Terms

Series

Alpha Income Trust Preferred Securities (8.0% Cumulative Capital Securities)

Liquidation Preference

$2.50

Coupon Rate

8%

Rate Type

Fixed

Annual Dividend

$0.2

Payment Frequency

Quarterly

Cumulative

Yes

Perpetual

No

Convertible

No

Callable

Yes

First Call Date

June 7, 2024

First Call Price

$2.50

Mandatory Redemption Date

June 7, 2049

Capital Stack Ranking

Junior To: All Senior And Subordinated Debt Of Air T, Inc., All Liabilities Of Air T, Inc.'S Subsidiaries (Structural Subordination); Pari Passu With: Common Securities Of Air T Funding (Except During An Event Of Default); Senior To: Common Securities Of Air T Funding (Held By The Company), Air T, Inc. Common Stock

Regulatory (Basel III) Call

Yes

Tax Classification

Other

Qualifies for QDI

No

Qualifies for DRD

No

Shares Offered

8,400,000

Prospectus Summary

Air T Funding, a Delaware statutory business trust sponsored by Air T, Inc., is offering 8,400,000 Capital Securities (Alpha Income Trust Preferred Securities, also called 8.0% Cumulative Capital Securities) at a liquidation amount of $2.50 per share, issuable upon exercise of warrants at $2.40 each. The securities pay a fixed 8.0% annual distribution ($0.20/share, or $0.05 quarterly), with payments on February 15, May 15, August 15, and November 15 each year, commencing August 15, 2019. These are cumulative, meaning any deferred distributions accrue at 8% compounded quarterly and must be paid in full before Air T can resume payments on junior securities. The trust matures on June 7, 2049, with an optional call at par beginning June 7, 2024. The Capital Securities represent beneficial interests in Air T Funding, which holds only Air T, Inc.'s 8% Junior Subordinated Debentures. As a holding company issue, these securities are structurally subordinated to all liabilities of Air T's operating subsidiaries. The Company's obligations under the Guarantee and the Debentures rank junior to all of Air T's current and future Senior and Subordinated Debt (approximately $59.8 million as of September 30, 2018) and are unsecured. The Capital Treatment Event call provision allows early redemption of the entire issue if a regulatory or structural event undermines the intended tax or investment company status of the trust — a risk that could force involuntary redemption at par plus accrued distributions. In a default scenario, Capital Securities holders have direct legal recourse against Air T, Inc. At the $2.50 liquidation amount, the effective yield at par is 8.0% annually. Importantly, distributions on these Capital Securities are derived from interest payments on the Junior Subordinated Debentures, not corporate dividends; accordingly, they are expected to be treated as ordinary interest income for U.S. federal tax purposes and do not qualify for the preferential 15%/20% qualified dividend income (QDI) rate or the corporate dividends-received deduction (DRD). Payments are made quarterly on the 15th of February, May, August, and November. The primary risk to income continuity is the Company's right, on or after June 7, 2024, to defer distributions for up to 20 consecutive quarters; during any such deferral, Air T is blocked from paying dividends on its common stock or any pari passu/junior securities until all accumulated distributions are paid in full.

Summarized from the SEC prospectus filing.

Distribution History

Ranking vs. Other Preferreds

Dividend Stopper Provisions

Dividend Stopper Description

If the Company elects to defer interest payments on the Junior Subordinated Debentures (triggering a deferral of Capital Securities distributions), it is prohibited from paying dividends on its common stock or any securities ranking pari passu with or junior to the Debentures until the deferral period ends and all deferred amounts are paid.

Div Score Breakdown

Reinvesty's multi-factor safety analysis for this preferred, composite score: 47 (Average)