Preferreds rebound; Ashford Hospitality’s new issue frees to trade; Deutsche Bank lower

By Stephanie N. Rotondo

Seattle, July 7 – The preferred stock market was again looking to recoup losses from earlier in the week in Thursday trading.

The Wells Fargo Hybrid and Preferred Securities index ended up 20 basis points, after being up 30 bps at mid-morning. The index closed up 4 bps on Wednesday, though it was down 17 bps in early trading.

The course reversal into positive territory came after the Federal Reserve released the minutes from its latest policy meeting. The minutes showed that the central bank wanted to see how the United Kingdom’s Brexit vote turned out before making a firm decision on an interest rate increase. A week later, the U.K. opted to leave the European Union, a surprise move that roiled the markets.

As for preferred dealings, Ashford Hospitality Trust Inc.’s $120 million of 7.375% series F cumulative preferreds – a deal priced Wednesday – had freed to trade by mid-morning, according to a trader.

At that time, he pegged the issue at $25.08 bid, $25.14 offered. At the bell, another market source saw the issue at $25.14, “which was probably reflective of the market.”

Morgan Stanley & Co. LLC and UBS Securities LLC ran the books. The deal came upsized from $75 million and tighter than the 7.5% area price talk.

Proceeds will be used to redeem the company’s 9% series E cumulative preferreds (NYSE: AHTPE). That issue closed off 15 cents at $25.12.

Meanwhile, a trader said there was a Bloomberg report circulating that indicated that U.S. banks need to raise $39 billion of new capital between now and 2018.

“That’s a good sign we should see some preferred deals coming,” he said.

He also noted that he was hearing of a real estate investment trust deal, possibly for next week.

Deutsche Bank eyed

Deutsche Bank AG’s trust preferred securities attempted to rise with the market on Thursday. Alas, the preferreds failed to do so.

The 7.6% TruPs (NYSE: DTK) closed at $24.69, off 16 cents. That issue was up 8 cents earlier in the day.

The 8.05% TruPs (NYSE: DKT), however, were weak all around. The preferreds ended at $25.13, down 13 cents. The paper was off a dime at mid-morning.

The German bank’s preferreds have been in retreat since the United Kingdom voted to leave the European Union. A recent report from the International Monetary Fund didn’t help matters, as the report deemed the bank as one of the riskiest in Germany.

The latest CCAR results have also weighed on the name. Deutsche Bank was one of two banks that saw their capital plans rejected by the Federal Reserve, Santander being the second one.

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