Preferred market mixed; Deutsche Bank pressured by Europe woes; Pennsylvania REIT prices deal

By Stephanie N. Rotondo

Portland, Ore., April 13 - Preferred stock trading remained muted Friday, as has been the case for most of the week.

"The whole week has been incredibly light," a market source said. In terms of overall market performance, he noted that, week over week, preferreds were "not much below where they were a week ago."

The day itself was "kind of mixed," the source added. Initially, he said, "the market dropped" despite decent earnings from banking giants J.P. Morgan Chase & Co. and Wells Fargo & Co.

"I guess the news out of Europe was overwhelmingly negative," he remarked, referring to Spanish stocks' tumble and the country's subsequent increase in borrowing costs.

The negativity out of Europe did not bode well for European names such as Deutsche Bank AG. The German bank's preferreds were among the day's most active, and they declined more than most.

In the primary arena, Pennsylvania Real Estate Investment Trust priced a $100 million issue of 8.25% series A cumulative redeemable perpetual preferred shares. The deal was faring relatively well in the gray market but was not getting much interest due to its small size.

Deutsche Bank loses ground

Deutsche Bank preferreds were pressured as investors worried about further financial issues within the European Union, specifically Spain's debt woes.

The 7.6% trust preferreds (NYSE: DTK) dropped 19 cents, ending at $25.20. The 6.375% noncumulative trust preferreds (NYSE: DUA) fell 16 cents to $23.03, and the 6.625% noncumulative trust preferreds (NYSE: DTT) declined a dime to $24.00.

The declines came even as the Wall Street Journal reported that the bank was nearing a deal regarding the sale of its U.S. asset management operations. Deutsche Bank has been in talks with Guggenheim Partners. Guggenheim has until the end of the week to make a detailed bid for the unit, which has been valued at around €1.6 billion.

According to the Journal article, analysts believe the sale would be a boon for Deutsche Bank because it would help improve its equity position.

Pennsylvania REIT prices

Pennsylvania REIT issued $100 million of 8.25% series A cumulative redeemable perpetual preferred shares on Friday.

The deal was originally announced Thursday, and another trader saw price talk around 8.375%.

A trader said the paper was "hanging around" $24.85 bid, $24.90 offered in the gray market.

However, another source said he saw little going on in the name and attributed the lack of interest to its small size.

The Philadelphia-based REIT will apply to list the preferreds on the New York Stock Exchange under the symbol "PEIPA." Settlement is expected April 20.

Wells Fargo Securities, LLC, Citigroup Global Markets Inc. and Bank of America Merrill Lynch are the joint bookrunners.

Proceeds will be used to repay amounts outstanding under the company's revolving credit facility and other debt and for other general corporate purposes.

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