. Inc.’s New 6.25% Series D Mandatory Convertible Preferred Stock: An In-depth Analysis
In a recent development, KKR & Co. Inc. (KKR) has announced the issuance of a new 6.25% Series D Mandatory Convertible Preferred Stock (KKR-D). This securities offering, which is currently trading at $49.36, comes with a Yield to Maturity (YTM) of 6.98%. Despite not being rated by Standard & Poor’s (S&P), Moody’s, or Fitch, this preferred stock is expected to closely align with KKR’s common stock, creating potential arbitrage opportunities when the prices deviate.
Key Features and Terms of KKR-D
The new KKR-D shares will not bear dividends. Instead, they will convert into common stock based on KKR’s average stock price before March 1, 2028. The conversion price will be calculated as the arithmetic mean of the daily volume-weighted average price (VWAP) of KKR’s common stock during the conversion period.
Impact on Individual Investors
For individual investors, the new KKR-D offering presents several potential advantages. First, the high initial yield of 6.98% is attractive, especially in the current low-interest-rate environment. Moreover, the close alignment with KKR’s common stock offers an opportunity to gain exposure to the company’s growth potential while receiving a steady income stream. However, investors should be aware of the conversion risk, as the conversion price is dependent on KKR’s stock price.
Impact on the Wider Market
From a macroeconomic perspective, the KKR-D offering could have several implications. The issuance of non-rated preferred stocks by large corporations, especially those with strong credit ratings, could potentially disrupt the traditional bond market. This could lead to increased competition between preferred stocks and bonds, potentially making it more difficult for bond issuers to price their offerings.
Additionally, the close alignment between KKR-D and KKR’s common stock could create arbitrage opportunities for institutional investors. These opportunities could potentially lead to increased volatility in KKR’s stock price as arbitrage transactions are executed.
Conclusion
In conclusion, KKR’s new 6.25% Series D Mandatory Convertible Preferred Stock (KKR-D) offers an attractive yield and the potential for capital appreciation through alignment with KKR’s common stock. However, investors should be aware of the conversion risk and the potential impact on the wider market. As the issuance of non-rated preferred stocks by large corporations becomes more common, it could disrupt the traditional bond market and create new opportunities for institutional arbitrage transactions.
- KKR has issued a new preferred stock, KKR-D, with a 6.25% coupon and a YTM of 6.98%.
- The preferred stock is not rated by S&P, Moody’s, or Fitch.
- KKR-D will convert into common stock based on KKR’s average stock price before March 1, 2028.
- The close alignment of KKR-D with KKR’s common stock creates potential arbitrage opportunities.
- Individual investors may find the high initial yield attractive, but should be aware of conversion risk.
- The issuance of non-rated preferred stocks by large corporations could disrupt the traditional bond market.
