Deutsche Bank prices benchmark CoCo deal; State Street launched at 6%; Sotherly deal eyed

By Stephanie N. Rotondo

Phoenix, Nov. 18 – Two new deals were added to the preferred stock calendar on Tuesday.

State Street Corp. announced a sale of series E fixed-rate noncumulative perpetual preferreds.

Initial price talk was in a 6.125% to 6.25% range.

“It’s doing well; they might even be able to price it around 6%,” a trader said early in the day.

He said the paper was trading at less 8 cents in the early gray market.

“It’s a pretty standard type of State Street listing,” the trader remarked.

The deal then launched at 6%.

At the end of the day, a market source quoted the issue at $24.90 bid, $24.95 offered.

“It was very well received,” said yet another trader, noting “a lot of retail and institutional demand.”

While the deal was said to have priced, details were not available as of press time.

Morgan Stanley & Co. LLC, BofA Merrill Lynch, UBS Securities LLC and Wells Fargo Securities LLC are the joint bookrunning managers.

Proceeds will be used for general corporate purposes, which may include working capital, capital expenditures, investments in or loans to subsidiaries, refinancing of outstanding debt or capital securities, share repurchases, dividends, potential acquisitions and the satisfaction of other obligations.

As the market awaited pricing on the new issue, the company’s existing preferreds were on the active side, but weaker.

The 5.25% series C noncumulative perpetual preferreds (NYSE: STTPC) declined 27 cents to $24.41. The 5.9% fixed-to-floating rate series D noncumulative preferreds (NYSE: STTPD) ended 7 cents weaker at $25.95.

Deutsche Bank AG meantime was shopping a benchmark offering of noncumulative perpetual tier 1 notes (expected ratings: Ba3/BB/BB+).

Price talk was in the 7.5% area. After the market closed, $1.5 billion of the contingent convertible notes were sold at 100.065 to yield 7.5%.

Deutsche Bank Securities Inc. is the bookrunner.

The notes become callable April 30, 2025 and then every five years thereafter, only if fully written up and subject to regulatory approval.

One trader also noted that an expected deal from Sotherly Hotels LP – a sale of $25-par senior unsecured notes due 2019 announced last week – could price Tuesday evening, “though we probably won’t see details until tomorrow.”

He said that issue was trading around $24.75 in the gray market.

“There’s not a lot of institutional demand in that one,” he said.

Sandler O’Neill + Partners LP is running the books.

Overall, the preferred market was “up a touch pretty much all day,” a source said. But then things turned negative in the last half hour, leaving the Wells Fargo Hybrid and Preferred Securities index down 16 basis points.

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