Morning Commentary: Goldman slated to sell noncumulatives; foreign banks firm as market improves

By Stephanie N. Rotondo

Seattle, Feb. 16 – With the preferred stock market continuing its rebound from Friday, Goldman Sachs Group Inc. announced plans to sell new $25-par noncumulative perpetual preferred stock on Monday.

A trader said there was no selling group on the Goldman Sachs & Co.-led deal, adding that price talk was in a 6.375% to 6.5% context.

The trader saw the issue trading “around $24.80” in the early gray market.

“Supposedly they are using proceeds to redeem some of their $1,000-pars,” the trader commented, pointing to a press release on the company’s website.

In the press release, New York-based Goldman announced a tender offer for up to $400 million of two series of its $1,000-par automatic preferred enhanced capital securities (Apex) – the 5.793% fixed-to-floating rate Apex and the floating-rate Apex.

A total of $1.75 billion of the 5.793% Apex are outstanding, as well as $500 million of the floating-rate Apex. The bank is offering $750 per each $1,000 of the securities, plus accrued distributions.

On the heels of the new issue, Goldman’s 5.95% series I noncumulative preferreds (NYSE: GSPI) were slipping, as is typical as investors jockey their positions around.

The preferreds were down 17 cents at $24.94 at mid-morning.

Away from Goldman, a trader said foreign banks were better as the market digested news from China claiming they had hit bottom and were in the initial stages of recovery. Also helping the market improve was news that four top oil producers – including Saudi Arabia and Russia – had agreed to freeze crude production at January levels.

Among said banks, HSBC Holdings plc’s 8% exchangeable perpetual subordinated capital securities (NYSE: HSEB) were up 29 cents, or 1.15%, at $25.48. Deutsche Bank AG’s 7.6% trust preferred securities (NYSE: DTK) were up 69 cents, or 3.01%, at $23.64.

Overall, the preferred stock market was up 94 basis points at mid-morning, according to the Wells Fargo Hybrid and Preferred Securities index. The index had been up more than 100 bps earlier in the session.

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