Mounting concerns about Europe remain key driver of preferred market; Charles Schwab upsizes

By Stephanie N. Rotondo

Phoenix, May 30 - Preferred stocks were on the decline in Wednesday trading as pressure from Europe mounted.

"Foreign stuff was all down," a trader said. He added that domestic issuers were also feeling the pain, though not as much as their foreign counterparts.

"I thought we'd see a bigger more to the downside, but we're not," he remarked.

In the primary market, Charles Schwab Corp. brought a $425 million offering of 6% series B noncumulative perpetual preferreds, a trader told Prospect News.

Price talk on the preferreds (expected Baa2/BBB+/BB+) was originally 6% to 6.125%, according to the trader. The deal was also upsized from $200 million.

Among recent deals, Prospect Capital Corp.'s 6.95% senior notes due 2022 officially listed on the New York Stock Exchange under the ticker symbol "PRY."

Issuers hurt by Europe again

The continuing debacle in Europe again weighed heavily on preferreds both foreign and domestic.

Deutsche Bank AG's 8.05% trust preferreds (NYSE: DKT) dropped $1.07, or 4.07%, to $25.10 in Wednesday trading. Other foreign issues, like Barclays plc and Royal Bank of Scotland Group plc, also experienced declines.

Barclays' 7.75% series 4 noncumulative callable dollar preference shares slipped 14 cents to $24.78, and RBS' 7.25% series T noncumulative dollar preference shares (NYSE: RBSPT) lost 36 cents, or 1.88%, to end at $18.75.

Spanish bank Banco Santander SA was naturally on the day's list of losers given its country's current crisis. The 10.5% series 10 noncumulative guaranteed preferreds (NYSE: STDPE) lost 11 cents, closing at $25.20.

On the domestic side, JPMorgan Chase & Co.'s 7.2% fixed-to-floating-rate series BB capital securities (NYSE: JPMPB) fell 23 cents to $25.75. The 8.625% series J noncumulative preferred shares (NYSE: JPMPI) were also down 23 cents at $26.43.

Schwab deal comes

Charles Schwab priced $425 million of 6% series B noncumulative perpetual preferreds on Wednesday.

"It's hanging out" at $24.65 bid, $24.70 offered in the gray market, a trader commented. "I have a feeling it will be soft for a while, especially in this market."

The San Francisco-based investment company has applied to list the new preferreds on the NYSE under the symbol "SCHWPB." Settlement is expected June 6.

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

Proceeds will be used for general corporate purposes, which may include extending credit to or funding investments in subsidiaries and the possible refinancing of outstanding debt obligations.

Prospect Capital lists

Prospect Capital's $100 million issue of 6.95% $25-par senior notes due Nov. 15, 2022 listed on the NYSE on Wednesday.

The deal priced April 24. The ticker symbol is "PRY."

The issue fell 50 cents in midweek trading, or 2%, to end at $24.50.

Proceeds from the offering will be used initially to maintain balance sheet liquidity and then to make long-term investments.

Prospect Capital is a New York-based financial services company that primarily lends to and invests in middle-market privately held companies.

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