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Morning Commentary: Preferreds open soft; City Office bringing new issue; Deutsche Bank dives
By Stephanie N. Rotondo
Seattle, Sept. 26 – The preferred stock market was under pressure as the new week got underway.
The Wells Fargo Hybrid and Preferred Securities index was down 16 basis points at mid-morning.
A trader said there was no news to drive the market downward, though the broader markets were also selling off. He noted that the market was “focused on these debates,” referring to the first round of U.S. presidential debates between candidates Hillary Clinton and Donald Trump.
Despite the day’s weak start, new issues were still hitting the tape.
City Office REIT Inc. said it was selling $75 million of series A cumulative redeemable preferred stock, with price talk at 6.5% to 6.75%.
A trader saw the paper at $24.67 bid in the early gray market.
Raymond James & Associates Inc., Wunderlich Securities Inc., D.A. Davidson, Janney Montgomery Scott LLC and Compass Point are running the deal.
Proceeds will be used in part to finance acquisitions, with the remainder going toward general working capital purposes. That includes possible future acquisitions, creating reserves for capital expenditures, tenant improvements and leasing commissions.
In the secondary market, Deutsche Bank AG’s preferreds were sliding as it was being reported that the German government had no intention of giving the bank financial support, should it need it.
The bank’s financial health has come under fire in recent weeks, due in part to a $14 billion proposed settlement from the U.S. Department of Justice over an investigation into the bank’s role in the subprime mortgage crisis.
The bank has said it will not pay $14 billion but will instead negotiate to a lower price.
The 7.6% trust preferred securities (NYSE: DTK) were down 67 cents, or 2.65%, at $24.60 at mid-morning. The 8.05% TruPS (NYSE: DKT) were off 83 cents, or 3.20%, at $25.11, while the 6.55% TruPS (NYSE: DXB) had dropped 98 cents, or 3.94%, to $23.75.
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