Goldman Sachs prices new noncumulative issue; foreign banks firm as preferred market rises

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.

The New York-based financial institution sold $675 million of the securities at par to yield 6.3%.

Initial price talk was in a 6.375% to 6.5% context.

Post-pricing, the new preferreds were pegged at $24.88 bid, $24.90 offered by one trader. A second trader placed the issue at $24.90 bid, $24.95 offered.

A 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 news release on the company’s website.

In the news release, 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 about $1.67 in 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 closed off 14 cents at $24.97. The paper was down 17 cents at $24.94 at mid-morning.

However, the 6.375% series K fixed-to-floating rate noncumulative perpetual preferreds (NYSE: GSPK) ended higher on the day, finishing up 34 cents, or 1.34%, at $25.73.

Overall, the preferred stock market was up 192 basis points for the day, better than the 94 bps gain seen at mid-morning, according to the Wells Fargo Hybrid and Preferred Securities index.

Foreign banks firm

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) rose 35 cents, or 1.39%, to $25.53. Deutsche Bank AG’s 7.6% trust preferred securities (NYSE: DTK) were up 89 cents, or 3.88%, at $23.84.

Deutsche Bank’s 8.05% TruPs (NYSE: DKT) were also better, improving 62 cents, or 2.62%, to $24.30.

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