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Bread Financial Launches 8.625% Preferred Stock IPO to Raise $150M

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  Published in Stocks and Investing on Wednesday, December 24th 2025 at 5:00 GMT by Seeking Alpha

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Bread Financial Holdings Launches a New 8.625 % Preferred Stock IPO – What Investors Need to Know

Bread Financial Holdings, a U.S. bank‑holding company that has carved out a niche in mortgage origination and real‑estate financing, announced the pricing of a fresh equity offering on the Nasdaq in late August 2024. The company is issuing 8.625 % preferred stock (ticker: BFHPRA) in a public offering that is expected to raise approximately $150 million. The new preferred shares come at a price of $50.00 each and will be offered to a mix of institutional and retail investors under the lead underwriting firm Morgan Stanley, with participation from other major banks.

1. Why Bread Financial Is Raising Capital

Bread Financial’s business model centers on delivering mortgages and commercial real‑estate financing to a diverse set of borrowers, from first‑time home buyers to mid‑market real‑estate developers. The firm has built a sizable loan portfolio through a network of independent brokers and has recently expanded its digital origination platform to tap the growing demand for remote mortgage services.

The proceeds from the preferred stock IPO will be used in three primary ways:

1. Expansion of the Loan Origination Business – The company plans to invest in technology upgrades and hiring additional loan officers to scale its reach in the highly competitive residential mortgage market.
2. Refinancing of Existing Debt – Bread will use a portion of the funds to refinance higher‑interest unsecured notes that were issued last year.
3. General Corporate Purposes – The remaining capital will support working‑capital needs and other corporate initiatives.

The firm’s management highlighted that the infusion of capital is intended to keep the company “well‑capitalized” and to support its growth ambitions in an environment of rising mortgage rates and increased regulatory scrutiny.

2. Features of the 8.625 % Preferred Stock

The preferred shares are structured to offer a fixed dividend of 8.625 % per annum, payable semi‑annually, which is roughly 1.5 times the current U.S. Treasury rate on a comparable maturity. The shares come with several protective features for investors:

• Dividend Prioritization – Preferred dividends must be paid before any dividends are issued to common shareholders.
• Redemption Rights – Bread has the option to redeem the shares at par after five years, providing a degree of liquidity for investors.
• Conversion Option – Holders can convert the preferred shares into common shares at a predetermined conversion price after a five‑year holding period, allowing them to participate in potential upside.
• Cumulative Dividends – If the company is unable to pay a dividend in any period, the dividend will accumulate and be paid in the future, ensuring that shareholders are not left with unpaid dividends.

The preferred shares are not listed on any exchange at the time of issuance, but the company has provided a detailed liquidity plan that includes potential secondary market sales once a trading platform is available.

3. Investor Considerations & Risks

Like any high‑yield security, the 8.625 % preferred shares carry a set of risks that potential investors must weigh:

• Credit Risk – The firm’s earnings are largely derived from mortgage servicing, which is sensitive to credit losses and default rates. A spike in loan defaults could impair Bread’s ability to meet dividend obligations.
• Interest‑Rate Risk – Higher prevailing rates could make the fixed dividend less attractive to investors and potentially impact Bread’s cost of capital.
• Regulatory Risk – As a bank‑holding entity, Bread must comply with banking regulations and prudential capital requirements. Regulatory changes could affect its ability to issue new securities or alter its business model.
• Liquidity Risk – Because the preferred shares are not yet listed, there is limited market depth, and secondary trading might be slow or costly for investors wishing to exit.

Management’s commentary emphasizes that the company’s conservative underwriting standards and diversified loan portfolio help mitigate some of these risks. However, prospective investors should perform due diligence, including reviewing the company’s 10‑K filings and the latest earnings releases.

4. Market Context & Comparable Offerings

The current financial landscape is defined by a combination of tight credit markets, rising interest rates, and an increasing appetite for yield‑generating securities. Bread’s preferred shares fall within a niche of banking‐sector preferred stocks that have become popular among income‑focused investors seeking higher yields than those offered by corporate bonds.

In comparison, other recent preferred stock offerings, such as those by Bank of America and JPMorgan, have attracted significant institutional interest, particularly in the 6‑9 % dividend range. Bread’s 8.625 % dividend positions it competitively within this space, especially given its focus on the residential mortgage sector, which has seen resilient demand amid low‑interest‑rate environments.

5. How to Participate

Retail and institutional investors can subscribe to the offering through their brokerage accounts. The initial allocation is set for early September, with a book‑building period that will determine final pricing and allotment. The company’s underwriters have stated that the shares will be sold at a 4 % discount to the offering price, creating an immediate yield advantage for early participants.

6. Bottom Line

Bread Financial Holdings’ 8.625 % preferred stock IPO presents a notable opportunity for investors seeking high current income within the banking sector. The firm’s solid track record in mortgage origination, combined with the attractive dividend, could make the preferred shares appealing for income‑seeking portfolios. However, the investment carries credit, interest‑rate, and liquidity risks that warrant careful consideration. As with any new security, monitoring Bread’s quarterly reports and staying informed about macro‑economic developments will be key to assessing the long‑term value of the investment.

For those interested in the full prospectus, the company has made the 8‑K filing and other regulatory documents available on its website, offering deeper insight into the offering’s terms and the company’s strategic vision.