Discover prices new deal, trades above par; Hartford $25-par notes active; recent deals list

By Stephanie N. Rotondo

Phoenix, Oct. 9 - It was a "slow but steady" Tuesday for the preferred stock market, a trader reported.

"We're generally weaker with the equity markets," he added.

Another market source said that liquidity was "OK despite the long holiday weekend."

The nom du jour was Discover Financial Services, which announced plans for a sale of series B noncumulative perpetual preferreds early in the session.

Price talk was initially 6.75% to 6.875%, a trader said. However, another trader reported that the talk had been readjusted to around 6.5%.

"They've already closed the book," he said, opining that the deal should do well around the readjusted price talk despite being a lower-rated financial than some others that have recently tapped the market. "People are probably getting sick of loading up portfolios with 5% perpetual paper."

The deal priced at 6.5% and came upsized at $500 million.

Hartford Financial Group Inc.'s 7.875% $25-par fixed-to-floating junior subordinated debentures due 2042 made the day's most active list. A source said there was no credit-specific news to cause the heavy activity but did point out that there have been some "positive broad industry things" put out in recent days.

Discover prices, sizzles

Discover Financial brought a $500 million offering of 6.5% series B noncumulative perpetual preferreds on Tuesday.

The deal came in line with revised price talk and was upsized from $250 million.

A trader said the issue had been trading around $24.90 in the gray market as of midday.

Post-pricing, another trader saw the issue around $25.05. A third source pegged the paper at $25.06 bid.

"There was a lot of focus on Discover," the third source said. "It's done quite well."

The source noted that it is unusual for a new issue to be trading at such high levels, especially in the gray market.

"Nobody was expecting it to do well," he said, quipping "who even has a Discover card?"

Still, he agreed that the higher coupon could be enticing buyers as well as the fact that it is "a new name in this market."

"It's a small deal and a name retail buyers know," another trader noted.

The joint bookrunners are Bank of America Merrill Lynch, Citigroup Global Markets Inc., J.P. Morgan Securities LLC, UBS Securities LLC and Wells Fargo Securities LLC.

Proceeds will be used for general corporate purposes, which may include advances to subsidiaries to finance their activities, repayment of outstanding debt and repurchases and redemptions of issued and outstanding securities of Discover Financial Services and its subsidiaries.

Hartford gets busy

Hartford Financial's 7.875% $25-par paper (NYSE: HGH) was among the day's most actively traded issues, a market source reported.

He was not sure what had prompted the activity, though he noted that "the common [stock] has been hitting highs recently" and that the company's convertible issues have been active.

The common stock (NYSE: HIG) fell 31 cents, or 1.46%, to $20.98.

The source also pointed out that there have been some positive reports about the insurance industry as a whole published recently.

And, with a 6.88% yield, "it's still pretty attractive," he said.

New NYSE listings

Three recent new issues were listed on the New York Stock Exchange Tuesday.

CBL & Associates Properties Inc.'s 6.625% series E cumulative redeemable preferreds - a $150 million issue that priced Sept. 28 and was later increased to $172.5 million via a greenshoe - listed under the ticker symbol "CBLPE."

The paper was up 2 cents, trading at $25.19.

Ares Capital Corp.'s 5.875% $25-par senior notes due 2022 listed under the ticker symbol "ARU." The $175 million deal came Sept. 21.

The notes were down 6 cents at $24.97.

And Miller Energy Resources Inc.'s 10.75% series C cumulative preferreds hit the NYSE under the ticker symbol "MILLPC." The $17.13 million "best-efforts" offering priced Sept. 28.

Paper was trading at $22.20, down 15 cents.

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