AmTrust Financial brings new issue; Gladstone frees; Southern lists; Deutsche Bank lower

By Stephanie N. Rotondo

Seattle, Sept. 20 – Another new preferred stock deal hit the tape on Tuesday, continuing the month’s steady flow.

AmTrust Financial Services Inc. said it was offering $25-par series F noncumulative preferreds, with price talk in a 7% to 7.125% context.

“They are probably going to upsize this and cut that yield way back,” a trader said, seeing the issue at $24.75 bid in the early gray market.

The trader’s speculation proved correct, as the deal came at 6.95%, with $250 million of the preferreds being sold.

Post-pricing, a market source placed the issue at $24.92 bid.

Morgan Stanley & Co. LLC, UBS Securities LLC, RBC Capital Markets and Keefe Bruyette & Woods Inc. ran the books.

Meanwhile, Gladstone Investment Corp.’s $50 million of 6.25% series D cumulative term preferred stock – a deal priced Monday – were seen at $24.81 bid, $24.85 offered in early trading.

The issue freed from the syndicate at 2 p.m. ET.

A source said that when the deal freed, it was bid for at $24.78, with no offers. But he said the preferreds “probably” went out in the mid-$24.80s, adding that the closing price was $24.89.

“But that was the high trade for the day,” he noted.

The deal came upsized from $35 million and tight to the 6.375% price talk.

Janney Montgomery Scott LLC was the bookrunner.

From last week’s business, Southern Co.’s $800 million of 5.25% $25-par series 2016A junior subordinated notes due 2076 began trading on the New York Stock Exchange on Tuesday under the ticker symbol “SOJB.”

The paper was trading at par at mid-morning, unchanged from opening levels. It closed at $24.99.

The notes dominated the day’s session, with nearly 1.24 million of the securities trading.

BofA Merrill Lynch, Morgan Stanley, UBS Securities and Wells Fargo Securities LLC led that deal.

Deutsche dwindles

Deutsche Bank AG’s preferreds continued their losing streak on Tuesday, as a new report from the Federal Deposit Insurance Corp. indicated that the German bank’s risk profile is just getting worse.

The 7.6% trust preferred securities (NYSE: DTK) waned 56 cents, or 2.21%, to $24.83. The 8.05% TruPS (NYSE: DKT) dropped 69 cents, or 2.62%, to $25.69.

The 6.55% TruPS (NYSE: DXB) lost 28 cents, or 1.14%, to end at $24.33.

The FDIC releases a leverage report every six months. In the latest report, Thomas Hoenig, vice chairman, said the bank’s leverage ratio was less than that of its peers – at 2.68% as of June 30, which was less than half of the average of the eight largest U.S. banks.

Deutsche Bank has been under pressure in recent weeks. Most recently, it was reported that the bank rebuffed a $14 billion settlement offer from the Justice Department in regards to the company’s role in the mortgage crisis. However, the bank did say that it was willing to negotiate.

On the potentially positive side, Deutsche Bank has said it is considering selling off some of its asset management operations.

Fannie-ing the flames

Fannie Mae’s preferreds jumped in Tuesday trading, though a market source opined that the gains were purely due to speculation.

The 6.75% series Q noncumulative preferreds (OTCBB: FNMAI) rose 41 cents, or 15.19%, to $3.11, while the 8.25% series S fixed-to-floating rate noncumulative preferreds (OTCBB: FNMAS) improved 44 cents, or 13.84%, to $3.62.

“Because of the high risk nature of those securities, they respond a lot” to speculation, the source said.

He did note that there were a couple of Bloomberg Intelligence pieces that came out early in the day, one that was essentially an overview of the GSE’s situation and one that speculated that Jeb Hensarling (R-TX), the chair of the House Financial Services Committee, could bring up GSE reform again in 2017.

But the source commented that in addition to being speculation, it is actually Hensarling’s job to bring that topic back to the table.

“So they just stirred [things] up,” he said of the reports.

© 2015 Prospect News.
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